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13 October 2021 / Sara M. Costanzo

What You Need to Know About Embezzlement and Fraud: Our Top Four Tips


We recently attended the Ohio Association of Public Treasurers (OAPT) Fall Conference on October 6, 2021. Shareholder and speaker Sara Costanzo presented Embezzlement & Fraud in Government. Now, we want to share her top four takeaways from this presentation to help you identify and avoid losses from embezzlement and fraud cases. 
 
1. Know the difference between embezzlement vs. fraud
Embezzlement involves the fraudulent appropriation of property or money that someone has been entrusted with, to utilize for their own benefit. This could be cash, company checks, jewelry, electronics, or even postage stamps. This is different from regular fraud because the person who takes the money or property generally has trusted and legitimate access to the valuables before they take them for their own use. 

Chapter 2913 of the Ohio Revised Code states that fraud, as a criminal act of deception, means knowingly deceiving another or causing another to be deceived by any false or misleading representation, withholding information, preventing another from acquiring information, or by any other conduct, act, or omission.
 
2. Stay up to date on federal and state laws
Crimes can be prosecuted at either the state or federal level, depending on a number of factors including:
  • Type of fraud scheme and amount of money stolen
  • Laws violated (federal, state, or both)
  • Method of operation
  • Use of public services (such as the U.S. Postal Service, telecommunication systems, and Medicare) that fall under federal or state regulation and authority
  • Location of the crime (within a state or across state or national borders)
Ohio’s law sets time limits for a host of specific crimes. For crimes not specifically listed in the statute, a general statute of limitations applies based on the category of the crime. The general time limits are six years for felonies, two years for misdemeanors, and six months for minor misdemeanors.

Theft-related and fraud offenses include:
  • Identity fraud: Six years after the crime, or if this period has expired, five years after discovery of the offense
  • Misconduct by public servant: Any time while the person remains in office or in their position, or two years after leaving office or the position
  • Offenses involving fraud or breach of fiduciary duty: One year after discovery of offense (if the underlying time limit has expired)
  • Felony theft ($1,000 or more): Six years after the crime
  • Misdemeanor theft (less than $1,000): Two years after the crime
3. Keep your eyes peeled for red flags
A number of red flags can alert an employer or company to possible fraud. Be prepared by monitoring a strong system of internal controls, utilizing anti-fraud controls, and applying data analysis software.
 
Things to watch for:
  • An employee living a lifestyle that appears beyond their means or having financial difficulties
  • Increased depletion of petty cash
  • A suspiciously low inventory of goods
  • An employee who is defensive about taking time off
  • An employee that has too close of a relationship with some vendors (this may also put some employers on notice of a possible inside theft)
4. Avoid losses at all costs
According to the ACFE Report to the Nation’s 2018 Global Study on Occupational Fraud and Abuse, 53% of all fraud cases recover nothing, 32% make a partial recovery, and only 15% recover all losses. 

Here are some tips for avoiding losses:
  • Control cash receipts – issuing for all cash transactions in duplicate.
  • Post all payments to a billing system.
  • Routinely reconcile money in hand with documented deposits.
  • Prepare bank deposit slips daily.
  • Review spending trends over time between similarly- situated employees.
  • Educate employees and train managers on approving expense reports.
  • Consider an automated expense management system.
  • Use purchase orders.
Our team at Weltman has extensive experience in handling cases involving embezzlement and fraud. If you have further questions about embezzlement, fraud, and/or the collection process, please contact Sara Costanzo at any time.
 
This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship, or be legally binding in any way.

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Sara M. Costanzo

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