Getting taken down the river
Perhaps second only to pay, it is the glue that ties business owners and their workers.
It is trust. And in Connecticut ”“ at the extreme fringe, anyway, but maybe closer to home than you would hope ”“ it is coming unglued in the most pernicious form.
Embezzlement.
A new study from Marquet International Ltd. listed Vermont and Connecticut as the one-two punch nationally on an “embezzlement propensity factor” index covering known cases in 2011.
When it comes to embezzlement, of course, so much is about the unknown.
Fairfield County is home to a significant financial services sector, the industry that suffered the greatest losses last year on the embezzlement front, according to Boston-based Marquet International.
But nonprofits ”“ also a major “industry” around here ”“ and religious groups combined accounted for one-sixth of all the incidents studied.
In other words, keep an eye on the plate wherever it is being passed.
Problem is, close to three in four of known embezzlers are the people charged with doing just that ”“ finance, bookkeeping and accounting staff.
In all, prosecutors chased down 18 cases in Connecticut last year in which $16.7 million was stolen by people inside companies. The state had one case that registered among the top 10 nationally last year ”“ the woman who stole more than $6 million from Waterbury-based Webster Bank and Bank of America Corp.
Other cases investigated by U.S. Attorney David Fein in the past year involved embezzlement at Greenwich-based Clearwater Capital, Greenwich Automotive Services, Latex International in Shelton, and Omega Engineering in Stamford.
New York, meanwhile, topped the list for the highest average loss among states at approaching $2.5 million per episode.
In concocting what would become one of the more famous con-artist episodes in literary history ”“ the King and Duke of “Huckleberry Finn” ”“ Mark Twain imagined the swindlers floating into town just long enough to execute their schemes, then hightailing it. Indeed, the one town where they go for the big score, they stick around one day too many and see the bag of gold slip from their grasp (of course, it is not without a smidgen of irony that Hartford”™s Mark Twain House & Museum itself fell victim to an embezzlement scheme, with the perpetrator getting a three-and-a-half-year prison sentence last year).
Embezzlers baffle us due to the amount of time they work their plots among the very people that trust them ”“ more so even than Ponzi schemers who are typically smooth-talking third parties who work to get people to trust them with their money.
The average embezzlement scheme”™s duration, according to Marquet International? Five years. That”™s anywhere from 130 to 260 pay and expense reimbursement runs.
Most major embezzlers appear to have been motivated by a desire to live a relatively more lavish lifestyle, rather than driven by financial woes, according to Marquet International.
Forged checks were the most prevalent form of embezzlement in 2011, followed by unauthorized electronic transfers and by theft of cash receipts, depending on how you stack the numbers.
Marquet International notes the most “effective” method of embezzlement two years running, however is vendor fraud, which accounts for more than twice its percentage in losses as compared to occurrences.
“Rationalization is the most elusive segment of the fraud triangle,” author Chris Marquet writes in his report. “There is a paucity of data on this subject and we believe the psychology behind the embezzlement phenomenon must be studied further to understand what motivates certain individuals to commit these kinds of frauds.”
But we do know some, Marquet adds. Among other motivations, embezzlers typically believe they are:
Ӣ entitled to the money;
Ӣ in desperate financial straits;
Ӣ only borrowing the money; or
Ӣ not doing anything wrong.
When a company brings a new person on board, it is a statement of implicit faith that individual will work to further the collective company”™s interest. Whether a small business or a corporate giant, that individual joins a working-hours family that could number 100 people, 10, a few.
Problem is, the embezzlers make themselves right at home.
To quote Twain”™s king: “Hain”™t we got all the fools in town on our side? And ain”™t that a big enough majority in any town?”
To quote another great yarn spinner, Ronald Reagan:
“Trust, but verify.”