43
First comes trust, then comes theft
A system of checks and balances can aid in maintaining workplace honesty
and Elise Franco
YOUNGSTOWN
A business loses large sums of money and evidence points to an employee theft — often a person who is a longtime, trusted worker.
It happens over and over.
“Good people want to trust people,” said Boardman police Chief Jack Nichols.
But that trust should not override precautions when it comes to business, say local law- enforcement and business professionals.
Melissa Ames of the Youngstown Better Business Bureau said there does seem to a be a lot of small-business theft.
Preventing such theft starts with the employee hiring, she said.
“The first interview is often short. Business owners wear many hats, and they might not do a thorough background check or check references,” she said.
Once an employee is hired, it’s easy for him or her to gain trust.
“You see them on a daily basis and become friends. That’s why there’s such a great feeling of mistrust when these thefts are reported,” she said.
That’s exactly how Brandon Davis, a partner from Tri T&J Ltd. of Poland, feels. Tri T&J’s former bookkeeper, Thomas Morris, is accused of taking between $75,000 and $150,000 in money, appliances and services. Davis said the partners had considered Morris a friend.
“If someone stole your purse, you’d be shocked. You’d be mad. You’d be all those things. At first there’s disbelief, that it can’t be true, but something was wrong and it started to add up pretty quick,” Davis said.
Morris has pleaded innocent and has retained the services of Atty. Robert J. Rohrbaugh II.
“We all had the ability to review things, but as far as him having access, everything flowed through his house,” Davis said.
Davis said the partners had meetings and believed they were looking at accurate books.
“Before you know it, you’re looking at stuff that’s completely made up,” he said.
“It’s embarrassing to have our names associated with this as this is something we should have caught. But when you’re lied to and it’s calculated, it’s very frustrating to have to deal with when you know you’re probably not going to get your money back,” Davis continued.
Ric Barringer, owner of Southwind Trucking Inc. in Austintown, experienced the same thing when business partner, bookkeeper and trusted friend Scott Adair embezzled $1.3 million from their company between 2004 and 2007.
Adair was sentenced in August 2011 to four years in prison.
His wife, Linda, was sentenced to four year’s probation for related crimes.
“Scott had a degree in finance, so it only made sense to let him handle that part of the business,” Barringer said. “We thought the world of this guy. ... He wasn’t a bad guy at first.”
Barringer, who started Southwind in 1994, said he knew something wasn’t quite right when money became tighter than usual, but never suspected Adair was stealing. Several months later, however, he found a bank book marked “Southwind” that he’d never seen before.
“He was putting deposits into the company’s account then taking them out as cash,” Barringer said. “When I confronted [Adair] about that third account, he walked out and never came back.
“I look back, and the things he told me don’t make sense now.”
Barringer said he gave Adair two years to make restitution to the company before taking the case to the Mahoning County Prosecutor’s Office.
“I tried to bring him to the table to reconcile enough to keep us afloat and get him out,” Barringer said. “He never admitted to [the embezzlement.]”
Ames said the prevalence of whistleblower policies are on the rise to help address this.
“You want a culture of trust, but this lets employes know that they are open to come to you and report potential fraud without repercussions,” she said.
The BBB also recommends a segregation of duties in a company, and if a certified public accountant is not reviewing a business’s finances, then a CPA should at least be consulted about the company’s procedure to try to stop any weaknesses.
“It will cost you up front, but you will have a better sense of your business from a bird’s eye view,” Ames said.
Poland Village Police Chief Russell Beatty said, in his opinion, these types of thefts are under-reported, especially when the suspect is a close friend or family member and the company will try to seek restitution without going to court.
“It’s about checks and balances. With any business, you should have at least a few people looking at the books, and it’s best if they aren’t from the same department, too,” Beatty said.
Barringer said his company has implemented this type of system of checks and balances, something he wishes he’d done sooner.
And Southwind employee Kathy Caldwell said the system is working well.
“We do it by cross control. One person opens the mail, one makes the deposits, one writes the checks, and so on,” said Caldwell.
“Everyone has to be able to look at the books and say, ‘I know what that is for,’ and Ric [Barringer] sees it all.”
Nichols said outside audits are “a good thing and it’s good if the owners know how the books work.”
Nichols offered several warning signs of internal theft.
“If your bookkeeper is just a dedicated employee and hasn’t taken a vacation in seven years, take a second look. A lot of times, [those accused] float money from one account to another, and if they take time off work, the whole thing falls apart,” Nichols said.
The thefts are usually discovered when someone else has to step in and take care of the books, he said.
“I’ve seen employees open VISA cards in the name of their employer and use them to pay their own bills. ... Or they write out checks to pay household bills out of the company checkbook, and the employer doesn’t realize there are two payments made to Ohio Edison this month. I’ve seen mortgages paid by company funds,” Nichols said.
Ames said if business owners suspect fraud, they could contact the Association of Certified Fraud Examiners, or forensic accountants, and said it’s always a good policy to have an outside audit done periodically.
“It’s all about taking time to make sure your business is run as efficiently as possible,” she said.