An Interview With a Convicted Felon: Employee Theft

Dan, a convicted felon was in his late 40s who worked as a bookkeeper/controller full-time for a movie theater company, and part-time for another movie theater operator.

My firm was called in to perform an investigation on dance company many years ago. I ended up testifying before jury that convicted Dan of employee theft. It’s not often you get to interview somebody who you actually put in prison. The first thing Dan said to me, “was getting caught was the best thing that ever happened to me.”

Dan was charged with Grand Larceny in the First Degree and was convicted by a jury after our testimony.

Opportunity

He was a fairly competent bookkeeper with several years’ experience who would work 50 to 60 hours a week at his full-time job and part-time job. He enjoyed the work and was in charge of an office of two people, one accounts payable clerk, and one accounts receivable clerk at his full-time job. At the part-time job he oversaw two people in a similar situation.

He was a family man with three children and a wife. He spent most of his time working and little time with his family. His wife had a good job and the family lived comfortable on their combined income.

He said he was diagnosed with bipolar disorder. He enjoyed gambling, playing poker and blackjack. Mostly he like playing blackjack at both Atlantic City casinos and online.

Most small business owners are so busy that they are extremely happy to find a competent employee to handle the bookkeeping and accounting and finance needs without much intervention by the owners. That was the situation that Dan found himself in. As he took on more responsibilities at both of his jobs he realized that he had complete control of the accounting and finance activities at the company. There was little or no segregation of duties, spot checking his work, etc.

Rationalization

At some point Dan said his bipolar disorder worsened and he started to gamble more and more. The problem with gambling, especially blackjack is that typically you will win five or six hands in a row and start to think you are invincible. This is known as the gambler’s fallacy. For example, let’s say you work your way up to $40,000 or $50,000 in winnings over three hours at an Atlantic City Casino; at that point you feel invincible, and bet it all and lose.

Dan also mentioned that one of the manages did not like him, and this helped him rationalize stealing.

Dan’s gambling addiction and his bipolar disordered worsened and one day he decided to write a checks to himself from both his part-time job and full-time job.  No one seemed to notice or care. Eventually he wised up and set up two companies utilizing business names similar to some of the company’s vendors.

For example, if they were buying movie supplies from a movie vendor called Movie Time Supplies, he would set up a bank account doing business as Movie Supplies. The combined sales of the businesses that he worked for were $11 million, so he was able to hide close to $250,000 per year without anyone noticing.

Pressure

As his losses mounted, he needed to steal more and more to pay his debts and hide it from his family.

He went on stealing money for close to 10 years and spending all the money on his gambling habit. Eventually he got sloppy and started to write more checks to himself rather than write the check out to one of his phony companies.

How he was Caught

After 10 years he left the company to pursue other jobs, never thinking anything would ever come of the millions of dollars he stole from the businesses.

As I said earlier, the business owners were busy and there were no internal controls so there is no reason Dan would ever have gotten caught. However, a tax audit was performed by the state after he left the company, and during the audit they picked up checks that he wrote out to himself.

State audits typically looks at any checks written to individuals. The reason for this is that the state likes to classify individual as employees so they can collect more payroll taxes and can check for underpaid sales tax. This is standard operating policy for all state audits. During the audit Dan’s name came up several times. This was a surprise to the owners who did not know why he was writing checks to himself. Eventually they became very nervous and had a forensic audit performed and found out that he had stolen a great deal of money.

If Dan was still working at the company at the time of the audit, he could have easily covered this up. An investigation resulted in charges being filed against him. He pleaded guilty and spent five and a half years in a minimum-security prison. Once out he started to pay restitution for all the money that was stolen.

Dan did tell me that other employees were involved, but he did not implicate them; I’m not sure if this was 100% accurate.

While in prison he was offered classes in computer and business which did help improve his skills.

Dan said getting caught was one of the best things that happen to him.