Worried about embezzlement? The attorneys at Davis & Santos have tips on preventing and dealing with employee theft
The law firm of has a team of attorneys dedicated to commercial and complex business litigation. Whether it’s the risk of civil lawsuits, government investigation, or regulatory enforcement, or even the specter of criminal investigation or prosecution, these elite and experienced lawyers have seen—and litigated—just about everything. But today, they are seeing more and more businesses threatened from within by their very own employees.
Embezzlement—the misappropriation or outright theft of money, inventory, or confidential information by a trusted employee—seems to be on the rise. If you’re a business owner concerned about the prospect of employee theft, the attorneys at can help. They can aid in prevention by evaluating your internal controls to minimize risk; counsel you on the right types of agreements with your employees to best position you in case something does happen; and, if embezzlement is already happening, help you take swift and decisive action.
If you suspect embezzlement, contact at or online to see if they may be able to assist.
The first step in reducing the risk of embezzlement at your company or business is to institute a system of controls that will make theft more difficult. For instance, track all transactions and keep detailed records and receipts, and manage and monitor your computers, electronic devices, and email systems so that exchanges are clearly traceable. You can also divide responsibilities among several employees, ensuring oversight and checks and balances every time money, goods, or information changes hands. Revisit employee handbooks and consider implementing confidentiality agreements for proprietary information. And consider an outside audit of your practices, systems, and bookkeeping by a third party—someone who can look at the big picture and make certain things are running smoothly and without irregularities.
Next, it’s important that you know who’s working for you. This should start before day one, with a thorough background check of prospective employees before you hire them. You need to know if they’ve had any previous trouble with the law.
After a worker has started, pay attention to their behavior. There’s no reason to start out suspicious, but maintain supervision and be mindful of and responsible for their actions and behavior. Often, thefts are committed by the company’s most trusted and long-term employees so supervision should never be overlooked. Watch for red flags, such as whether they suddenly keep irregular or unusual hours at work, coming in at times when there’s no one watching. Take note of their lifestyle and whether they seem to be living beyond the means afforded by what you’re paying them.
WHAT TO DO IF YOU SUSPECT EMBEZZLEMENT
First, assess the situation. What was taken? How much? Try to determine whether it was taken intentionally: was it theft, or could it be an innocent mistake or misplacement of funds? Then build your case. Gather documents, records, and surveillance video if accessible, and you may even consider a forensic audit to show wrongdoing. Davis & Santos attorneys regularly team up with forensic auditors and they can assist in recommending auditors and overseeing such audits.
STOP THE BLEEDING
Next, you need to stop the bleeding. Once you’ve determined that an employee has been misappropriating cash, materials, or information, quickly remove them from their responsibility over those resources and restrict their access. Take control of any relevant e-mails, computers, or other electronic devices, such as cell phones or tablets. Then appraise and address the potential impact of the incident and the loss on your business and customers. Will this affect your ability to service them?
The firm’s expert attorneys will help you evaluate what sort of short-term emergency relief might be available before letting the employee know you are aware of the theft. They can also help determine whether investigation should be done via counsel, using the advantages of attorney-client privilege. They can coordinate the right team to investigate and assess the damage, help you make claims on insurance policies, and decide on the proper action if the theft impacted any vendors, customers, or other employees. And they can help you take the proper legal action to protect your business.
In employee embezzlement cases, the key is getting the right team in place to investigate, assess, and take swift action to prevent further dissipation of stolen funds. The quicker you act, the better your chances of limiting the damage and recovering what you’ve already lost.
This article is informational only. No attorney-client relationship arises from the publication or use of this article. It is not a substitute for legal advice or opinions. For more information, contact at or online to see if we may be able to assist your business legal needs.