Embezzlement is a very specific type of fraud, and most cases involve taking money from an employer. In legal terms, embezzlement is the taking of goods, whether money, merchandise or information, that has been entrusted to you or your employer for your use or gain. If you are a business owner, embezzlement is a serious issue that can damage your bottom line and the integrity of your company; and if you suspect an employee is stealing from you, you need to handle the matter quickly and carefully.
When you suspect an employee is embezzling, the first step is to gather evidence to prove your suspicions. Businesses with sloppy bookkeeping are often targets for embezzlers; when the books are in order and accurate, it’s significantly more difficult to hide illegal transactions. Keep a close eye on the books, and make copies of paperwork regarding suspicious transactions. Look for patterns of cash disappearing and sudden decreases in cash flow or out of the ordinary expenditures, such as a significant increase in office supply purchases. When you have these records, you can more easily prove your case for embezzlement should you choose to prosecute.
Embezzlement is a serious accusation, and making a false assumption could land you in legal trouble. When you suspect embezzlement, consult with an attorney and law enforcement to get specific advice on how to proceed. Embezzlement is treated like any other crime of theft, and there are no specific laws regarding employee theft. However, many local law enforcement departments may not have the resources to investigate white-collar crime. If you can prove that the employee used the money across state lines, such as writing checks to out-of-state business, the FBI may be willing to investigate and prosecute. To successfully prosecute embezzlement, you need to have an airtight case; without solid proof, the case may never make it to court or you can be subject to a civil countersuit from the employee.
Although the FBI makes more than 20,000 arrests for embezzlement each year, according to "Inc." magazine, very few small business actually press charges. Small local businesses are often embarrassed by the theft and do not want to make their private business public. However, embezzlement is a crime; and while a case can take several years to prosecute in court -- and you may never get the money back, even with a restitution order -- choosing to press charges can send a message that you’re serious about theft and help you get closure to a difficult situation. At the very least, you should fire an employee who steals from your company. With the advice of human resources and an attorney, create a termination document that outlines terms of confidentiality, future references and restitution, if possible. For example, in some cases, an employee may agree to give up his final paycheck, bonuses or stock options to repay you for his theft. You cannot take that money without consent, but an employee may agree to those terms to avoid prosecution.
Establish a Policy
While it can be difficult to prevent all employee theft, by establishing a training program that clearly outlines a zero-tolerance policy for employee theft, you may deter a potential embezzler. The policy should detail the steps that you’ll take if you discover theft, up to and including prosecution. Having this written policy in place -- and a signed declaration of understanding by the employee -- gives you a road map for action when there is a problem and removes some of the emotional aspects of the decision. In addition, consider purchasing an insurance policy that guards against employee theft. At the very least, if something should happen, you can file a claim and recoup some of the costs of the theft.
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