As a small business owner, you may have already been confronted with the problem of employee theft and know the damage it can wreak on you, your family, your employees and your business. If you have not had to deal with employee theft, sooner or later you probably will.
Opportunity – Simply put, most small businesses are vulnerable to employee theft. Medical offices, contractors, retailers and restauranteurs are particularly susceptible. Most small business owners delegate day to day bookkeeping, banking, and accounts receivable responsibilities to one or more employees, usually the ones you trust the most. You may have a ballpark sense of your banking and accounts receivable information, but as long as there is money in the bank and no crisis, you concentrate on your work and leave the “number-crunching” to others. As an owner once confided to me, he was simply too busy to pay attention. At the end of the year, he looked at his total receipts and his net income. If they were close to what he expected, he did not look any further.
Motive – As discussed below, once employee theft is discovered the motive becomes clear. The employee may have an unknown addiction – to gambling, drugs or something else. The employee may simply be living beyond his or her means and conclude that he or she is entitled to a “little extra” from the company. Often, an employee rationalizes the theft while continuing to steal larger and larger amounts. The employee may have more sinister and specific motives, such as harboring bitterness at being passed over for promotion or being demoted and intent on proving that he or she is too smart to get caught stealing.
Second, the thief is more often than not a highly trusted employee. The prototypical thief is a long time employee who is extremely familiar with the financial aspects of your company. They interact with clients and vendors, and may handle or process accounts receivables, accounts payables, or banking functions for the company. They rarely take vacations or sick time. They are viewed within the company as loyal, trusted, giving individuals and would be last on a list of people you would suspect.
Work with your attorney to assess the nature and scope of the loss. Bear in mind that perpetrators frequently use several different schemes, so you must be thorough and fast. Depending on the scope and sophistication of the theft, your attorney may recommend that you hire a forensic accountant to help with this process.
While you are determining and documenting at least generally the amount of the loss and the means by which the loss occurred, your attorney should be performing an initial investigation on the thief. A good investigator will have sophisticated means of providing you with information on the thief’s assets, including bank accounts, securities accounts and interests in real property. Once you know where the asserts are, you can immediately move to have them seized.
As you read this, 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.
If you are faced with employee theft, taking the right action immediately can mean the difference between quickly recovering your losses, and years of frustration. Make certain that you have been fully and accurately informed about all of your options by speaking to an attorney who is knowledgeable, qualified and experienced in this area of the law, and by promptly contacting the police and your insurer.
Our firm offers this free case evaluation so that you may obtain legal advice without any financial commitment or obligation on your part.
Fill out the form below to begin the process of retaining the legal representation that you will need from our firm.