that should have been hundreds of dollars was a fraction of that.
The main reason people steal is because of opportunity, followed by need and greed. One thing I always say is, if you make it easy for people to steal from you, they will. It's a simple principle, but my years in the fraud business have proved to me that it holds true time and time again.
THE IRS IS YOUR FRIEND
Embezzlement fascinates me, because we know how to prevent it. For over one hundred years, the accounting tools have been in place. This is why we have auditors. This is why we conduct audits. This is why we have internal auditors. This is why we have due diligence. This is why we have best practices. This is why we have controls. This is why we have segregation of duties.
The problem today is, the bigger companies have become, the less controls they have. The more they merge with other companies, the fewer controls that stay in place. Accounting staffs that used to be six people are now one person. You can't segregate duties with one person. If I have a bookkeeper who writes checks, signs checks, and reconciles checks for me, then it's just a matter of time before I have a bookkeeper who steals from me. So today, we've taken all of those controls that we've learned in accounting for one hundred years and thrown them out the window.
Even if you catch an embezzler, don't expect to get your money back. If you have an employee who stole $60,000 from you and you went to court and the employee pleaded guilty, he'll get probation and there's no restitution. You're out $60,000, while he's driving a brand-new car and living in a great house on the lake. There is one recourse. It's rarely used, but it's my favorite. If someone steals $60,000 from you, you can file a 1099 on that employee with the government. The 1099 is a wonderful tool. It gets you a write-off on your taxes of $60,000, and you may get as much as one-third of the money back from the IRS for reporting someone who failed to pay taxes on earned income, even if it was earned by theft. The IRS will go after the person, and it has the power to take his home, take his car, and garnish his wages, things that you don't have the power to do even in a successful civil action. It's always been my experience that the threat of a 1099 is far greater than the threat of a lawsuit or prosecution.
THE GUY NEXT DOOR
One thing to keep in mind is that the culprit is often the last person you would suspect. That's the curious thing about embezzlement. It's rarely the new worker who's a total mystery to you. It's not the guy with the shifty eyes and the sinister glare. Embezzlers are frequently some of the nicest people in the world. They're the ones who sit at the next desk, who have lunch with you, who are in the adjacent pew at church on Sunday.
Far more often than not, the embezzler is the guy who's been at the company forever and who you trust implicitly. That's one of the reasons why embezzlements often persist for years without being detected. There was a recent case of a fifty-one-year-old woman that worked as a payroll and employee benefits administrator for a sizable Arizona plumbing company. She was very sociable, very well-liked, and very involved in the community. Everyone found it hard to believe when they discovered that over an eight-year period, she had embezzled nearly $2 million. Just about every week, she signed and cashed fraudulent insurance checks. She began her scheme practically the day she was hired. By the time she was caught, she was cashing checks at a rate of $40,000 a week.
Then there was the bookkeeper for a Manhattan magazine publisher. She was fifty-four, an esteemed senior employee, earning $150,000 a year. She decided to give herself a raise. She inserted her name as an additional payee in the books she kept. That gave her another $15,000 a year. Year after year, she added her name to more and more checks. After ten years had passed, she was receiving more than fifty checks, in amounts ranging between $15,000 and $75,000. Just like that, she was earning $1 million a year. By the time an audit finally caught her, she had embezzled something like $8.2 million.
Her lawyer claimed