Hans Kasper, MS-CPA, PS

Swindler's List
 

Recently, I was called by a client of mine to send two copies of my book to companies in eastern Washington.  They had been violated by their employees.  It happens every day.  Don't let it happen to you.

In 1995, I wrote a book entitled Swindler's List about how to stop employee theft.  Here are some excerpts from the book.

My purpose for writing this book was to provide you with a guide presenting the techniques handed down from generation-to-generation by the masters.  You may freely utilize these techniques with confidence and discretion to gain a better fare in life than your employer is willing to grant you.  True, there is a risk, but there is a risk in anything that is poorly planned and much less of a risk in doing something that is well thought out with perfection in mind.  Therefore, I put to you this premise-- only the fools get caught.

You must choose your employer carefully-- like a fine wine.  This process is very much like looking for a job in a good company, but, in your case, you will be looking for certain flaws upon which you can build your success. On the part of the manager or owner, you must look for dishonesty toward government taxing and regulatory agencies, employees, vendors, or customers.  When you find it, you must document it thoroughly-- how else can you blackmail them if they catch you?  Also, a poorly defined accounting system with limited internal control is a must for success-- what better environment can there be to employ your sinister trade?  Best of all, an absentee owner who leaves everything in your trusted hands while he is away is your guide to success.  This will allow you, in a short span of time, to draw and quarter the company he has worked so hard to build, thereby leaving him penniless, in bankruptcy, and at the hands of the IRS.

I have heard it said that thirty minutes of study a day will lead you to the status of an expert in five years.  Therefore, take the time to learn your skills and hone them into the art of a master.  Remember, the owners are at your mercy for they have chosen to be ignorant of what you can do to them and how they can prevent it.  They deserve it, don’t they?  The masters have a wise saying, “A penny stolen is a penny earned.” 

My purpose for writing this book was to provide you as a business owner with the opportunity to understand how to limit theft in your business.  By so understanding and implementing a plan to do so, you will have lifted off the back of your business the single, most internally-destructive burden it could carry-- employee theft.  Since most theft occurs during good economic times and is discovered during poor economic times, its discovery usually clouds a business’s recovery and sometimes buries it into bankruptcy.

This book will explain to you what doesn't work and what may well work in your business to prevent such theft from happening.  The solutions are simple to understand and easy to employ.  This manual shows how a small change here and there will add up to a better night’s sleep.  Company after company that I have worked with have successfully taken these steps with satisfying results.  One owner has stated, "This is the first time, absent collusion, that I feel that I am not going to be ripped off by my employees."  May your results be as comforting.

In their 1993 Fraud Survey of 330 of the 2,000 largest companies in the United States KPMG Peat Marwick found that:

• 76% of the companies had experienced fraud in the past year,

• 58% of the companies reported 1 to 5 occurrences, 10% with 6 to 10, 7% with 11 to 20, and 25% with over 21 occurrences during the last year,

•  the median cost of fraud per company was $200,000 with 18% over $1,000,000 and a total cost for all companies of $224,000,000.

• a 59% of frauds were found by instituting internal controls,

• misappropriation of funds, or embezzlement was discovered by 20%,

• check forgery by 9%,

• false invoices by 15%,

• outright theft by 12%,

• poor internal controls was given as the reason for a majority (56%) of the frauds,

• management decisions to override internal controls caused 40% of the frauds,

• but only 3% of the respondents improved internal controls and only 2% were thinking about doing so.

What are these companies' reasons why they don’t want to plug the hole?  They may be:

• Laziness,

• Ignorance, despite the facts presented to them,

• Fear of upsetting the employees, or

• Cost of implementation is too high.

Now think about what you have just read.  Ninety-five percent of the employers are being ripped off and they aren’t going to do anything about preventing such a theft in the future.  Now, why is that?  I wonder-- I just wonder if they don’t have their fingers in the pie too.  You see, if they install internal controls to stop employee fraud, it could also cut them out of the pie, and they might be taking the lion’s share.

As I said before, this is the perfect environment that the “for theft” employee must find to employ his trade, and it seems to be prevalent.

“Each day, 57.4 billion checks are written.  Of these, 1.2 million are forged.  But 99 percent of all forgers are amateurs and can be stopped with preventative measures.”  Trade West, December, 1993.

What does this mean?  This amounts to 438 million forged checks per year, or 8.76 million per State per year, or 24,000 per State per day.  That means you are most likely a victim already, only you just don’t know it.  At best case, you are a victim waiting to happen.

What are some of the forms of employee fraud?  They are: 

You shouldn’t write a book like this.  It will give people ideas that they shouldn’t have, and they will steal from my business now that you have shown them how to do it.

I believe that these are valid questions and concerns; however, based upon the data above, massive theft is already taking place.  By writing this book, theft will not increase to any large extent, but your opportunity as an owner to stop most of the theft that is occurring is substantial.  The fault of theft from a moral basis lies with the employee and from an opportunity basis lies with the owner.

As an owner, you will now learn how your employees are already stealing from you and how you might have an opportunity to stop it.

BELOW YOU WILL FIND ONE OF THE 38 EMPLOYEE THEFT CASES IN SWINDLER'S LIST.  To order Swindler's List click here.

Sheila had graduated from college with an accounting degree at the top of her class, but she could never seem to get a job any better than accounts payable clerk.  Everyone else got the accounting jobs, but not her.  After her grief had settled in and she began to make the best of it, she tried hard to become the best accounts payable clerk anyone had ever seen;  however, she never seemed to be able to please Sarah, the office manager.

If Sarah said to do something one way and Sheila did it, then Sarah would always countermand herself by saying the Sheila had done it wrong.  Eventually, Sheila began to realize that Sarah didn’t want her around.  So Sheila got up her courage and began to look for a new job, but none were to be found.  No matter how she tried in the interview, nothing came of it.  As Sarah became more and more severe each day, Sheila knew she would have to quit.

It was on the 4th of July, Independence Day, that she finally made up her mind to leave her employment and that she would do it in an All-American way.  Each month Sheila would input and print checks for $1,000,000 in accounts payable-- $250,000 per week.  She was also the one who fielded all of the accounts payable calls as they came in.  This was going to be a snap.

Her normal process was to input the bills, run the checks, give the checks and the bills to the president to be reviewed and signed, get the checks back from the president, stuff them into envelopes, and mail them.  During the first week, after she got the signed checks back, she took the originals and put them into her brief case to take home rather than mail to the vendors.  Then she took a blank check and made it out to herself for $250,000, signed the president’s name, and deposited it to her account.  When the vendors called about their past due invoices, she just told them “next week” and put them off.  She repeated these steps during the next three weeks until the end of the month when she put on her royal-command performance.

She waited until there were enough people around to witness Sarah pressing her too hard, then she blew up at her and stormed out of the building saying, “You can’t fire me, I quit!”  And, looking the president square in the eye, she said to him, “With her around, you can take this job and shove it.”  By the time the company could piece together what Sheila had done, she was long gone and so was $1,000,000. INTERPOL is still looking for her.

The owner had always swore that he was going to fire Sarah for treating the employees so badly.  Now, having lost everything he had, he only regrets that he didn’t follow through.

Loss Prevention Plan

• Do not return the signed accounts payable or payroll checks to the respective clerks who prepared them.  For accounts payable, either you stuff and mail them or have someone who doesn’t work in accounting do it.  For payroll, either you stuff and had them out or have the department managers hand them out.

• Put people like Sarah into counseling or fire them; otherwise, it will come back to haunt you.

To order Swindler's List click here.