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Want to learn more about your own fraud risk? We know about small-business frauds that you may never have considered. Call TraceTech Solutions at (339) 237-1696 to schedule a no-cost discussion.
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The Small-Business Fraud Advisor
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Dear Reader,
Dotting every “i” and crossing every “t”, attorneys owe their success to attending to the details. But occasionally they fail to do it when managing the financials of their own practices. Sometimes the results are disastrous.
The path has been gone down many times. Too busy to do the accounting on their own, the managing partner engages the receptionist, the office manager or a paralegal to assist. As the practice grows, a part- or full-time bookkeeper may be hired. Oversight of the clients’ details is necessarily paramount, but oversight of the internal details wanes as trust grows, providing the opportunity for someone to walk off with the practice’s money without anyone being the wiser.
Think it doesn’t happen? You’re mistaken. It has happened, it’s happening as you read this, and it will continue to happen. The following three stories are indicative….
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Case 1: Bookkeeper Embezzles $425K from NJ Attorney
Attorney’s often maintain accounts on behalf of their clients. Those clients trust and expect that the funds are in safe hands. And most of the time that trust is well-founded. But without the appropriate level of oversight, the safe-guarder can become the safe-cracker.
This happened to a New Jersey attorney. His bookkeeper of 18 years was recently sentenced for stealing $425,000 from  clients’ accounts over a nine-year period. She stole the money by transferring the funds from trust accounts to her own account and used some of the monies to pay for personal expenses, including credit card bills. She even used some of the stolen funds to pad her savings account.
$425,000 is a lot of money. And, as is typically the case in workplace frauds, it was stolen by an employee who was completely trusted. Trust in the practice’s staff is a necessary aspect of doing business. But that never displaces the need to verify. The alert attorney will understand the risk of delegating day-to-day management of client funds to an employee, and take the additional time to examine disbursements from trust accounts to verify that financial control protocols are working as designed.
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Case 2: Attorney Steals $343,000 from the Partnership
The phrase “Trust but Verify” should also be the credo of a legal firm’s members. As uncomfortable it is to believe that a trusted employee has  helped themselves to the firm’s money, the idea that a firm member can do the same is downright frightening. But it can and does happen.
To illustrate, a Georgia attorney was recently sentenced to federal prison for stealing $343,639 from his firm by forging the signature of one of the law firm’s principals on checks that were actually for attorney’s fees – and then depositing that money into his own personal bank account, which he then used to pay his mortgage, credit card bills, child’s college tuition and a second home for his wife. |
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Case 3: Bookkeeper Nearly Bankrupts California Attorney
Attorney Michael Villa had been working like crazy. But he just couldn’t seem to get his financial head above water. A few years after opening his own firm, he moved to a smaller office and reduced the hours of his only employee, a bookkeeper he had hired over three years before. Then one day, as he passed by her desk, he opened the envelope that contained the monthly bank statement, wondering if the bank had charged him a new $10 fee.
What he saw made the $10 fee look like a drop of water in an  ocean of red. The statement showed that thousands of dollars had been transferred to unfamiliar accounts including five credit cards, the phone company and PG&E. Following an investigation the final tally of losses came to $116,000.
By nature, attorneys are inquisitive. They seek information and understand its value. Bank statements contain a goldmine of information. Attorneys that ignore them do so at their own peril. |
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What’s In Your Wallet?
You can probably count the number of minutes that you left your wallet on your work desk in the last year on one hand. And that’s regardless of whether anyone other than your staff was in the office during those periods.
If you’re looking for a model of good financial control, look no  further. The way you watch over your wallet is a great example.
Can you state without hesitation that your business’ financial controls are as tight as the financial controls you place on your own wallet? If you’re like most, the answer is an honest “No”. But then ask yourself which loss would hurt you more: the loss of your wallet or the loss of your business’ assets?
Though the above three cases involved attorneys, they could have involved any type of business. Simply stated, the financial controls of the victims weren’t adequate enough to prevent, deter or detect the thefts from happening. Think about it this way: the attorney in Case #1 effectively left his wallet out in the open – for nine straight years.
TraceTech provides its clients with a cost-effective way to monitor for many common small- and mid-size business frauds. Though we work offsite and out of sight, TraceTech can uncover or provide clues to fraud schemes that most business owners and managers have never even imagined.
To learn more about the services we offer, visit www.tracetechsolutions.com. |
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Sincerely,
Steven Schottenfeld
TraceTech Solutions, LLC
www.tracetechsolutions.com
sschottenfeld@tracetechsolutions.com |
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