Question: The news this year has had its share of embezzlement cases where employees, including a school administrative assistant, a law firm office manager, a bank branch assistant manager and a museum bookkeeper, have been accused or convicted of stealing money. Do you consider the volume of cases a rash related to a slow and unsteady economic recovery, or is a more-or-less normal level?
Answer: The number of embezzlement-related cases reported to authorities has remained consistent over the past five years.
Q: Embezzlement is the act of someone stealing money or property that’s been entrusted to them. Is there a specific Hawaii law that treats such theft differently than other theft?
A: No, Hawaii’s theft statute is broadly defined to include eight different means of committing theft, one of which applies to all forms of embezzlement.
Q: Is there a threshold dollar figure for embezzlement?
A: A person commits theft in the first degree if he/she steals property the value of which exceeds $20,000. Theft in the first degree is a class B felony punishable by up to 10 years in prison and a $25,000 fine, or both.
A person commits theft in the second degree if he/she steals property the value of which exceeds $300 but not more than $20,000. Theft in the second degree is a class C felony punishable by up to five years in prison and a $10,000 fine, or both.
Q: Are certain kinds of organizations or businesses — say by industry or ownership or size — more susceptible to embezzlement than others?
A: No.
Q: What employee positions generally have the highest risks for embezzlement?
A: Office managers and bookkeepers, and those who handle cash transactions or process the proceeds of cash transactions.
Q: A lot of embezzlement cases seem to involve misuse of checks. What are some other ways people embezzle?
A: Unauthorized use of a company’s credit card; falsely applying for, and using, a credit card taken out in the company’s name; stealing company property; creating "ghost employees" on the company’s book; employees "giving themselves" unauthorized raises, overtime or bonuses; and stealing from the "petty cash" account.
Q: From your experience, what are among some extraordinary cases you’ve heard or been involved with?
A: I can’t discuss pending cases. However, here are completed cases that involved people who were convicted of theft based on embezzlement-type activities:
Ronald Ching was the former bookkeeper for ABC Music Inc. He had nine personal credit cards issued in his name.
Analysis of his credit card records revealed that he was using his credit cards to make large "purchases" at various strip clubs. During the period from October 2000 to May 2004, Ching used ABC Music company checks to pay off his credit cards.
All together, Ching used 57 company checks to pay off his credit card debts. The total amount from the 57 checks was about $370,000. Ching concealed his theft by listing all of the checks in the company ledger as payments to Yamaha Music Co. — a regular vendor used by ABC Music. Ching’s theft was a big reason why ABC Music later filed for bankruptcy.
Tammy Tanaka was a cashier for the Hilo Hattie store at Ala Moana Center. An internal audit revealed that Tanaka was processing fraudulent merchandise returns and taking a corresponding amount of cash from the register.
The audit revealed that from January 2005 to May 2007, Tanaka processed over 600 fraudulent returns and stole $122,085.51. The theft was inadvertently discovered when a manager reviewed the daily journal report and discovered an unauthorized refund of $540, which the manager had not authorized. The refund was traced back to Tanaka. That triggered the audit. Tanaka was able to conceal her theft by either not preparing a return and void form or by disposing of it, rather than attaching it to the daily journal report as policies required.
Q: What are some prevention strategies organizations can take to guard against embezzlement?
A: Companies should conduct frequent, random, unannounced audits. Audits should be completed by outside accountants or auditors.
Checks should require at least two signatures. Never pre-sign checks.
Don’t use signature stamps. Don’t use computerized signatures on checks. Monthly bank statements and credit card statements should be mailed to an address that is inaccessible to the officer manager and bookkeeper, and other employees who are responsible for money-related transactions and record keeping.
Those statements should be scrutinized monthly and compared to the company’s books to ensure that the information is consistent and accurate.
Don’t let one person handle payroll, accounts receivable, accounts payable, etc. Divide these tasks among several employees.
Interviewed by Andrew Gomes. "Akamai Money" seeks out local experts to answer questions about business in Hawaii. If you have an issue you would like us to tackle, please email it to business@staradvertiser.com and put "Akamai Money" in the subject line.
