We have thrown out these numbers in the past and it makes sense to do so again, and again, and again. Only 4% of fraudsters that are caught in the act had a prior conviction. Fraudsters that had been with their company 5 years or longer stole twice as much than those that had been with their company 5 years or less. Unfortunately, a majority of victims of fraud recover nothing. These are real numbers and relate back to a real case involving a community service organization.
Oftentimes, an organization that falls victim to fraud does not report the theft to law enforcement. The main reason they do not do so is because they do not want the negative publicity to their business. The victim organization will terminate employment with the fraudster, which allows this person to go on to the next unknowing victim and continue their crime cycle. In this case, it was revealed that our fraudster had served at least two other community service organizations prior to serving with the one that finally reported the theft. Want to guess what reason was given for the termination of employment with the prior two organizations? You bet, the same one that the final organization used to terminate employment and to press charges, embezzlement!
In this case, the embezzlement occurred over a two-year period. Our fraudster used funds from the organization to pay for a family vacation, utility bills and repairs to personal assets. The fraudster used the organization’s credit card to pay for these personal expenses and manipulated the organizations bookkeeping files to try and cover up the fraud.
The community service organization began to experience money troubles which prompted the Board of Directors to begin looking at the financial records of the organization. The Executive Director also handled the finances of the organization and was reluctant to allow anyone access to the books. Silo’s and the lack of transparency are two immediate red flags for a Board when it comes to fraud and financial records. Once the Board did receive access, the fraud became obvious as money was missing and the financial records were kept in a “sloppy” fashion.
It is not known if this organization required an audit or if one ever occurred. However, keep in mind that audits are not designed to detect fraud. Audits measure practices and whether they are being followed or not. By all accounts it does not appear that this organization had any sort of outside financial insight whether an audit or an examination to ensure that they were operating their fiduciary duty appropriately.
Fortunately, the organization chose to prosecute this fraudster. They chose to do something that two other prior organizations did not have the guts to do. Based on the evidence the fraudster was facing up to 5 years in prison and a $50,000.00 fine. The fraudster was sentenced to a month in jail and ordered to pay only $3,500.00 in restitution in a plea deal. It is not known if the fraudster served the full sentence. I imagine the restitution was easily paid back since it was such a tremendously low amount.
By being the “grown up” the unfortunate aspect of this case is that the organization did take a negative publicity hit. Donations, which were crucial to the operation of the organization dried up. Who wants to donate money to an organization if it is just going to fill the pocket of a fraudster? Also, many individuals that used the services provided by the organization found another resource to use as the reliability of the organization came into question. In order to keep things going the organization had to hold a fundraiser to raise funds for its programs and show the community that they were still alive and well after the fraud.
If only the first organization that had a run-in with this individual had chosen to prosecute, two other organizations may have been saved the fate of the public relations nightmare that nearly took at least one of them down. Individuals that benefited from the service provided by this organization would have continued to receive services uninterrupted. Not only did the organization take a hit, but the community as a whole took a hit as well. Friends and family of the fraudster had to deal with the outcome of the actions of this one individual.