How They Got Caught

Continuing our series on corporate fraud, today’s topic is how people who steal from their companies get caught. In addition to all helping themselves to money that doesn’t belong to them, they have something in common. They never thought they’d get caught. Here are some stories on how they did.

As a fraud deterrent I’ll always advise people to tell your CFO to take two consecutive weeks of vacation a year. Take that opportunity to sit at his desk, open his mail and talk to his secretary. You may be surprised at what you learn.

I did just that for a company where I was Interim CEO. I found that the CFO was having his Cayman Island bank account statements sent to his office, clearly detailing the money he was stealing from the company. Another time I suspected a CFO of fraud so I poked around on his computer. I found a spreadsheet detailing all the money he had stolen, dated and tracked. I love organized thieves. They make my job so much easier.

2010.07.28m3You never know how you’ll find fraud. I once had a potential client that found the controller had siphoned $3 million from the payroll account over the period of four years by creating dummy employees. The company hired a new CEO who determined that the headcount didn’t match. I never got them as a client. Once the bank found out, it decided it couldn’t trust the balance sheets and called the loan. The company had to shut its doors.

And here’s a story that literally takes the cake. Tom Murphy started the hugely popular Murphy’s restaurant more than 30 years in Atlanta. He wrote a lot of checks and had huge statements so he hired a Georgia State grad to help out as a bookkeeper. He knew Murphy’s was taking in a lot of money but he never seemed to have enough to cover his expenses.

So he looked over the bank statements himself one day. In just one month he found the bookkeeper had written checks for $3000 to himself. Going back through older statements, Tom found the guy had stolen $35,000 over the past year.

He called the guy who said he had “borrowed it” because he was getting married, planned to pay it back etc. Back in his more naïve days, Tom believed him. As he writes in his book, Murphy’s: 30 Years of Recipes and Memories, “Lesson learned: After you find someone stealing from you, chances are good he is lying when he says he will pay you back.”

The guy didn’t show up for work the next day so Tom called the police. Turns out he hightailed it to Mexico and eventually landed in Texas.

Here’s the fun part. Two weeks later the guy’s sister called Tom and said her brother was in town and she was having a going-away party for him. “Would you make the cake?” she asked.

“Of course,” he said and got the address. Then he called the chief of police to arrange a special delivery. Now that’s a surprise party where everyone was surprised.

So there’s a lesson for would-be thieves. While you may be justifying your crime to yourself, as we discussed in a previous column when I wrote about rationalization as part of the fraud triangle, you’ll have a lot harder time justifying it when you get caught. And you most likely will.

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