‘The temptation is simply too great’ – fraud in the High Country
SUMMIT COUNTY – Harry Woolley’s no stranger to fraud and embezzlement.Through his career in banking, he’s said, he’s seen dozens of his customers victimized by unscrupulous employees.”The sad thing is, in my 35 years in banking I’ve seen this sort of thing happen time and time again,” he said. The unfortunate truism, he said, is as long as there is opportunity for someone to steal then it will happen.”Often the temptation is simply too great,” he said.Woolley, who is the Summit County market president for Bank of the West, said that in the past 30 days the bank has seen incidents of fraud carried out against three different customers, each a small independent business.The message to be gleaned is that small businesses, more than ever, need to protect themselves against fraud and theft, he said.
Debit-card dangerJust because someone owns a business, doesn’t mean they have a good business sense, Woolley said.It’s not unusual, he added, for a business owner to want to believe the best about others, which unfortunately is not always a good business practice. He related the story of a business owner hiring someone to keep the company’s accounts and who, over time, seemed the perfect employee – always willing to take on more accounting duties, always wanting to take work home, always paying attention to the details.In reality, she wasn’t taking care of the woman’s business. Instead the bookkeeper was stealing. The error was when the business owner agreed that the bookkeeper should be able to sign checks.The bookkeeper had signed more than $100,000 in fraudulent checks. The theft went undiscovered for a while, but the excuses the bookkeeper was making did not block the business owner from digging deeper.”You can imagine in a small business what $100,000 is,” he said. “This was significant.”As she dug deeper the business owner found her bookkeeper had been arrested previously for embezzlement and had even written checks from her employer’s account to pay attorneys who represented her in a previous theft case.”The crux of the whole thing is she did not have proper checks and balances in place and she trusted the wrong person,” he said.
Woolley acknowledged that simple background checks seldom will uncover if an individual has a history of stealing. Most companies, fearing potential liability, will usually acknowledge only that a person was employed and the period they were employed.”The sad thing in today’s world is you could be hiring the biggest thief in town but you can’t find that out,” he said.It is not unusual for thieves to think of themselves as smarter than their employer, after all, accountants are generally smart people. If they are dishonest and smart, the result can be ruinous.In the second situation Woolley outlined, it was an accountant who figured out it was possible to use debit cards as an easy source of money.In simple terms it worked like this: He used his personal debit card to run what are called “point of sale” reversals for charges that never took place. Because he had access to the company’s credit card processing machine, it was a matter of giving himself a credit when no real charge had actually taken place. He also set up auto-debits, which were drawn from his employer’s checking account and used to pay loans like a car payment. He then cut off the bottom of the bank statement where the automatic transactions were listed so the business owner never saw the fraudulent transactions.”The owner thought he was looking at the entire statement,” he said.Over a period of more than two years nearly $300,000 was stolen.
‘Huge opportunity’Businesses are not the only entities in danger.”Individuals are stolen from, too,” Woolley said.”You have a housekeeper you trust. Maybe it’s someone who comes in to help you once a week or so. You trust them and think it’s OK to leave things like the check book lying out,” he said. “They go into the back of it and tear out a couple of checks. They know what your signature looks like so it’s easy for them to sign your checks.”The amount is usually small enough so that it slides through and goes undiscovered. The same scam can be and has been plied to businesses. Woolley tells the story of an attorney whose secretary used stolen checks to draw funds from the firm’s escrow account.”There is no way in the modern banking world that every signature on every check can be checked for authenticity,” he said. “The way the system works is if you’re smart enough to utilize the system and an owner doesn’t have checks and balances in place, there is the huge opportunity for employee theft.”Incidentally, the FBI says the profile of an embezzler is someone who has been on the job five to six years, delivers above-average performance, and is highly motivated, valued and trusted.Vail, Colorado