Two heads are better than one

Hiring employees is expensive. I get it. Really, I do. Segregating duties to prevent fraud by employing more than one person seems like overkill. For small businesses, although desirable, it is just not feasible. It is just not realistic to expect a small business owner to employ two or more employees when they can make do with just one.

For mid and large sized companies, segregating duties is absolutely crucial. Here’s an example of why…

Shaun Allen Clark pleaded guilty to a $2.3 million embezzlement scheme. Clark stole checks from The Scotts Company totaling $24,450. That was just the beginning. In 2008, Clark joined the Ohio Bridge Corporation as a controller. Between April 2008, and September 2009, he embezzled $2,310,006. How did Clark manage to steal so much money in such a short time? The answer is simple – he controlled everything…

  • Clark was granted access to initiate wire transfers from the company’s accounts to pay for raw materials. He used this access to transfer funds to his personal account. (Remember what I said about banks and detecting embezzlement?)
  • As controller, Clark managed bookkeeping and accounting entries involving the Ohio Bridge Company and its subsidiaries. He used his access to the “books” to hide evidence of the fraud.
  • Clark served as the point person for the bank regarding a line of credit.  He submitted fraudulent financial statements to the bank in order to comply with the terms of the line of credit and support the embezzlement scheme.

So where did the money go? Clark reportedly spent $100,000 to buy Ohio State football season tickets. He had $101,788.35 in his bank accounts, as well as Chevy Tahoe and boat for his efforts. As for the rest of the money? Who knows…

Small companies can’t hire more than the bare minimum. Preventing employee fraud at small companies requires more creativity to be successful (more to follow in a post next month).

However, medium and large-sized organizations can often afford to have more than one employee involved in a process. Doing so can dramatically reduce the potential for fraud. As this case shows, vesting all that power with one individual resulted in a seven-figure loss than would force many companies to close their doors. Saving on labor costs seems like “false economy” don’t you think?

Need a writer that understands fraud? When you hire me to write an article, blog post, newsletter or white paper you get an accomplished writer that is also an expert in fraud.

paul@mccormackwrites.com


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About Paul McCormack
I have over 20 years of experience in corporate fraud and intellectual theft prevention, detection and investigation. Unlike many fraud experts, I have both industry and professional services experience. To date, I have conducted over 800 interrogations of fraud suspects including numerous senior corporate executives. As a freelance writer, I have written over 1,000 articles on a broad range of topics. My areas of expertise include: • Asset Misappropriation • Big Data • Bribery, Corruption, and Collusion • Check, Wire, ACH, and Credit Card Fraud • Consumer Fraud • Corporate Security • Cybersecurity • Data privacy (Europe, Brazil, Russia, India, and China) • Drug Trafficking • Embezzlement • Employee Fraud • Executive Protection • Fintech • Financial Statement Fraud • FCPA • Healthcare fraud • Identity Theft • Intellectual Property Theft • Internal Audit • Interrogation Tactics • Loss Prevention • Mobile Fraud • Money Laundering • Operational Excellence • Organized Crime • Payments Fraud • PCI Compliance • Retail Fraud • Risk Management • Terrorism and Counterterrorism • UK Bribery Act • Workplace Violence

3 Responses to Two heads are better than one

  1. karanalf says:

    Firms who cannot afford more than one employee per post can still avail themselves of the services of specialist companies who can audit/vet/check accounts on an ad hoc basis. Surely surprise visitations by experts would cut the chances of fraud occurring? Seems a small expense to avoid major losses.

  2. Wow!!! This article really begins to make me think about the organizational chart that I have created within my small business. It also makes me think about just how fast do I want my business to grow. Of course I want the business to grow exponentially but at what costs, when you grow so fast that you cant 1. Get a training program that will train at least 2 employees when we are talking about finance. 2. The owner of the business is so wrapped up in business development that there could be a chance that finances, as important as they are, fall to the wayside for a short spell. This blog makes me scratch my head to think about just how fast we are to grow. Again Wow!!!

  3. Pingback: $2.7 million embezzled from Arizona National Guard « Fraud Happens

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