Summary:
Guest, Frank Suponcic of Marcum LLC’s valuation, forensic and litigation services group, concentrates on fraud and embezzlement. Frank has investigated and managed multi-million dollar forensic engagements. He helps businesses investigate payroll, cash receipts, billing, cash disbursements and expense reimbursement schemes.
He regularly assist clients in evaluating their internal controls to help minimize their likelihood of becoming a victim of a financial crime. Frank has written several articles on fraud, forensic accounting and identity theft, and is a frequent speaker throughout Ohio on these subjects.
Important Links:
Download Frank’s free eBook: Fraud Prevention Measures!
Transcript of Biz Chat Ohio’s podcast 1.3
Hello, everyone. Welcome to Biz Chat Ohio, the podcast bringing you big ideas for small businesses. Throughout this series, we hope to bring the best of small business news and industry trends from Ohio thought leaders. I’m your host Cathy Walsh, director of the Small Business Development Center at Lakeland Community College, and I’m joined by my co-host and soul sister Gretchen Skok DiSanto, director of Lakeland Community College’s Entrepreneurship Center and business advisor for the Ohio Small Business Development Center. Hello, Gretchen.
Hello, Cathy. Hello, everyone. So in our roles at the Ohio Small Business Development Center– which is also known as the SPDC, if you’ve heard that out there– Cathy and I often find that our business clients are not aware of the safeguards they should be taking in order to prevent fraud at their businesses. We’ve unfortunately seen some terrible situations where employees have stolen thousands of dollars from small businesses. I actually have a gentleman who does a lot of work at my house. I was just talking to him the other day about something like this, and he was telling me how a lady that worked with him for 15 years that he significantly trusted ended up stealing $250,000 from him. So these stories are everywhere, and we want to shine a light on this business problem. So our special guest today is an expert in helping to protect small businesses from fraud schemes.
So today we are joined by Frank Suponcic from Marcum’s Valuation, Forensic & Litigation Services group, which concentrates on fraud and embezzlement. Frank has investigated and managed multi-million dollar forensic engagements. In his role, he helps businesses investigate payroll, cash receipts, billing, cash disbursements, and expense reimbursement schemes. He regularly assists clients in evaluating their internal controls to help minimize their likelihood of becoming a victim of a financial crime. And Mr. Suponcic has written several articles on fraud, forensic accounting, and identity theft, and is a frequent speaker throughout Ohio on these subjects. So Frank, we want to welcome you to Biz Chat Ohio, and we’re glad that you’re with us today.
Thank you so much, Cathy and Gretchen, for the opportunity.
Sure. So, like Gretchen said, this topic is also near and dear to me, as well, as I started my career in banking and unfortunately saw many instances of fraud and embezzlement, both by my customers’ employees and by, unfortunately, our own employees. And I was always struck by some of these people who were found guilty of embezzlement or fraud. Sometimes they were typically the kindest and most trustworthy employees that I could have identified. And sometimes they fell into financial difficulties, sometimes it was other things that motivated them, but I was just shocked at some of the people who engaged in this behavior. And I know we’ll talk about some of those misconceptions later in the podcast, but I just want to say that that’s why this topic is so important, to protect not only yourself but your employees from doing something that can hurt them. But Frank, can you start out by sharing some of your background and your current role at Marcum?
Sure. For those listening, Skoda Minotti was merged into Marcum in December of 2019, so some people may not be familiar with the Marcum name, at least in the Cleveland market. So if you know the name Skoda Minotti, that’s who Marcum is in Cleveland. I began my career with Skoda Minotti in 1994. Prior to that, I was with a local CPA firm in Independence for about a dozen years. And while there, I was always interested in the area of forensic work and wanted to get into that line of work because I thought it was challenging. I thought it was interesting, as opposed to financial statements and tax returns.
And in 1994, Greg Skoda gave me the opportunity to come to Skoda Minotti, begin the litigation support practice group that we have. And today we have a staff of seven, which is one of the larger forensic groups and valuation groups in the Cleveland marketplace. And as a result of that and the established relationships that we have with many of the reputable attorneys in the Cleveland market, the reputation that we have– it has really– the group has blossomed and is one of the go to firms in Cleveland with regard to litigation support, forensic, and valuation services. So it’s really been a fantastic ride here.
I started off as a supervisor. I’m now a partner in charge of forensics. So it has enabled me to grow as a person and to kind of give you the opportunity to do what you want to do with your career, as opposed to punching a clock at a 9 to 5 job. I’m passionate about it. I love what I do. And sometimes that’s kind of cynical, considering that the work that I’m doing is I’m investigating people that lie, cheat, and steal. Those people may not be appreciative of the art that I’m performing, but whoever is using or retaining us– whether it’s an attorney, a private company, or law enforcement, or a prosecutor’s office– they’re usually well-served and, at the end of the day, a satisfied customer.
Excellent. Thanks, Frank. So some surveys out there report that 80% of businesses are the victim of fraud each year. That seems really high. Do you think this business problem is overblown, or do you think, in your experience, those surveys are accurate and that it’s that big of a problem?
It is a problem. I don’t know if 80% is an accurate number. The problem with financial crimes is that there really isn’t a good data collection service that the cases are reported to. Usually, a lot of those surveys are predicated based on criminal cases. And what I’ve learned is that, half of the cases that I’ve worked or even national studies will show that only half of the forensic cases actually turn criminal.
Many of them are civil as a result of the victim, let’s just say the owner or the not-for-profit, they really want to fire the person if they haven’t been fired. And be made whole, get their money back, and go on their way. They don’t want the negative exposure that a criminal case may provide to that entity as a result of, oh my gosh, this company lost a million dollars. Boy, they got really poor internal controls. I can’t believe that that happened there. Not to mention the time that a criminal case may take away from the company actually being profitable through depositions, and attending trials, and et cetera.
So most of the cases don’t go criminal. And the fact that there isn’t a reporting mechanism, I’m not going to say that the 80% may be high. I mean, I’ve seen studies that show 75% of employees steal. Now, doesn’t mean that they steal all the time. They may steal once. But it is a problem. And I think, unfortunately in our society and the business climate, despite all the exposure and coverage and enhancement of forensic stories and theft cases, a lot of people still believe that it can’t happen to them.
Oh, isn’t that the truth? It’s not going to be me, it’s somebody else’s business. That won’t happen to me.
Yeah, it’s a sad revelation.
So what do you think the most prevalent fraud or embezzlement schemes are out there right now? What have you seen lately that people are falling prey to?
The two of the bigger ones that we’ve seen reoccurring in the past couple of years– and when I say the past couple of years, 2020, as a result of the disruption that many businesses faced and having their employees work remotely. I’m excluding 2020, just because of what you’ve seen in 2020, if employees are working remotely, you’re dealing more with electronic data. You don’t have the actual invoice, you’ve got an electronic image. You don’t have the actual check, you’re dealing with maybe a wire transfer or some other way of making the payment to the customer that the person can’t forge a check as easy as if they had the paper copy in their hand.
Absent that, what we’ve seen prior to that was a significant increase in credit card and expense report fraud. And also an increase of fraud involving what I’ll call EFT, or electronic fund transfer, transactions. Wire transfers, ATMs’ transactions that are tied to corporate accounts. People’s personal credit cards that are tied to corporate accounts. Wire transfers from a corporate or a business account to a personal account, or a shell company that the fraudster might have set up themselves. It was more electronic in nature because you don’t have as many substantiating documents that could bring to light to a business owner or an executive director a fraudulent transaction. If you can hide the bank statement that would reflect all of these electronic transactions, then no one’s ever going to know that fraudulent transaction occurred.
And the other thing with regard to credit card and expense reports, once again, somebody isn’t looking over the shoulder of the employee. And as a result, the employee is taking liberty with either one, opening up completely a fraudulent credit card, usually in the same name of a– let’s say that the company has an ABC credit card. You’ll see that the employee will also have an ABC credit card, so that when the disbursement goes through on the books, oh, well I know that I have a credit card with ABC Company, it’s no big deal. It doesn’t click on them that there’s more than one transaction a month to the ABC credit card. And as a result of that, the person’s obviously financially benefiting as a result of the fraud.
The other one is where the executive– other people in the company have access to the corporate credit card, but the person whose name the corporate credit card in is never reviewing the transactions on that corporate credit card. And while credit card and expense report fraud are traditionally not the largest types of frauds that companies are affected by– because financial statement frauds are by far the largest and fraudulent payments, as far as withdrawals to an individual or diversions, are the largest ones that we have seen. Credit card and expense reimbursement frauds can total up.
In the past, we worked a couple of cases that exceeded a million dollars of losses. And they may have accumulated over 5, 10 years, 15 years, but over time that number adds up. It’s a number that businesses should be aware of, the type of fraud that businesses should be aware of, that’s often overlooked. So I think that because of the dollar amount of fraud being lessened, people just don’t have their radar up to be looking for it.
Interesting. Thanks.
So what are one or two safeguards that businesses can use to protect their organizations and employees from the types of fraud that you just mentioned?
I could probably spend an hour talking and talking on this subject alone, and it’s hard to pick out two. I’ll throw up the first one, which is probably the most obvious or should be the most obvious to every business owner, and that’s to have good internal controls. You need checks and balances, you need proper safeguards. And what we’ve seen with a lot of smaller businesses is that you may have an owner of a company, you may have a bookkeeper– I might even use the word controller or the great accountant– but you’ve got a bookkeeper, and that’s it. Well, that one person has control over absolutely every financial aspect of that business, and as a result, there are very limited internal controls, especially if the business owner is out there making money, working jobs, whatever it may be. They trust that person. And in the world of fraud, fraud by definition is a violation of trust. So once you trust that person, that’s the first biggest mistake that people make, is that they completely trust them.
The second one is that they’re completely hands off. And if they’re completely hands off and you have a one-person accounting department, there are no internal controls. So you have to work controls in to some degree, whether it’s the business owner looking over that person’s shoulder, whether it’s an outside person, their accountant, a CPA, someone like myself that just comes in and provides a level of– I’m not going to say security but oversight. That the person that is writing the checks, making the deposits, knows that someone else is going to look at this, and that’s a deterrent in itself. So proper internal controls is the most important thing because every fraud occurs as a result of some kind of a breakdown in internal controls.
The second one– and this is kind of common sense. But it’s a huge misstep that many businesses take, especially in this day and age right now, where there is such a demand for people in the marketplace, whether it’s a fast food worker or whether it’s a bookkeeper or an accountant, that there just aren’t enough people to service the demand. That people will just go ahead and hire somebody without checking their background. And that is a fatal mistake because out of desperation of trying to find somebody now– because I need a bookkeeper in here, I have to do my billing, I have to write checks. This person comes to me. And they may have really a nice resume, and they just left off the fact that they were convicted for embezzlement in their last employer and just gotten out of prison. Whatever it may be, they don’t check it because the person was so convincing in the telephone interview. Even if they may have done a face to face.
And what happens? That person recognizes because they’re a– I’m going to use the word “professional fraudster”– recognizes that, oh my gosh, after a month I realize that the owner of the company isn’t looking at financial statements. He’s not looking at the checkbook. I’m getting all the bank statements. Man, there is no internal control here whatsoever.
What happens right off the bat is that you’ve got people that are stealing. And it’s not uncommon that once a person with criminal intent understands the internal controls, understands the weaknesses, and it’s really up to them to, what I would say, test the system. Maybe run a few fraudulent transactions through. Once those don’t get caught, because those can always be explained as, oh, I forgot I had to borrow $50 to get gas or I had to do something. And then once that doesn’t get caught, because if it gets caught then that tells them, somebody is looking over my shoulder, there is some internal controls, I can’t steal this way. But if that test is successful, meaning that it is not detected, then that person knows they have carte blanche to go ahead and do whatever they want.
So to know who’s working for you is critical. And in this day and age of so economical background checks, it’s really crazy if people don’t do that. And we’ve seen a lot of business owners that haven’t.
We worked a case not that long ago. A person hires somebody, I’m going to say out of desperation. The person was extremely compelling in their interview, and within a month the person started stealing. This was a medical-related company. And it was involving credit card transactions. And after that fraud was detected, the person was terminated. We went in there. We determined that this person over their lifetime– and the person was probably in their 40s– had 24 different aliases. He had been convicted, not just caught, convicted criminally a dozen times, and it was never caught.
Now, would an educated business person hire a person that has one conviction for a financial crime, let alone a dozen? In this case, this person didn’t do their homework, and as a result got burned for $400,000. So as simple as that is, it’s such a simple step.
And a third one that I’m going to throw out there as a freebie is people should have theft insurance. I know it sounds kind of morbid that you’re going to have insurance, but you are insuring– especially for small business owners that don’t have adequate internal controls, to have theft insurance really should be a must. It should be a no-brainer. And what we’ve seen in a lot of cases is that we’ll ask, that’s one of the first questions, do you have theft insurance? Well, of course we do. They give me their copy of their insurance policy, and it’s a directors and officers policy, it’s an auto policy. Theft insurance is a separate rider.
It’s very economical, considering the damage that can be done. And the premiums correspond to the amount of theft loss that they are going to insure. So every company should have theft coverage, and it’s called employee dishonesty insurance, theft coverage, a bunch of different names. At the end of the day, it means that you are going to be protected or be made whole as a result of the potential unlikelihood that one of your very good employees may steal from you. Just about every company is under-insured that I’ve ever seen. And usually–
So I’ve got a–
Go ahead.
Sorry, Frank. So I’ve got, not about insurance, but I have a follow-up question. Do you think it’s a best practice to communicate to employees that are working with money in your organization upon hiring, like maybe in some type of employee orientation, about the things that organization does for internal controls? Just get it out right out in the open? I mean, is that something businesses should be doing?
One of the best anti-fraud techniques that a company can implement– and we kind of refer to this as “the tone at the top” and we kind of tie that into employee education– is that yes, you should do that. Because you want to instill in that person’s mind that, gosh, this company takes fraud seriously. Gosh, if I steal, something’s going to happen to me. And companies do that through a bunch of different ways.
One, we’ve seen companies that would actually get all their employees together, depending on the size of the company, and talk about fraud, talk about the effects of fraud, talk about what will happen to them. And really good companies will reinforce that with a fraud policy that they will actually make the employees sign, which stipulates that if I steal or if I’m caught stealing, this is what will happen to me. I’m going to be terminated. I’m going to be criminally prosecuted. They’re going to be made whole for all theft, as well as out all outside independent costs that are incurred in the prosecution, and we will cut off your leg if it’s necessary. In other words, you need to scare these people that if they do something, there’s going to be a price to pay.
The hardened fraudster isn’t going to care if they’ve got a fraud policy. They’re going to evaluate your internal controls. They’re going to exploit the system. And those people, you’re just going to have to catch. It’s the people that are the– like Cathy mentioned earlier, there’s good people that do bad things. And I don’t want to say that there are good reasons to steal, but you’re facing foreclosure, you’ve got a medical crisis, your kid needs braces. Whatever the economic need that a person has– the car broke down, you need a new car, but you don’t have the money for a new car– whatever the need is, people in their mind will rationalize that it’s OK to steal and they will, be it a completely good person.
A lot of people that commit financial crimes aren’t your typical street thugs. They don’t have prior criminal arrests. They’re usually first-time offenders. They get caught, and they learn their lesson. They’ll never do it again. But you just think of the people that do this only once and get caught, it can be a large number.
So it is very important to educate the employee, and it’s not just a one time deal. You think about the onboarding process of a new employee. You got the employee handbook, you got the conflict of interest policy, you got all your health insurance forms, now you’re going to throw in a fraud policy. You’re going to talk to them about fraud. Well, you do it separately.
A lot of times, we’ve seen HR do this, where they just go ahead and reinforce this. And then you make the person sign a document that A, I have participated in this, I understand this. You give them some room to put on there, hey, are you aware of anything? Because roughly half of the frauds that are detected come from employee tips. If you don’t ask your employee, hey, do you see anything unusual going on? I don’t care how insignificant it is. If you see something, say something. And you give them the opportunity to answer. Maybe about 99% of the time, people leave that blank. And then they sign it that A, they haven’t committed any kind of fraud. They’re not aware of any kind of frauds. The document’s retained in the personnel file.
Well, the value of that is when that person does is caught with regard to fraud, committing some sort of a financial crime, they can’t come back and say, oh, well, I was just borrowing it. Because that’s the number one response from a fraudster, I’m only borrowing it. You know, I was planning on paying it back. Of course you’re planning on paying it back upon being caught. Well, now all of a sudden, it’s a demand note. OK, we’re calling your theft. You have to pay it all back now. You can just continue with your job. That doesn’t work that way. But in their minds, commonly that’s what their defense is.
So employee education is critical. Tone at the top is critical, that if you see the company owner or an executive taking their family to Hawaii on vacation or running personal expenditures, you’re sending a message to the employees, hey, that’s OK for me to do. And they will emulate that. So that’s the tone at the top, and that kind of goes hand-in-hand with regard to employee education, but that should really start on day one.
Thanks, Frank. That was excellent advice.
I totally agree with that because working in a bank, everything was done under dual control. And obviously the bank wants to protect its assets, but you’re also protecting yourself when you’re doing things under dual control. It not only makes you think twice about doing something that might be fraudulent, but it also protects you knowing there’s two sets of eyes if I ever get accused of something, that I wasn’t doing something alone. If there’s money missing from somewhere, I was with another person when we went to count that money, there were two of us that signed off. So it’s harder to bring two people in, so having that dual control protects your employees as well as protects the business itself. So there’s nothing wrong with having dual control, having somebody looking over your shoulder, and letting your employees know that that’s how we operate for everybody’s benefit.
And just think of a check. Many, many checks require dual signatures. Why is that? That’s an internal control. You now need to bring somebody else in, unless you’re going to forge someone’s name. Which, if you’re stealing money, what’s the big deal about going ahead and getting a forgery charge on top of it?
Nonetheless, there are some people that will try to commit a financial crime in through a disbursement scheme, where instead of forging a name, they’re going to go ahead and get that other person’s signature on there and, as a result, justify to them for whatever reason that this is for. Here, I need you to sign this check, and they just go ahead and sign it. Don’t even look at who it’s made to, what the purpose of it is. Boom, it’s done. When all of a sudden that person has facilitated that, the dual signature is the control that you now need to bring a second person in, and people that commit financial crimes typically don’t like associates Now all of a sudden, if that person knows that it’s a financial crime, now that’s like they both have something on one another from a blackmail standpoint. So typically a fraudster likes to run the scheme alone. They don’t like cohorts.
I do want to just back up a little bit. You were talking about doing background checks. I think that’s a really important thing. How much does a typical background check cost, and is it better to have that done professionally? Some people might think, well, I could just Google them and see what I can find. But talk just a little bit more about the background check, the cost, and why it’s important.
The cost of a background check, an independent– one of the issues that falls into the cost category of a background check is, is this person a lifer, let’s just say in the greater Cleveland area, as opposed to looking at their resume and finding out that they’ve lived in Florida, they lived in California? The more places that they’ve lived, the more places that you have to search court dockets, with regard to potential criminal activity. So if a person is in one geographical market, the cost of a background check is much cheaper than a person that’s lived in multiple locales. And the person could live in multiple locales completely legitimately, it’s not like they were stealing in one city, going into another.
You can get background checks, I mean, the prices come down so much on background checks. You can get background checks anywhere, from $50 to $100. It’s like going through a buffet line, what do you want us to check? I want you to check, most importantly, I want to find out about a criminal background. All right, well, they’re from Cleveland. All right, well, if they’re from Cleveland, maybe they worked in Lake County, maybe they worked in Ashtabula County. So you would do a background check within a relative, reasonable circumference of the Cleveland market. You’re just not going to look in Cuyahoga County because that person could have worked outside that county and been arrested there. So they’re so beneficial.
And depending on what position that the employee has– obviously in the area of fraud and embezzlement, I’m concerned about financial crimes. But then you start getting into red flags, identifying red flags, and is this person– do they have civil cases against them? Are they going through a divorce? The fact that someone’s getting a divorce doesn’t mean they’re going to steal, it just may mean that they have a financial need. And the same thing with regard to, let’s say unpaid taxes. If they have tax liens, all right, well, gosh, this person’s got money problems. If they have money problems, God, they’re in charge of my books.
My solution for them– not that they’re going to because most people don’t steal. Typically. Some people may think about it, but then the good angel pops up and says, OK, you really shouldn’t do that, and they don’t. But it’s the person that has that infrequent financial need, that recognizes that the system may be weak, that may go ahead and do something. And if they get caught, now you’ve got a track record that a prospective employer could go back on and say, all right, jeez, do I really want to hire this person?
And trust me, if it ever does get to the employment interview process, that person is going to justify to the employer that there’s a reason why I did that. There’s a reason why I didn’t file income taxes, there’s a reason that I let my CPA license expire when all these years I’ve been holding myself out as a CPA. I’ve been holding myself out as an upstanding, honest person, but then when that company did a background check, they find out that I’m not a CPA, I’ve done time for tax evasion. And now this person has to kind of blow smoke into the interviewer’s face and say, oh, there’s a reason for all this.
There’s always a reason for everything. And we’ve seen cases where people that have disclosed their discretions while an employee, and they’ve had to explain why some of these things happen, were in fact at the onset of employment, their background was never checked. And they could have nipped that in the bud. And then at that point in time, if you know that the person has this kind of a background and you do hire them and they do steal from you, well, you have nobody to blame but yourself for hiring a person with that kind of questionable background to handle your money.
So earlier we talked about misconceptions. We’ve been talking about a lot of those throughout this discussion, but is there anything else you’d want to point out as a common misconception?
There’s a bunch of misconceptions. The first of which, and many of you mention this, can’t happen in my business. How many times without– when we would have the initial consultation with a victim and usually their legal counsel that, I can’t believe that this happened to me. I run such a good business, all my people are good. The best one is, they’re family.
They think the fact that someone’s family, that family have some kind of code that they would never steal from somebody. You can throw that out the window because it’s crazy how many family members will steal from another family member. A lot of the work that we do in matrimonial cases, as crazy as it sounds, a spouse can steal from the other spouse. They can shelter a bunch of money because maybe the marriage isn’t going that well. And they’re going to be trying to squirrel away money because they know that when the marriage goes south, I have to give up half of what I’ve accumulated. Well, gosh, if I could shelter this and they don’t know about it, ha ha, I got one over. We’ve done a lot of work with regard to marital cases because people never think that a spouse would steal from another.
Another huge misconception is that management saying, well, everybody here is honest. And especially if they are a religious person that is very devout, that they just can’t fathom that somebody that works for them would steal. And we’ve worked cases for churches.
You know, I actually got fired off of a case because– it is a true story– where I went to meet with the church, the reverend, and I was just killing time, and I was in the vestibule. And I saw these collection canisters in the lobby. And I just lifted it up, and inside it was a bunch of cash. I put it back, I didn’t take anything. I looked at the other one, there was a bunch of cash. And this might’ve been a Monday, maybe there was Sunday services.
And I mentioned to the reverend, jeez, let me give you a freebie right off the bat. You just can’t leave this cash sitting in there, front door wide open. Anybody could come in here, tap into that, and take it. And I realize that you may say, well, if they needed it, I’m OK taking it. But when I insinuated that people steal, that guy ended the interview, and I didn’t get the job. But I was there as a fraud examiner. You’re giving people the opportunity, and I do this for a living. If I didn’t perform fraud examinations and chase after people that lie, cheat, and steal, I’d be doing income taxes and financial statements. I’m not. Because people do this.
And it doesn’t matter what organization you are. It could be a government, it could be a church, it could be a business, it could be a mom-and-pops, or it doesn’t matter. Fraud knows no boundaries. And to have a priest tell me, get the heck out of here, people don’t steal. OK. So they’re very trusting.
Another common misconception is that crime does not pay, if you commit the crime, you’re going to do the time. Well, if you looked at statistics and what happens to people when they commit a financial crime, they’re pretty sobering. The largest case that I worked was $7 million of embezzlement. And in the fraud presentations that I give, I always ask the attendees, hey, how much time do you think a person would get for stealing $7 million? And the answers go all over the board. Life, death penalty, nothing. But in that case, the person got one year. And it’s like, oh my god, you’re kidding me. A person stole $7 million, and they got one year of prison? Well, it was actually one year and one day, they actually did seven months. And that just flabbergasts people that for committing a crime of that nature, the punishment is not that steep.
A lot of times for first time offenders, embezzlement’s a nonviolent crime. Would you rather have that cell taken up by someone that’s a violent criminal, a drug dealer, a rapist, a robber, or you have this poor guy in there or a woman that wrote checks to herself? So a lot of the times that the courts go relatively easy on a white collar criminal, at least the first time, than they would for someone else.
So I’m not going to say crime does pay. It’s just that it’s a misconception that, oh my gosh, if you’re going to steal money– other than robbing a bank– in a non-violent manner, you’re going to get thrown in prison for a long time. I don’t know about that. And you’ll see case after case in the paper. And with high profile cases, you’ll see a prosecutor that will want to go after a person that has stolen money, say from a governmental entity or a not-for-profit entity. You might not see the same response with regard to a business entity. Remember, only half the cases go criminal anyways.
So we’re getting short here on time, but just the one last question. Is there anything on the horizon that small businesses need to be paying attention to?
I think with regard to the whole global pandemic and really the change in the work environment, the dramatic change in work environment, that a lot of businesses have seen in the past 15, 16 months as a result of the COVID, is that now you’ve seen some companies have reduced accounting staff. If you reduced accounting staff, chances are you’re reducing internal controls. We talked about that earlier, how important that is.
Another issue with regard to the remote employees, if they’re working remotely, chances are many of the transactions that are being facilitated are electronic transactions. So there should be a heightened awareness with regard to looking, scrutinizing, that bank statement. Where is the money going electronically? And if you’re a business owner, probably you don’t want to ask the employee, you want to ask the financial institution, kind of get some backup on this. If you ask that to the employee, chances are they could fabricate a document that could be convincing that will make you think that the transaction’s legitimate. Whereas if you requested that document from the bank, it’s going to be a completely different document that’s going to tell you something that you might not want to hear. So have the radar up with regard to electronic activity, as a result of the changed work environment.
Now, coming into June, you’re going to be seeing more and more companies get back to full strength, get back to how things are. Then you’re going to get back to traditional internal controls, segregation of duties, required vacations. People just have to be mindful of the one-person office that has control over everything. If that’s the case that they have, the business owner has to get more involved. It’s as simple as that.
Hey, thanks so much for being with us today, Frank. You know, your insight is certainly going to help listeners as they look to protect their businesses against these various fraud schemes that you’ve talked to us about today. You shared a lot of great information, and I know that we could probably talk about this all day, given your experience and the cases you’ve worked on. If listeners want more, is there a resource or a website that you would recommend to people? Are there resources on Marcum’s website? Or I know you also sent us a booklet. Is that something that we could share with our listeners on our podcast website?
Anybody that would want a copy of a e-book that I compiled with regard to fraud prevention measures, sure, be happy to share that with anybody that would request a copy.
OK, perfect.
Yeah, thanks, Frank. I know I could talk about this for a lot longer. The stories themselves are fascinating. But we’re going to add everything you talked about, hopefully, to show notes. We’ll get some sort of mechanism up where people can request that book. And I just want to say thank you again for being here. This podcast–
Thank you for having me.
Oh, you’re welcome. Maybe down the road, we can do another one. Maybe there’ll be a new topic we can come up with because I could certainly–
That would be great.
–do this again. It’s fascinating information, it’s fascinating stuff, but it’s also scary. And as someone who’s seen a lot of businesses just taken under by somebody who had some sort of scheme against them, it’s a very serious topic as well though.
It’s wrecked families, it’s wrecked companies. I would say that it’s not a victimless crime.
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