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Managing the Fallout of Embezzlement

On Behalf of | Jan 15, 2021 | Business Law |

Discovering that a trusted employee was stealing from your company, engaging in fraud or misusing finances is often devastating for employers. On top of learning that someone you trusted hurt your company and your employees, you may be reeling from considerable financial losses and feel overwhelmed by cleaning up the mess the thief made of your company’s finances. Frequently, the person keeping the books had authority to complete financial transactions without additional oversight, and you may be unsure where to even start to determine exactly how much damage the person has done.

Picking up the pieces after this type of event can be difficult, but it is not impossible.

Working with Law Enforcement

Many people attempt to handle matters involving fraud internally, especially when a business is small, or a friend or family member is the person engaging in illegal activity. However, it is crucial to work with law enforcement.

Embezzlement and fraud and theft are criminal offenses. Working with state and federal agencies to investigate the situation can help build a case against the perpetrator. Law enforcement can more easily obtain records documenting the dishonest acts by the perpetrator and will often be able to obtain cooperation from witnesses who may have information regarding the theft.

When business owners are cooperative, they can help ensure the guilty party is not able to commit similar acts in a different company. Often, the court can order a perpetrator not to work in any positions involving responsibility for finances as a condition of their sentence. The court can also order that the perpetrator pay restitution upon conviction to repay the amount that was stolen.

Examining Banking, Credit Card Relationships

Embezzlement investigations often reveal practices like forged checks and false charges that banks, credit card companies and or other institutions should have discovered. Under these circumstances, business owners may want to discuss with an attorney whether there may be grounds to hold these businesses liable for damages, as well.

Whether banks or other institutions were negligent or not, it may be wise for business owners to revisit their current financial relationships and determine if they should make changes to prevent future incidents. Often, embezzlement cases involve a trusted employee who had actual authority from the company to complete financial transactions, but who misused that authority to obtain funds for their own personal use. Unfortunately, this can often go on for months or years before being discovered. It is important to make sure that your company’s processes are set up to catch any such acts early.

Act Now to Protect Your Business Later

After fraud, employers should act quickly in terms of examining insurance coverage, involving law enforcement, and adjusting current financial systems to prevent further losses. Business owners who take these steps may have better options for recovering economic damages.

Dealing with the aftermath of embezzlement can be complicated. However, when business owners approach this situation assertively, recovering from an embezzlement incident can be more manageable. Working with an attorney to set up processes and procedures to safeguard your company’s finances and catch any problems early, as well as assist you in the event something goes wrong, can save your company both time and money in the long run.