The owner of the small law firm was stunned when his landlord called wondering where the rent check was.
The firm’s bookkeeper was out sick that day, so the call went to the owner, who discovered that the bookkeeper had been gambling online with company money. She was able to mask her losses for a while, but when they surpassed $60,000, things began to unravel.
“She was the sole person [handling the money]; she did everything,” says Lynn Basconi, senior manager at Ciuni & Panichi Inc. “They trusted her. She was actually pretty clever. She was writing herself checks, but in the system, she was putting them in as other vendors. If you just looked in the system, you wouldn’t notice anything. You’d have to go through the actual cancelled checks to see what she was doing.”
It’s a problem that can affect any business, but quickly growing smaller companies may be most vulnerable.
“A lot of companies have grown over the last 10 years,” Basconi says. “The same people are there. There’s a lot more cash available. They may have been very trustworthy people at some point, but something happens, and they see the opportunity and they take it.
“If the records are a mess and there is a lot of turmoil going on, it’s a hotbed for somebody. You don’t have to have an MBA to figure out the system and a way to steal the money.”
The best deterrent is the involvement of the business owner.
“You, the owner, have got to get these bank statements, before they’re opened, and you’ve got to look through them,” Basconi says. “Everybody gripes about that. You don’t have to do it every month, and you don’t have to do every check, but you have to keep yourself on the pulse of the business. Cash is king. That’s where it’s usually going to happen.”
Business owners should review statements online so they’re not waiting 30 or 45 days for bank statements. Fidelity bonding can also ease the pain if a company is the victim of theft.
Basconi is usually called in only when the company owner suspects a problem. Quite often, business owners simply don’t want to believe someone they trust has been stealing.
“If it’s a company of less than 50 people, you pretty much know everybody in the place,” Basconi says. “If someone starts acting weird or if their lifestyle isn’t conducive to what they’re getting paid … generally, your intuition tells you something is wrong.”
That’s when Basconi starts playing detective, reviewing statements and, if need be, getting copies of cancelled checks from the bank.
“It takes a day or two just to figure out what this person was capable of doing,” Basconi says. “We interview all kinds of people. A lot of employees knew what was going on, but they never said anything. You get a lot of information from a lot of different people.
“If they’re still there, I come in under the guise of ‘We’re looking at the internal controls.’ If I really need to get to something, I might have to go back later at night. Somebody would have to meet me there so we could get into some of this stuff; otherwise, the person my start shredding everything.”
To avoid falling victim to fraud and theft, Basconi recommends business owners review their processes. Companies often don’t have the luxury of having several people in the accounting department, but that doesn’t mean they should be easy prey.
Owners need to segregate accounting duties so one person isn’t in charge of everything.
“We try to get away from saying you need to hire somebody because it is usually not an option,” Basconi says. “We look at what everybody is doing and try to shift some things around so there are checks and balances against each other.”
HOW TO REACH: Ciuni & Panichi Inc., (216) 831-7171 or www.cp-advisors.com/
Scams 101
Lynn Basconi has seen a wide variety of scams during her days as a senior manager with Ciuni & Panichi Inc., such as the chief financial officer who used a company credit card to charge $8,000 to feed his online pornography habit.
“When the charge came through on the credit card, it was a very generic name, nothing that would tell you what it is,” Basconi says. “He was charging it to the company as dues and subscriptions.”
Basconi tells clients to cut up their company credit cards, or at least be more diligent with them.
“People give company credit cards to employees and then don’t look at the statements, don’t follow up on anything,” she says. “It’s just a disaster. Make everybody charge stuff on their own and put it on an expense report with the support and have it go through the system that way.”
But it seems that as soon as business owners find a way to stop one form of theft, another arises.
“We have a client that owns a lot of fast food restaurant,” Basconi says. “Employees were actually selling banking information that’s on the paycheck, the routing number and all that. There’s some ring out there that is going after this kind of thing. They’re either putting false checks through or doing wire transfers out of the account.”
That company is now paying employees with debit cards.
“You can’t even keep up with all the scams that are going on out there,” Basconi says.