Kirk & Toberty, Attorneys-At-Law
Obviously, employee theft takes on all kinds of forms, and ranges in scope from the petty (an employee taking an improper discount) to the catastrophic (a CFO who has engaged in a sophisticated seven figure embezzlement scheme). This article addresses immediate steps that should be undertaken when an employer discovers, or suspects, that an employee has engaged in a substantial theft.
When facts are initially discovered that raise the concern of a theft, questions immediately present themselves: Should law enforcement be contacted? If so, when? What is the effect of contacting them? What is the effect of not immediately contacting them? To what extent will the matter become public and what effect will any publicity have on the company? What steps are proper or improper relative to an employee subject to suspicion, or who has been confirmed as having stolen company funds? Among those questions, for most victims the defining question is the probability of recovering the stolen funds.
Two things can be said with certainty: First, the initial actions taken upon the discovery of an actual or suspected instance of employee theft will define your opportunities for recovery of stolen funds. Second, taking the immediate proper action will maximize both the odds of recovering and the amount of that recovery.
Most employers simply do not have the experience or the properly trained resources to effectively assess how best to proceed. So, they are well advised to seek the assistance of a professional who has the proper training and experience in this specific area. Because the employer will of necessity be making decisions with legal impacts, the employer should retain counsel. With the assistance of that counsel, they can begin to assess the issues and formulate future steps.
With respect to the decision to contact law enforcement, the employer should keep in mind that the primary goal of law enforcement is NOT the recovery of the stolen funds. It is to prosecute the thief for his or her criminal action. Also understand that law enforcement investigations of non-violent crimes such as theft often take several months. Even then, the District Attorney may decide that there is not enough evidence to file criminal charges.
As compared to what is a typically lengthy criminal investigation, California law permits a victim of employee theft (or any theft) to file an immediate civil lawsuit against the thief without disclosing the filing. The victim can then seek an order immediately freezing the perpetrator’s assets. A Sheriff or Marshal can then seize those assets. In such a case, the court holds the assets until resolution of the case. A victim may also be entitled to recovery of all accrued interest, and in some instance even three times the amount of the loss.
As you read this article, take a few moments to review your insurance coverage. If you do not have any coverage for employee theft or embezzlement, check with your insurer to determine how much they will charge to provide coverage as an additional benefit under your policy.