How do you deal with an employee you suspect of embezzlement?

Legally Speaking

Clifford Warren Lober

Dr. Lober is a dermatologist in practice in Florida and a partner in the law firm Lober, Brown, and Lober.

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It’s a bright, sunny afternoon and Bryan, who has just returned from lunch, is interrupted by his receptionist who tells him Lonnie is on the telephone. Lonnie is evidently quite upset and believes that his office manager is stealing money from the practice. Bryan picks up the telephone and begins the conversation.

Bryan: Hello, Lonnie! How are you?

Lonnie: I’m really upset, Bryan. I think that my office manager, Sara, who has been with me for over 15 years, has been stealing money from my practice! I thought that she was a great employee, since she has always been the first one to arrive in the office in the morning, the last to leave in the afternoon, and only rarely takes vacation or sick leave. At the end of every day she takes all of the checks and cash we receive and deposits them in the bank. Sara checks the credit card and bank statements when they arrive every month. She’s really efficient!

Bryan: Why do you think she is stealing money?

Lonnie: After several patients complained that they received bills from my office that they had already paid and after receiving a notice from the IRS for non-payment of taxes, I asked our front desk receptionist to keep a record of the amount of money she gave Sara to deposit every day. When I checked with the bank, only part of it was actually deposited.

Bryan: If your suspicion is correct, Sara may be guilty of embezzlement.

Lonnie: Isn’t that simply stealing?

Bryan: That depends upon state law. In some states, criminal statutes treat embezzlement as theft. Usually, however, embezzlement is a distinct crime in which several factors have to be present. First, the property must have belonged to someone other than the accused. In this case, the money clearly belonged to you or your practice, not Sara. Secondly, the accused usually must at some point have been in lawful possession of the property. Since Sara is your office manager and charged with handling the money received, she was certainly in lawful possession of your money when your receptionist gave it to her to deposit.

Lonnie: Why is it so important that she was in lawful possession of the money?

Bryan: Because if you accuse someone of embezzlement who was not in lawful possession of the money at some point in time, you may be accusing them of the wrong crime.

Lonnie: Are there any other requirements for someone to be accused of embezzlement?

Bryan: Yes. Many states require that the accused be in a position of trust. In this case, your office manager has a fiduciary duty to safeguard the practice’s money. Finally, the accused usually must have intended to defraud the lawful owner.[pagebreak]

Lonnie: How can you prove what Sara intended to do? Can’t she simply say she intended to put the money back?

Bryan: Although she may say anything she wants, that defense usually does not hold up in court. Are you aware of any significant changes in Sara’s life? For example, are you aware of a financial or health crisis in her family? Is anyone in her family addicted to drugs, alcohol, or gambling? Significant changes in an employee’s personal circumstances may be associated with an increased likelihood of embezzlement.

Lonnie: No, Bryan. I am not aware of any such circumstances. Incidentally, what is the punishment for embezzlement?

Bryan: Depending upon the value of the property or money taken, embezzlement may be a misdemeanor or a felony. Penalties usually involve making restitution to the victims as well as fines and possible imprisonment. Several states impose additional or harsher penalties for the embezzlement of particular items, such as firearms. They may also do so when certain classes of victims, such as the disabled or elderly, are involved.

Lonnie: What should I do now?

Bryan: Effective immediately, you must look at all bank and credit card statements yourself. Your receptionist should tell you every day the amount of money that is to be deposited and it should correlate with your bank receipts. You should revoke Sara’s access to the practice’s deposits and bank accounts and have new account numbers generated. If you have a signature stamp, get rid of it and insist on signing all checks over a minimal value yourself. I will contact your CPA and initiate an audit of the practice. You need to place Sara on paid leave immediately. If the audit confirms that she has embezzled the practice, you will need to terminate her employment.

Lonnie: Thanks, Bryan!

If you have any suggestions for topics to be discussed in this column, please e-mail them to me at loberc@gmail.com. See the February 2013 issue of Dermatology World for disclaimers. 

 

Key points

  1. To prove the crime of embezzlement, it usually must be proven the property in question initially belonged to someone other than the accused, that the accused at some point in time had been in lawful possession of the property and in a position of trust, and that the accused had the intent to convert the property to his/her benefit.
  2. Indications of possible embezzlement include overly dedicated employees who always arrive first in the morning, leave last in the afternoon, and rarely take vacation or sick leave, who have sole oversight of office finances, and those who have a significant change in personal circumstances (such as a major illness or addiction in the family).
  3. Penalties for embezzlement, which usually depend upon the amount and type of property converted, usually involve restitution as well as fines or imprisonment.
  4. To avoid embezzlement, personally examine all bank and credit card statements. No single person in your office other than you should have exclusive daily oversight or control of the practice’s finances. If you have a signature stamp, get rid of it and insist on signing all checks over a nominal value yourself.
  5. If you are suspicious that your practice has been embezzled, contact your attorney.

 

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Key points