The Good:

The good news in this situation is that workers’ compensation fraud can sometimes be prevented. Learning how to control and prevent this type of fraud will help save you time, money, and energy in the future. Check out this article on techniques to reduce and control workers’ compensation fraud.

The Bad:

The bad news is that your business may be at higher risk for workers’ compensation fraud. There are signs that tell whether your business is a target for workers’ compensation fraud. This PDF file consists of 15 warning signs of workers’ compensation fraud, and this Fox Small Business video explains how and why it may happen.

The Ugly:

Despite knowing how to prevent workers’ compensation fraud, the ugly truth is that it still happens. It seems workers’ compensation fraud cases are increasing with the economy at a stand-still. This site states that workers’ compensation fraud is the second mostly costly type of fraud to small businesses, behind identity theft. Here are workers’ compensation fraud cases happening to small businesses around the nation.

1. Caught in the Act
2. Hid Payroll for an Unfair Advantage
3. $2.7 Million Scam

“Makowski-Budrow was as a paid on-call firefighter”

A former firefighter from Brainerd, Minnesota was sentenced to 30 months in prison for his role in embezzling over $600,000 from the Mille Lacs Band of Ojibwe. He worked there as a construction project manager and admitted to arranging kickbacks for personal enrichment from 2005 to mid 2007.

“An accountant and her husband have been charged with theft and forgery”

This dynamic husband and wife duo from Denver, Colorado were accused of stealing nearly $270,000 from a Denver construction firm. She worked at the firm as a project accountant. Their theft scheme was a combination of check forgery and creating bogus vendor companies.

“An employee in the vendor’s organization had nickel and dimed several stores”

A jewelry department store had noticed that their inventory was shrinking by increasing amounts. The manager made it so employee theft was highly unlikely and shoplifting was near impossible. It so happened that a vendor employee was shorting this store and other store inventories by almost $200,000 from past years. Proper audits may have solved this mystery sooner.

“Navistar employees buried their fraud in accounts that are easy to manipulate”

In this case, the former auditors of Navistar are being sued while some of their employees are in hot water for concealing fraudulent transactions. It is said that the employee fraud was hidden in vendor accounts where it was simple to conceal from the auditors. The employees agreed to pay hefty clawbacks and fines from the years when the company’s income was falsely inflated.

Check out this article for more types of vendor fraud schemes, too.

“She admitted writing 474 unauthorized checks… and depositing the funds into her own bank accounts.”

The former bookkeeper of Standard Sheet Metal Inc., a metal fabrication company in Kansas City, pleaded guilty to 16 counts of bank fraud. She admitted writing 474 unauthorized checks on the company account and depositing them towards her personal accounts. She stole nearly $720,000 from the business and was ordered by the judge to pay restitution to the metal company where she was employed for over ten years.

“He was such a nice person… we didn’t suspect a thing.”

Ryan Holloway, a former office manager of a Moab, UT doctor’s office was accused of embezzling $215,000. He pleaded guilty to “second-degree felony theft and third-degree felony forgery.” The local physician said he never suspected that Holloway was capable of such intolerable acts. Holloway left a sloppy paper trail of his forged checks and bank transfers, which raised suspicions and caused him to get fired. Even though Holloway was caught, the Moab physician says he will be dealing with this mess for years to come.

“She was a trusted employee… She fooled us all.”

Terry Straw of Colorado was an offer manager of a construction company for ten years and created a plan that allowed her to embezzle almost $750,000. She caused 60 layoffs and nearly ran the company to the ground. The company president said she had everyone fooled, and although the company is in delicate condition, they will pull through these tough times.

“We have been such a tight-knit organization all these years.”

In Michigan, the former office manager of an orthodontist practice was accused of embezzling over $180,000.  Rhonda Wilson was a trusted employee of the firm and worked there for 28 years. The family-owned orthodontist practice thought they had their bases covered, but they believe that she began skimming cash deposits and disguising vendor payments from 2007 to 2010. The practice now feels that Wilson should feel embarrassed for taking advantage of their trust.

1. “All an individual needs is a valid routing and account number.” Unfortunately this scenario and outcome is not uncommon. In this particular story, at least seven blank checks from the Natchez-Adams School District were written out and cashed in the amount of $8,500 by six different people. All of the checks were cashed at varying Wal-Mart stores along the Gulf coast. Lieutenant Craig Godbold says this happens more often than we think, and the perpetrator is usually long gone before the case is solved.

2. “The business owner says she never worked for him.” Just a few days ago, a woman from Fort Myers was arrested and accused of stealing and manipulating checks written to a dry cleaner. Although, she claims she found the stack of checks in her drawer at home (some dated back to 2001) when the business owner said she never worked for him. Although the amount that Diane Taylor stole is unknown, hopefully the business can recover from this detrimental experience.

3. “He has also illegally obtained the name and accounting number of at least three individuals.” An unidentified man in Kentucky has somehow gotten a hold of blank checks from the Lyon County EMS. Thus far he has cashed three checks and also obtained the names and information of three individuals and used their information to cash the forged checks. It’s currently unknown how much he has stolen, but he is still on the loose.

4. “They had every piece of a person’s confidential information.” A group of men were caught with fraudulent checks this past weekend in a popular New Hampshire outlet. After obtaining a search warrant, the van rented by the three men was full of fake check-printing equipment, and hundreds of individuals’ personal information that were used on the fraudulent checks.

A new bookkeeper tried to cover his tracks by backdating embezzlement entries to before he arrived. At the time, he was among the many who did not know that QuickBooks already had an always-on audit trail. Turning it on simply made QuickBooks begin tracking CHANGES to existing entries, in addition to letting you see the audit trail report (without changes) from the date someone began using the QuickBooks file. I told the business attorney this. He later said that the bookkeeper confessed and went to jail, after seeing the actual entry dates of the backdated entries.

QuickBooks fraud often involves bookkeepers paying personal utility, gas and other bills, possibly by not entering proper payee names in QuickBooks. An annual income statement, which compares each month to the same month last year, helps catch this and other improper expenses. One bookkeeper promised to repay a company owner $50,000, with a second mortgage on the bookkeeper’s house, when caught using QuickBooks this way. As we were leaving, he also offered to deliver an overdue company electric check. It was overdue because the bookkeeper used prior company electric checks to pay his personal electric bills. However, the bookkeeper then substituted his own account number, for the company account number, on the new check. The electric company would not change this initially, though the amount was ten times what the bookkeeper owed when he submitted the altered company check.

QuickBooks fraud also often involves pocketing cash sales. Intuit facilitates this by letting users print invoices and delete them, without first saving them to the audit trail. It finally got a preference to require saving, but it is (was?) off by default. Intuit executives know this often happens, but their lack of integrity (once Intuit’s #1 operating value) lets them keep helping owners commit tax fraud in this way.

The above type of annual – monthly comparative income statement also lets me spot frequent QuickBooks petty cash fraud. This involves repeat submission of the same receipts. Other QuickBooks frauds showed stolen inventory or receivables. Receivable fraud (or bad bookkeeping) shows up in accounts receivable aging reports, especially when you change the periods to 90, 360. Fortunately, the QuickBooks Accountant Edition can quickly and automatically fix many cases where the original sale and the later collection were both credited to income. This automatic fix also applies to accounts payable, sales tax payable and payroll tax payable, where both the initial recording and later payment result in duplicated expenses.

A bookkeeper and a manager used QuickBooks to steal $250,000+, while an owner was out trying to recover from a liver transplant. They covered this by not paying about this much in payroll taxes. I got extensive affidavits and other documents, to prove the owner was not available at the time of these thefts. These convinced the Internal Revenue agent. However, a ridiculously incompetent supervisor insisted on assessing the taxes against the owner. IRS, of course, collected nothing because, by then, the owner had nothing, but these types of cases led to our getting the Internal Revenue Taxpayer Advocates.

Annual – monthly comparative income statements and QuickBooks Accountant Edition fixes are very good, but AuditMyBooks is even better at catching Quickbooks fraud and errors. This is the newest of my Amazing QuickBooks Add-ons.

~Mike Block CPA of Fort Lauderdale, FL

The Six Signs of Internal Fraud: http://accounting.smartpros.com/x59050.xml

Warning Signs of Fraud- Behavioral Red Flags: http://www.null-lairson.com/blog/2011/07/warning-signs-of-fraud-%E2%80%93-behavioral-red-flags/

Seven Signs that Fraud May Be a Problem in Transportation Operations: http://www.scdigest.com/assets/On_Target/08-07-29-1.php?cid=1818&ctype=content

National Check Fraud Center- Check Fraud Prevention: 16 Signs for Bad Checks http://www.ckfraud.org/ckfraud.html#signs

13 Red Flags to Bookkeeping Fraud: http://www.brs-seattle.com/bookfraud.html

If you’ve been there, you know that you are overwhelmed by the fear of the uncertainty; right?  How much are you willing to pay to get an answer?  Most anything!   The decision is not based on the money, but rather on the value of being able to provide the one thing that is needed most; the certainty.

Before I let you in on some deliverable solutions, here are the six most powerful human needs:  Certainty, Variety, Connection, Improvement, Significance & Contribution.

If you are analyzing this – and I truly hope you are, you might say –“hey Val, if our client needs certainty but also needs variety – isn’t variety uncertainty?”  Yes, absolutely!   That is the “balance” factor.

I imagine you’ve seen cases where each year the client gets the same form to fill out, the same questions (they still don’t know how to answer), and see the same tax return and bill at the end.  They are so-o-o-o certain it will never be better, that they are bored to death – not their death, yours.  It filled one need, and yes a significant one, but the relationship was void of the other needs.  Have you seen the stats – 33% of all clients are looking for a new accountant?  Is that shocking to you?

Solution  – provide a service to your clients that will meet more needs – ideally all six!  Here is how Audit My Books fulfills them ALL:

Certainty – Peace of mind by identifying suspect financial transactions, and proactively reducing business risk.

Variety – the AP Analyzer provides a 17 point feedback system.

Connection – Use the FREE Check-up to start a discussion.

Improvement – Provide client with a control mechanism for errors/fraud.

Significance – Continuously monitor QuickBooks for possible problems and schedule on a consistent basis, such as monthly or quarterly (which appeals to certainty also).

Contribution –  Use your professional expertise to determine cause, seriousness,  and next steps – the client feels their sense of contribution when they take action to implement.

Allow me to sum up (in my bottom-line way of thinking) why a high level of value service is important.  The one who is closest to the client wins.  It is as simple as this:   AuditMyBooks will bring you closer.

I hope I’ve given you a couple ideas to inspire you today.  If so, I ask you to please contact me.  Val Barschaw at www.valueadded-learning.com.  The QuickBooks training that is branded with your name and information, and hyper-linked back to you for clear communications.

A wide-spread check fraud ring is currently being investigated in Arkansas. Some of the confiscated counterfeit checks were made to look like local businesses in Jonesboro, AK. These checks mimic payroll checks from the company, Staffmark. The exact amount of check fraud is unknown, however it is said that it is an access of hundreds of thousands of dollars and is likely to become higher with further investigation.

http://www.nola.com/crime/index.ssf/2011/07/former_jefferson_parish_public.html

A former employee of the Jefferson Parish public school system pleaded guilty to “conspiring to commit payroll fraud”. While employed under the school system, from February 2007 to September 2009, Geselle Savoy submitted fraudulent payroll amounting to $132,000. From this amount, she took $38,000 for herself. She is to be sentenced this October, faces a $250,000 fine and up to 5 years in prison.

http://computerizedaccount.tripod.com/id24.html

Private detective, Steve McFarland, uses QuickBooks to help him catch fraud in small businesses. In this case, two employees from a general contractor in Gilroy, CA stole $1.2 million in check fraud and embezzlement activity. The audit trail in QuickBooks helped detect these crimes, however tedious hours and hours are spent breaking down what the audit trail information means, when AuditMyBooks Analyzer detects the errors and fraud in minutes!

http://online-accounting-bookkeeping.blogspot.com/2011/04/bookkeeper-fraud-not-interpreted.html

Bookkeeping fraud doesn’t just happen in the U.S. In this study conducted in Australia between 2005 to 2011, 65 counts of bookkeeping fraud were found. The fraud damage amounted to $31 million dollars. Keep in mind, that these are the accounts of fraud that were actually found.

http://www.lowellsun.com/breakingnews/ci_18483419

Another case of workers comp and payroll fraud hit my hometown of Lowell, MA a few weeks back. Dara Duong of Lowell, MA was accused of underreporting payroll- “thus avoiding paying a total of $110,000 in workers comp insurance premiums.” She allegedly stole from three local staffing companies and pleaded not guilty to these accusations.

http://blogs.pcmag.com/securitywatch/2011/04/small_business_banking_fraud_r.php

After reading these stories, do you still think fraud and accounting errors are less common than we think? Check out these small business fraud statistics- prepare to be blown away!

The woman who admitted to stealing millions from her employer, then went on the run, is back in Knox County.  She plead guilty to wire fraud and money laundering in February. She was a bookkeeper at Scan Carbon, and admitted to transferring up to $4 million dollars from the company to personal accounts, then creating false bank statements in an effort to cover her trail.

While working as a secretary and bookkeeper for Plumbers Local 614, Michelle Turney Thurlough secretly drained nearly $8,000 from the union’s finances.  She pleaded guilty to federal embezzlement charges in 2005, was placed on probation and ordered to repay the union $23,172, including auditing expenses required to unravel her theft.  Just six months after her sentencing, however, Thurlough began stealing again, this time from her new employer, Opera Memphis, which had hired her as an accountant and officer manager.

We had a small loophole — we weren’t double-checking someone we trusted.  She tried to fly under the radar with the small amounts she was taking.  (read more about fraud at a Jewelery store in FL)

A former bookkeeper for Opera Memphis pleaded guilty Monday to stealing more than $42,000 from the nonprofit organization and must spend 90 weekends in jail. (read more)

A former bookkeeper faces up to nine years in prison after she pleaded guilty this morning to stealing hundreds of thousands of dollars from her employer.  (read more)

Unless you are a trained medical professional, several key questions remain.  What is it?  How concerned should I be?  What should I do next?  A vascular surgeon would tell you that the growth is a carotid body tumor (also called a chemodectoma or paraganglioma) and is found in the upper neck at the branching of the carotid artery.

The surgeon might also add that although these types of tumors are not normally deadly, they can be locally aggressive; therefore, removal is recommended.

I think of AuditMyBooks Analyzer as a CT scan of QuickBooks.  Most people can look at the results from a scan and determine if something is wrong, but that’s really just the beginning.  It takes a skilled person to answer the important questions.  What is it?  How concerned should I be?  What should I do next?

The cure for errors and fraud, is best prescribed by a ProAdvisor, CPA or CFE.  This person has the independence and experience to evaluate the scan, assess the risk and suggest a solution to address the problem.

Get your FREE check-up for errors and fraud today!

Prosecutors told jurors that former part-time bookkeeper Jennifer Zito was a “very good liar” who stole from an elderly businessman who had no accounting or computer skills.

A man pleaded guilty to embezzling more than $448,000 in fake refunds from a supermarket chain and was sentenced to four years in prison.

A bookkeeper was arrested for embezzling nearly $250,000 from Tokay Glass Company over a period of several years

A bookkeeper who confessed to stealing $50,000 from her employer is now facing felony charges.

The former bookkeeper of a real estate company was recently sentenced to four to six years in prison for committing tax evasion and taking money from his employer.

The former bookkeeper of a non-profit agency, who charged a quarter of a million dollars to the organization’s VISA to buy designer clothes, a truck and a lake house, was sentenced Monday to more than four years in federal prison.

A bookkeeper faces up to 15 years in prison after pleading guilty Monday to embezzling more than $110,000 from two customers.

A woman is charged in a scheme to take more than $275,000 from the roofing company where she worked.

A woman went to jail after pleading guilty to stealing more than $350,000 from a business as the company’s bookkeeper.

It seems as though there isn’t a day that goes by in which another major embezzlement case has reared its ugly head in the United States. Some blame the state of the economy, which certainly is a positive factor for both the frequency and the discovery of this type of white collar crime by a typically more vigilant management. However, many embezzlers’ schemes last for years before they are found out, often beginning in good economic times, when it is easier to hide defalcations from business owners. One thing is for sure – there has been a spate of massive employee theft cases in recent years.

Is embezzlement a new white collar phenomenon? Certainly not – this kind of theft dates back to pre-history. Nevertheless, we believe the speed and ease with which currency moves today and sheer relative size of organizations compared to prior decades, has driven up the size and frequency of employee theft cases. Internal business controls notwithstanding, many of these cases involve simple and often “low-tech” schemes.

Visit the FraudTalk blog for the rest of the story.

A woman faces 10 felony charges after police say she wrote unauthorized checks to herself and took money from her employer.

Bookkeeper used credit cards from a business to pay his own personal expenses without authorization and also used checks of his employer to pay the expenses of his church where he had also served as bookkeeper.

A bookkeeper was charged with first-degree theft for allegedly embezzling more than $205,000 from a construction company.

A former bookkeeper for two Louisiana companies has pleaded guilty to embezzling more than $1.7 million from her employers.

Woman accused of stealing more than $46,000 between 2006 and 2009, when she worked as office manager and bookkeeper for the business.

A former bookkeeper for a real estate firm was sentenced Monday to 3 and a half years in prison and ordered to repay $1.3 million she stole to support her habits of drinking, gambling and being generous to strangers.

A former corporate bookkeeper pleaded guilty to identity theft and forgery, admitting he embezzled more than $250,000 from a Cashmere construction company via forged checks.

A former bookkeeper was sentenced to three to nine years in prison for stealing $664,000 from her employer.  Prosecutors said the woman stole the money by placing her husband on the payroll of her employer.

A judge sentenced a 54-year-old woman who stole $51,000 from the car dealership she was working for a few years ago to a year in jail Friday.

A question often posed to me is, “What is the typical profile of an embezzler?” Based upon Marquet International statistics compiled over the past three years of major embezzlements involving employee thefts of more than $100,000 in the United States, certain characteristics do stand out.

For example, she would be female, in her mid-40’s, working in a bookkeeping capacity at a small business, non-profit organization, government entity or in the healthcare or financial services industries. Let’s call her “Evelyn” the embezzler (no offense to all you Evelyns).

Evelyn would probably be a relatively long term employee (more than 5 years) and would generally be viewed as helpful, trustworthy and hard working. Many business owner victims exclaim after the fact how betrayed they feel and that they “trusted her completely and treated her like family.”

This fictitious prototypical embezzler Evelyn would engage in more than one type of misappropriation scheme, most likely forging checks, converting company reciepts for her own benefit or making unauthorized electronics funds transfers to herself or accounts she controls. Evelyn would most likely have schemed on her own without involving any co-conspirators. Her thefts would most likely span about 4 1/2 years. Evelyn would attempt to cover up her misdeeds by creating false bookkeeping entries and submitting false financial reports to her superiors.

In cases of employee thefts of more than $100,000, our Evelyn will embezzle on average more than $800,000. She would most likely be located in California, New York or Florida.

Rather than being motivated to steal as a result of severe personal financial difficulties, Evelyn would most likely be driven by greed or a desire to live a more lavish lifestyle than she would otherwise be able to achieve on her regular salary. The stolen monies would often go toward paying personal expenses such as credit card bills, mortgage and car payments, utilities and tuition bills. She would spend it on luxury items, such as jewelry, fine clothing, furniture, automobiles and high-end electronics. As for big ticket items, she would also likely spend the stolen funds on luxury vacations, gambling junkets, real estate or home renovations.

Of course, there are many exceptions to this profile – such as the fact that Evelyn’s male counterpart (Ernie the Embezzler) would likely embezzle a significantly greater amount.

Nevertheless, the good news is that eventually Evelyn would most likely get caught – probably by accident, but sometimes as a result of an alert co-worker or new staff. Unfortunately, annual audits typically will not surface such frauds. Evelyn would eventually get prosecuted – the wheels of justice move slowly but methodically – and she would make a plea arrangement and be sentenced to spend about 4 1/2 years in jail – roughly about as long as her scheme lasted.

Evelyn would also be ordered to pay restitution to the victim organization. The bad news is that full recovery is rarely made. Much of the money is spent and non-recoverable and those assets that can be attached will frequently have depreciated in value. Plus there is the added cost of investigating, auditing and correcting problems created by the embezzlement – sometimes large tax bills.

The other bad news is that the actions of the Evelyns of the world often have a devastating effect on many organizations, particularly small businesses and non-profits. The road to recovery can be difficult, time consuming and costly and many companies have had to cut benefits, lay off employees and even file for bankruptcy as a result of such an embezzler.

Visit the FraudTalk blog for more information including proactive steps small businesses can take to minimize the risk of embezzlement.

The former bookkeeper for a local petroleum interest group has been sentenced to more than two years in federal prison for embezzling nearly $700,000.

A woman accused of stealing more than $4 million dollars from her former employer pleaded guilty in federal court.

From 2005 through 2010, the bookkeeper devised a scheme to embezzle more than $2.3 million by creating false entries in company records to indicate certain corporate checks had been paid to transportation providers.

A woman has been arrested on suspicion of embezzling roughly $260,000 from a Glendale-based film production company and then racking up bills that included visits to salons.