Vermont Business Magazine: Embezzlement: A sad reality

Jim Rollings, president of Greater Burlington YMCA, knows what embezzlement costs. Fresh in his new position at the 'Y," Rollings discovered six months ago that trusted longtime employee Linda Hall had embezzled $71,000. He said the loss was barely discernible over the years. Rather than wanting Hall punished, he said, the collective feeling employees held toward Hall came down to a pervasive sadness.

Rollings' experience at the YMCA is just one of many cases of embezzlement counted in 2003, for which the total number isn't in yet, but those who deal with embezzlement say it is increasing in Vermont. In 2002 there were 99 cases.

Embezzlement in Vermont indeed is on the rise; cases disposed in court have almost doubled since 1990. Although it remains relatively rare compared with other types of larceny, it's slowly increasing. But when it happens, it takes a toll on companies beyond financial cost.

"I think there's a dramatic increase," said Chittenden County State's Attorney, Bob Simpson whose experience with the law dates back to 1979 when he worked as a deputy. "There seems to be a significantly greater number of people who are stealing from their employers."

The crime of embezzlement can range from a clerk at a convenience store pilfering a 20 from the cash register, to intricate theft that involves tens or hundreds of thousands of dollars. In some cases it can "cripple" a business, said Simpson, citing a company that went bankrupt shortly after reporting embezzlement.

Oddly, while people such as Simpson who investigate and prosecute embezzlement sense a dramatic rise in the crime, the numbers show only a slight increase over the years. In fact, 2002's 99 embezzlement charges come in lower than the 1998 high, when the state saw 120 cases of embezzlement.

Of those, the cases that made it to court in 2002 were only 52, according to reports from the Vermont Center for justice Research. In 2003, 53 embezzlement cases went to -court, but only 31 were convicted. In 1990, when VCJR started counting, only 27 cases of embezzlement were disposed, and 23 convicted.

But the numbers only tell part of the story of how much embezzlement costs financially, and otherwise.

The YMCA had offered Linda Hall a second chance. Hall came to the 'Y' as part of a prison rehabilitation program after serving time for embezzling $200,000 from the Town of Fletcher as the town treasurer.

After nine years at the 'Y' - among other things becoming a software expert there - Rollings said everyone assumed Hall had rehabilitated. In fact, he didn't even know about her past until an employee came to him suspecting the embezzlement.

"It was a sad dose of reality," said Rollings, characterizing the crime as similar to compulsive gambling. "It's like it's almost a sickness," he said.

Aside from the stolen money - for which, it turns out, the YMCA was insured - Rollings said the company had to hire a "forensics accountant." Other than that, he said, the overwhelming "cost" to having fallen victim to embezzling was the disheartening nature of the crime.

"It was just a little bit of a hard lesson in the realities of the imperfection of people and their behaviors," he said.

Another indirect cost to the embezzlement, he said, is the time he has to take to deal with it, and how it distracts him from his duties running the organization.

"It's time taken away from what you're here to do," Rollings said. "It's a sad distraction."

Rollings advice to other employers mirrors that of State Police.

"You need the obvious checks and balances, and you need a system that carefully goes back and reexamines all the calculations and balances and safeguards. You can never fully trust. You've got to have the systems in place that absolutely guarantee that there are no possible holes," he said.

Vermont State Police Detective Sergeant Mark Lauer says all employers ought to do a credit check on any employees who may handle finances. In fact, he says, a multi- or all-state background check is also a good idea. He said potential employers can request their own background checks from state police for a nominal fee.

Even before hiring, Lauer recommends employers make sure they have a policy in place articulating "that the content of their computer is not personal, and is subject to analysis or investigation." Also, he said, the policy should be clear that employee computer activity will be monitored.

"Whether you do that or not, the threat or possibility that it will happen is a very good deterrent. (Employers) should do spot checks of the activity taking place on their networks ... if you are in an industry and dealing with money, be suspicious of an employee transferring to their own account."

Like Rollings, Lauer stresses that companies need a "check and balance" system in place.

"There should be one person doing check writing and balancing the check book, and another person reviewing the check book for accuracy. It should be done annually," he said.

Embezzlement always has a cost above and beyond the stolen money, Lauer said. Sometimes the cost is that of buying and installing a hidden video camera system in a convenience store; sometimes it's hiring a "forensics accountant," or an auditor to track missing money. Sometimes it's indirect, such as when it takes time away from running the business.

Embezzlement is often hard to find, and hard to track statistically, he said.

He said annually Vermont sees between 3,000 and 5,000 robberies, and the suspect ends up arrested and in jail within 72 hours.

"Embezzlement goes on for years and years, and over time people get more aggressive because they haven't been caught yet," he said.

It can be extremely hard to detect, as in the case of Linda Hall, in which only an experienced accountant could figure out where the money went. Or it can be like the story Lauer told about a bank employee who skimmed a few cents here and there, amassing $20,000 in three years.

For 18 months, ending in June 2002, Beth Degreenia of East Haven was stealing from the US Postal Service. Degreenia was postmaster in Lyndon Center. She was finally caught because of a discrepancy between the number of postage stamps she ordered and the number she sold.

She admitted in January 2003 that she would sell the stamps and keep some of the money for herself Authorities charged her with stealing almost $34,000. She had been postmaster since 1999.

Embezzlement is considered a "twopart" crime, said Max Schlueter, Director Vermont Crime Information Center at Department of Public Safety. Often it gets reported as a larceny, and only after investigation does the arrest get written as an embezzlement. Indeed, in 2004, there have been 10 cases of embezzlement investigated, but 16 arrests for the same crime, making it a complex crime for people like Schlueter to track.

But there is some good news.

"Embezzlement is not a real common crime in Vermont. It's pretty low as a statewide figure, so we don't spend a lot time analyzing it," he said.

Embezzlement goes on for years and years, and over time people get more aggressive because they haven't been caught yet.