The Importance of Background Checks

by James Marasco, CPA, CFE, CIA
Director, Corporate Services
StoneBridge Business Partners

Reprinted with permission from FraudMatters Newsletter of CPA America.

A recent fraud case in upstate New York that made headlines shows the importance of background verification.

While on probation for embezzling funds from a former employer, the perpetrator committed the same crime against her next employer. This time she was order ed to prison for three to six years.

In her earlier job, she was hired as a bookkeeper for a property management company. She was in charge of writing checks, reconciling bank accounts and transferring money between the various accounts.

Within two years of her employment, she started keeping two sets of books: one set was shown to the owners and independent accountants, and the other represented the true picture of the company. What began as a small-scale embezzlement scheme soon exploded into something much larger.

The bookkeeper started writing checks to herself for small amounts, forging the owners’ signatures and depositing them into her own bank account. As time passed and she continued to get away with it, she even wrote company checks against her personal charge cards to pay down her balances. In some instances, she had to transfer money between company accounts to cover the checks that she had written. This is how it all began to unravel.

While on vacation, checks started bouncing and the bankcalled the owners of the company. They soon learnedthat the accounts were overdrawn and they had lost over $300,000.She had been perpetrating this crime against the companyfor nearly six years!

The bookkeeper was charged and convicted of grand larceny.She plea bargained and received a break on sentencing becauseof the generosity of a cousin who loaned her money to makerestitution.

She was sentenced to weekends in prison and a couple of years of parole. During this period, she found new employment as a bookkeeper at an architectural firm. Within a year, it was discovered she had committed the same crime there.She embezzled over $50,000. This time,she had no means to make restitution, and the court system wasn’t as accommodating. She was ordered to prison.

It’s unfortunate that her second employer didn’t perform a background check or employment verification prior to hiring her.