Fraud: Its Ripple Effects on the Entire Community

The Expert Podcast

Case Overview:

• Discusses a troubling case of corporate fraud involving a bookkeeper at Paul Patrick Electric, a small company that lost over $1.3 million through embezzlement over three to four years.

Key Takeaways:

• Impact on the company’s finances and employees:
  • The embezzler stole approximately $300,000 per year.
  • This amount represented 30% of the company's annual profit (assuming a 20% profit margin on $4 million in revenue).
  • Results in less funding for hiring new employees, giving raises, and marketing efforts.

Ripple Effects on the Community:

• The disappearance of funds affects community support, such as:
  • Donations to local schools and sports teams.
  • Sponsorships of community events, leading to an invisible impact on local resources and opportunities.

Fraud Prevention Insights:

• Importance of monitoring financial access:
  • Implement checks and balances, such as requiring more than one person to access financial records.
  • Ensure bookkeepers take vacations to allow for audits and reviews.
  • Redirect mail to someone other than the bookkeeper to avoid concealment of fraudulent activity.

Best Practices for Small Businesses:

• Emphasizes the need for best practices to catch fraud early, including:
  • Understanding the fraud triangle—recognizing that trusted individuals may still pose a risk.
  • Awareness of the potential for embezzlement in small companies.

Resources:

• Invitation to contact for more in-depth conversations with investigators or to learn about investigative services.
• Encouragement to explore more videos for additional insights into corporate fraud and related topics.