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Strategic Intelligence Vol:1 No:3

Beware of the “Best Employee We Have Ever Had”

We have all heard about or have had a few “Super Star” employees that seem way too good to be true. We often find ourselves wondering how we ever got by without them. Unfortunately sometimes these trusted employees can also cause the most damage…

A former client of ours had such an employee, let’s call her Beth. They always thought “how did we ever get by without Beth!” She had been with the company for slightly less than three years. The organization had three different branches and about 100 employees but she was the one that shined the brightest.

During her employment, she was in the accounting department which consisted of 4 individuals all together, Beth was the accounts payable specialist. She has also become the “go to” person for the CEO, handling everything from travel arrangements to PR events to holiday gifts for all the employees and more. Somehow she always managed to find the most unbelievable deals on products, services, travel, lodging, etc. Saving the company a significant amount of money annually, making her invaluable and extremely important to the organization.

For instance, one year Beth scored an amazing deal on employee Holiday gifts. She had a “friend” who told her about a close-out deal on flat screen TVs that originally retailed for $499 but where available for only $100 each! The CEO was very happy with her find, yet again, and approved the purchase of 100 TVs for each employee. Beth cut a check for $10,000 to the distributer and got the TVs within the week. Beth also had these great savings for her fellow co-workers, she would always tell other employees about great deals on designer bags, jewelry and electronics. She would take everyone’s orders and bring them their goods to the office just a few days later.

Now, if you are thinking that there is something fishy in this story then you, my friend, have the Strategic Intelligence to sense what happened next…

The CEO traveled for business on a very regular basis and Beth always arranged the most phenomenal prices on flights and hotels. In fact, one hotel stay would be the cause of her undoing and the start of a three-year nightmare for the company.

The CEO was traveling and out of town for a week. Beth booked a $400 per night suite for only $100 a night claiming that she made arrangements with the local chamber of commerce to receive that great discount. When the CEO was checking out of the hotel he was presented with a bill for the full non-discounted amount. He called Beth and she indicated that there was just some confusion and to give her a few minutes to straighten everything out. While he was waiting at the desk the clerk received a call and it quickly became clear that Beth was trying to settle a portion of the bill herself. Concerned, the CEO called the local chamber of commerce and was told that they had no such travel discount program!

Shortly after we began our investigation, referred the matter to Federal authorities and ultimately found out that Beth had embezzled more than $1,300,000 over the span of 26 months! During our review we found out that Beth would go into the office early in the morning and write many different checks payable to various vendors. She would then credit the cash and debit the inventory causing no net change to the asset side of the balance sheet. We found that, even though payable to vendors, Beth was able to use an ATM machine to deposit the checks into her personal account. The “great discounts” she always provided to the company and to her co-workers were simply arrived at by paying retail for a product or service and then making up the difference from the stolen cash in her account.


There are a number of lessons here...

Background Checks - When Beth was hired she told the company that she had been living and working in California, broke up with her boyfriend and moved back to the east coast. In reality she was actually on probation from embezzling funds from a similar company in a different county of the same state.

There is no such thing as a one size fits all background check. In this case our client would always get a criminal record check on any new hire from the local Sheriff's office. Something to keep in mind is that these checks only cover criminal records in that specific county. It is important to check both Federal and State records. It is also important to know where an employee lived prior to applying so the appropriate jurisdictions can be checked. Most of all, check prior work references.

Accounting Review – Most small business owners have put everything on the line to build their business and a situation like this one not only threatens the business but also the well-being of all the employees.

One real basic investment you can make in protecting your business is time; have your business bank statements sent to your home instead of your business and take the time each month to sit with the appropriate accounting staff to review and reconcile the statements. In this case, the CEO would have noticed that all of the checks were written to a seldom used vendor and would have been able to catch the theft quickly.

Divide and Conquer – It is never a good idea to have the same person approving an invoice and preparing the check to pay it. If possible, have one staff member prepare the invoice and another cut the check. In a real small setting have the invoice approved and the check cut and have both delivered to yourself for review and authorization.

Don’t Play Favorites – In the aftermath of this embezzlement we interviewed a number of other employees and they all indicated that the CEO relied on her so much so that, even though they may have seen something unusual, they were afraid to question the employee or approach the CEO due her perceived status.

Be Observant – Try always to be aware of employees work habits and interrelationships. Often times these are not indicative of anything but at least be aware. In this case there was a coffee shop next to the accounting office of the dealership and, one day the CEO told the owner about what had happened and the shop owner immediately replied “that young girl that I used to see coming in several days a week at 6:00 in the morning?”.

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