The Tribune Democrat, Johnstown, PA

Business

March 2, 2013

Embezzlers rely on trust

— Embezzlement: It’s a very different kind of heist – more espionage than smash-and-grab.

With the indictment of a Westmont resident for a suspected five-year, $100,000 retail fraud and the recent exposure of a Dixon, Ill. comptroller’s $53.7 million take across 20 years of municipal service, it’s evident that, even with the best laid plans, scammers will still find ways to plunder.

But there are ways to combat it, according to fraud experts.

Occupational embezzlement could spell doom for upstart or small businesses, especially with a lack of effective fraud detection worked into their tight budgets. Municipal embezzlement can directly impact the solvency of a city or township as much as it indirectly affects the community’s utilities, services and quality of life.

Rita Crundwell had been handling money for the northeastern Illinois community of Dixon since the 1980s. She pleaded guilty to wire fraud earlier this month, in one of the most high-profile – and highly damaging – corruption cases the state has ever seen, according to The Associated Press.

Randall Samborn is the spokesman for the U.S. Attorney’s office overseeing the northern district of Illinois.

“There’s no question that the town of Dixon placed a great deal of trust – almost its entire trust – in Rita Crundwell to handle its financial affairs,” he said. “It was sadly inadequate verification – this fraud was allowed to continue for two decades.”

The keyword here is “trust.” Embezzlers require a good deal of it to work their schemes without drawing attention to their illicit activities.

At small businesses or in small communities – like those in the Greater Johnstown area – putting faith in one manager or official to keep the books (instead of cook them) can be a huge leap, according to Stephanie Stohon, partner with CPA firm Wessel & Co. Her firm specializes in fraud investigation.

“(Often), you have one person paying payroll, making the deposit, paying expenses, signing the checks and reconciling the bank statement,” she said. “With the lack of segregation of duties in companies, it’s more likely that one person is responsible for incompatible accounting duties and has usually been with the company for a number of years, so they’re trusted.”

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