Employee Embezzlement Investigations, How Management,
Directors, Employee Steal.
This Crime often it involves
the trusted individual embezzling only a small proportion or fraction of
the total of the funds or resources he/she receives or controls; in an
attempt to minimize the risk of the detection of the misallocation of the
funds or resources. When successful, embezzlements continue for years (or
even decades) without detection.
It is also involves when a relatively
large proportion of the funds are needed at one time; or they are called
upon for another use; or, when a major institutional reorganization (the
closing or moving of a plant or business office, or a merger/acquisition
of a firm) requires the complete and independent accounting of all real
and liquid assets; prior to, or concurrent with, the reorganization, that
the victims realize the funds, savings, assets or other resources, are
missing and that they have been duped by the embezzler.
Types Of Embezzlement.
Typically, the criminal elements of
embezzlement are: (1) the fraudulent (2) conversion (3) of the
property (iv) of another person (4) by the person who has lawful
possession of the property.
(1) Fraudulence: The requirement
that the conversion be fraudulent requires that the embezzler
willfully, and without claim of right or mistake, converted the
entrusted property to his or her own use. .
conversion: Embezzlement is a crime against ownership; i.e. voiding
the right of the owner to control the disposition and use of the
property entrusted to the embezzler. The element of criminal
conversion requires substantial interference with the property rights
of the owner. (This is unlike larceny, wherein the slightest movement
of the property, when accompanied by the intent to permanently
deprive the owner of possession of the property is sufficient cause.
(3) Property: Embezzlement statutes do not limit the scope of the
crime to conversions of personal property. Statutes generally include
conversion of tangible personal property, intangible personal
property and chooses in action. Real property is not typically
(4) A person cannot embezzle his or her own
property. Lawful possession: The critical element is that the
embezzler must have been in lawful possession of the property at the
time of the fraudulent conversion, and not merely have custody of the
property. If the thief had lawful possession of the property, the
crime is embezzlement. If the thief merely had custody, the crime is
Methods Of Embezzlement.
Falsifying The Records.
Embezzlement sometimes involves falsification of records in order to
conceal the activity. Embezzlers commonly secrete relatively small
amounts repeatedly, in a systematic and/or methodical manner, over a
long period of time, although some embezzlers secrete one large sum at
once. Some very successful embezzlement schemes have continued for many
years before being detected due to the skill of the embezzler in
concealing the nature of the transactions or their skill in gaining the
trust and confidence of investors or clients, who are then reluctant to
"test" the embezzler's trustworthiness by forcing a withdrawal of
Embezzling should not be confused with skimming, which is
under-reporting income and pocketing the difference. For example, in
2005, several managers of the service provider Remark were found to be
under-reporting profits from a string of vending machine locations in
the eastern United States. While the amount stolen from each machine was
relatively small, the total amount taken from many machines over a
length of time was very large. A smart technique employed by many
small-time embezzlers can be covered by falsifying the records.
(Example, by removing a small amount of money and falsifying the record
the register would be technically correct, while the manager would
remove the profit and leave the float in, this method would effectively
make the register short for the next user and throw the blame onto
False Vendor Accounts.
Another method is to
create a false vendor account, and to supply false bills to the company
being embezzled so that the checks that are cut appear completely
legitimate. Yet another method is to create phantom employees, who are
then paid with payroll checks.
The latter two methods should be
uncovered by routine audits, but often aren't if the audit is not
sufficiently in-depth, because the paperwork appears to be in order. A
publicly traded company must change auditors and audit companies every
five years. The first method is easier to detect if all transactions are
by checks or other instrument, but if many transactions are in cash, it
is much more difficult to identify. Employers have developed a number of
strategies to deal with this problem. In fact, cash registers were
invented just for this reason.
Some of the most complex (and
potentially most lucrative) forms of embezzlement involve Ponzi-like
financial schemes where high returns to early investors are paid out of
funds received from later investors duped into believing they are
themselves receiving entry into a high return investment scheme. The
Madoff investment scandal is an example of this kind of high level
embezzlement scheme, where it is alleged that $65 billion was siphoned
off from gullible investors and financial institutions.
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