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October 12, 2003
The Oakland County
Prosecutor’s Office has initiated a prosecution against a person believed to be
responsible for embezzling more than $20,000 from a client of Millian Toms, a
local Certified Public Accountant.
Contrary to what legal
experts have said in the past, David Gorcyca’s office has decided to pursue a
case even though it is under $100,000 to $200,000, Millian said. “My guess is
that one of the reasons is that I documented the case to the degree that they
made an exception.
“I was just at a
seminar on fraud in the business place where I learned that there are
individuals out there whose career is to go from job to job embezzling money and
they never get caught or prosecuted. Often the employer chooses the easy way
out,” which would be not pursuing the case.
Millian recommends to
all clients and especially small clients that, as a minimum, “they receive
directly and review monthly all bank statements even if it’s your mother in law
that’s doing the bookkeeping.”
“In this particular
case, we have an individual running a small business who had two employees. The
employee in question had been with her 6 years. During that period of time, she
gradually assumed more and more responsibility including becoming a quasi-family
member, such as being invited to intimate family gatherings,” Millian said.
She eventually convinced the client to allow
her to do all the bookkeeping, bill paying, depositing, billing, bank
reconciling and filing of payroll tax returns. At year-end, when Millian’s
client suddenly realized that she had not signed any payroll tax checks, and the
employee could not explain why, the client called Millian in.
After Millian got all the payroll taxes filed
and paid, which involved doing monthly bank reconciliations for the year from
the bank statements only, Millian kept insisting on seeing the canceled checks.
At one point, Millian, with the client’s awareness, refused to file the annual
tax return until the checks were received.
In between, the office was broken into and
amazingly, someone stole all the paid bills and scattered the canceled checks.
All the office machinery was still there.
Finally, Millian picked up the canceled checks
on a Friday. Saturday, matching checks to the bank statements, she discovered 32
missing checks starting in April of 2002 with a few checks gradually increasing
each month to many checks in December of the same year.
Because they were scattered throughout the
year, Millian investigated further and found that according to the check stubs,
the checks all went to a certain few vendors. Millian’s suspicions were aroused
but she had no proof, so compared all the canceled checks she did have for the
year to the check stubs and was able to find two checks where the payee on the
stub was different than the payee on the check.
Sunday, Millian she was able to get a hold of
the client and meet with her. They then contacted the client’s attorney, who
agreed to meet them Monday morning and confront the employee. The employee was
suspended pending further investigation even though she denied any impropriety.
Subsequent copies of the 32 missing checks
revealed all the amounts went directly to the employee or were used to pay her
personal bills without the client’s permission or knowledge. Some of the checks
did not have maker signatures; some were forged; and some were actually signed
blank by the client while she was hospitalized with a heart attack in December.
“This is a perfect example of even when we’re a
small business, we have to perform due diligence,” Millian said. “Receiving
directly and reviewing bank statements prior to opening, checking who signed, it
is your signature, do you know who the payee is, are too many checks going to
that payee and do the total deposits for the month agree with your monthly gross
receipts?
Call Millian to come out and review your system
to see if you have all the safeguards available to you and you’re using them.
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