An Employee is Stealing - Now What?
You have just uncovered “proof” that one of your most trusted employees has been stealing from the company. Initial feelings are usually betrayal, anger and a desire to inflict some sort of harm on the offender. The immediate reaction in many companies is to fire the employee, escort them from the premises and phone the police. While these steps will undoubtedly satisfy the visceral need to punish the offender, it may not be the best approach. When an accusation of employee theft is contemplated a number of issues need to be considered.
As an employer you need to be aware that your right and ability to investigate the facts and circumstances surrounding the incident are intertwined with rights and protections conferred upon employees by federal and state laws. Use of polygraph tests, outside investigators, video cameras and monitoring devises are controlled by one or more federal or state laws. For example, the results of the polygraph or the refusal to submit to a polygraph are not grounds to terminate an employee, without a specific employment agreement to the contrary.
Members of management who are aware of the incident must be counseled about the necessity of privacy and confidentiality in the investigatory process. No investigation is facilitated by the premature disclosure of information to the wrong party. Once the target suspects that they are a being investigated they will quickly move to destroy any evidence of their crimes. Even an increase in “closed door” meetings could arouse suspicion.
Interviews by untrained members of management or human resources staff are a bad idea. Interview and interrogation is an acquired skill that requires significant training. If done improperly the result will be at the very least ineffective. Something as simple as where the interviewee is asked to sit could lead to a charge of false imprisonment.
Before the employee is accused and terminated from employment, the so called “proof” uncovered internally needs to be supported by an immediate and thorough investigation by someone trained in financial crime investigation. Often companies expose themselves to lawsuits because of their actions. Charges of unlawful detention, defamation, invasion of privacy and wrongful termination are frequently pursued by the perpetrator in these matters.
Next, the company needs to decide when or if the police are to be notified. Your interest as a business owner may be quite different from the police. Every company I have assisted with these matters wants to get their money back. The interest of law enforcement and the courts is all about putting people in jail. Restitution, while normally a component of sentencing, is often a hollow victory because the company’s money has been squandered or used for legal defense fees. Attempts to collect from the future earnings of a convicted felon are problematic at best.
Many organizations will decide that it is in their best interest to keep the incident out of the public view. Dealing with the press, shareholders or investors who tend to blow things grossly out of proportion is at a minimum a distraction from the central issue, correcting the problems that allowed the theft to happen.
In summary, immediately terminating the suspect and calling the police may not serve the company’s financial interests. Retaining experience forensic accountants and outside counsel should be the first step; followed immediately by a thorough investigation will help the company avoid unintended consequences of the unfortunate incident.
Article Provided by MKS&H's Forensic Accounting Expert, Bob Garvey, CPA, CFE, CVA, CFF.
Bob is a principal with MKS&H and the founder and practice leader for the firm's forensic accounting and financial advisory services. With over thirty years of experience, he is well known in the Mid-Atlantic region for providing forensic accounting, fraud investigation and fraud deterrence services. He has handled cases ranging from simple contract disputes to multi-million-dollar, multi-level international frauds. In addition, Bob testifies as an expert witness on matters involving complicated financial transactions, allegations of fraud, business disputes and divorce issues.