Joe Smith and his son Randy ran a very successful wholesale business. Joe had been at this for close to 30 years and was ready to slow down and enjoy the fruits of his labor with his wife Nancy. The employees consisted of a bookkeeper, three salesmen and four truck-drivers.

Sylvia, The Bookkeeper, had been with the company for over 15 years and was responsible for maintaining the Ledgers, reconciling the bank statements, and paying the vendors. Both Joe and Randy signed all checks and only one signature was required for the bank to process the payment. They liked Sylvia and, on occasion, would help her out. Not long ago, Sylvia's mother had been sick and she could not afford the mounting bills the insurance would not cover. Joe decided to pay these bills to help her out.

Joe had recently cut down his workload and was no longer working full-time. Randy took on the added burden and felt comfortable that the company was doing well and moving in the right direction. What Joe and Randy were not aware was that Sylvia had a gambling habit and, as a result, had lost a good deal of money. She was close to losing her home for non-payment.

Sylvia devised a very simple and clever scheme to get the money she desperately needed. She simply began to pay herself an additional $200 to $500 a week. She was able to forge Joe's signature and write the check with erasable ink. When the bank statements arrived, she would pull out the phony checks and change the Payee to one of the vendors. Since the amount was nominal, Sylvia knew exactly where to bury the expense that would be difficult to detect. It was not long before she was able to pay all her outstanding bills. At this point, she no longer needed to continue with this scheme, however, greed grabbed a hold of her. Sylvia rationalized that the company "Owed" her for her many years of devoted service and, really, she had been underpaid!

This scheme went on for several years before anyone started to catch on that a serious problem was brewing. The bank had notified Randy that several checks had bounced and they lacked sufficient funds to cover the payments. At this, Joe and Randy were scratching their heads because lack of cash had never been an issue. Their business had been doing very well and they should have sufficient funds to cover their operating expenses. They were surprised and concerned. They immediately contacted John Walker CPA, their accountant, to take a closer look at their bank account.

As John reviewed the cancelled checks, he grew very worried as he noticed a pattern develop. Certain checks had an endorsement different than the name noted on the face of the check. As he began to review the past year's activity, a very telling picture began to form. Once he had sufficient evidence, he met with Joe and Randy and gave them the rundown of his analysis. Joe and Randy were shocked and dumbfounded. How could Sylvia, whom they treated as if she had been part of their family, set out to ruin them!?

When Sylvia was confronted, she immediately denied any wrongdoing, however, as the mounting evidence was shown, she broke down and began to cry. In her turmoil, she blurts out " I'm sorry, I didn't know how to stop myself. It had been so easy!".

Points to Think About:

• How often do you review an employee's job responsibility to his actual duties? Does it make sense?
• Are there sufficient controls in place to mitigate the impact one person could have on your organization?
• Can you run a business and assume everyone else will do the "Right" thing when it comes to your business?