The anatomy of a white-collar theft

The anatomy of a white-collar theft

Recent Kane County events got me thinking about some of my favorite on-air conversations with former Ward and Jones co-host and retired South Elgin police chief, Larry Jones. Like clockwork, every three to four months we’d cover some form of local small business or government embezzlement, typically perpetrated by a mid-level money manager or bookkeeper.

Harkening back to his law enforcement days, the ever-insightful Mr. Jones would cogently note that these kinds of thefts always started off small with the errant party professing a full internal intention to pay it back. But they’d inevitable get in so deep that, even if they could return the now large sum of money, they couldn’t do it without fear of getting caught.

Considering the timeliness of the topic, I reached out to Larry one more time to ask him to help me create a profile of the average small business/local government embezzler. It can certainly be an aggravating factor, but he told me that staffers who steal to feed a chemical or gambling addiction are actually a small minority. More often than not, the thefts come at the hands of an employee who never really considered the possibility.

In fact, the “brash” offenders, as one former veteran prosecutor referred to them, are extremely rare and generally relegated to the political playing field. Infamous elected officials like Fast Eddie Vrdolyak, Michael Madigan, Ed Burke, and Aurora Mayor Richard Irvin may get all the press, but that kind of addictive in-your-face catch-me-if-you-can gaming the system approach is the exception and not the rule.

That means we’re talking about a crime of opportunity where the embezzler initially reacts to a lack of reasonable fiscal safeguards, particularly in the digital regard. They start by “misappropriating” a couple hundred dollars, but after they get away with it three or four times, it emboldens them to take even more.

When the amount stolen hits impossible-to-pay-it-back tipping point, an entitlement mentality creeps in whereby the embezzler starts to justify the ongoing thefts by telling themselves that they’re underpaid and underappreciated and they deserve the “extra” money.

A perfect example of this phenomenon was the former Geneva, Illinois, streets superintendent who was convicted of making personal purchases with his city issued credit card back in 2012. Those “acquisitions” never amounted to more than 200-something dollars a month over the course of eight years, but I’m sure it started off even smaller than that.

I’m equally convinced he intended to reimburse the city for those early expenditures, but after he escaped detection for so long he didn’t think twice about making the next charge.

More recently, the ten-year revenue manager at Geneva’s Herrington Inn was arrested for allegedly issuing herself $37,000 in 95 credit card refunds unrelated to any specific purchases between March 2021 and December 2022. It’s another textbook example of this classic slow-trickle form of embezzlement. Though, in this case, I’m not sure why it took the credit card company almost two years to catch on.  Perhaps those transactions finally reached an amount that set off some sort of automatic alarm.

But what surprises me most about these episodes is the counterintuitive reality that the reward is rarely worth the felony charges risk, particularly when these embezzlers almost always get caught.

At the time of his thefts, the Geneva superintendent’s salary was around $150,000 which makes that $2,500 in unauthorized annual charges appear downright paltry and utterly unworthy it. Chicago area revenue managers make an average $87,000 which certainly calls 18 grand a year in alleged thefts into serious question.

Not only did both individuals lose those well-paying jobs, but they’ll never work in their chosen fields again, which will greatly limit their future earning potential. Put more simply, their lives will never be the same for a relatively minor theft.

Larry’s theory was, when the embezzlement didn’t involve an addiction, it was the result of a need to “take a walk on the wild side,” and I think he’s onto something. Homo Sapiens cannot thrive without taking risks, but this existence demands that we avoid them at all costs. And whenever we sublimate a basic human drive it tends to manifest itself in some very strange ways.

Another ironic disconnect here is, despite how getting away with it encourages the next theft, whenever Larry arrested an embezzler at their residence, they always said something along the lines of “I’ve been waiting for you to show up.” It was essentially a front door confession without applying the least bit of pressure.

Larry also explained the fascinating form of compartmentalization that tends to go along with these scenarios. When the police would accuse a self-professed embezzler of taking money they hadn’t stolen, they would indignantly pound their fist on the table and swear their innocence. They seemed to glean some solace in the fact that they’d only go so far and no further.

Our aforementioned prosecutor similarly noted that these defendants typically confessed, asked for some sort of plea bargain, agreed to pay restitution, and were truly remorseful. Only a rare minority fought the criminal charges tooth and nail.

Since this is clearly a crime of convenience, it means the small business/government staffer solution is to stop saying “it can’t happen here” and implement the kind of fiscal checks and balances that won’t leave any tempting openings. I’m no fan of Oprah Winfrey, but when she warned businessmen to “personally sign all of your checks,” she was dead on. It’s a little more challenging in the digital banking era, but having at least two sets of eyes on the monthly “books” is quite the deterrent.

The awareness of a regular outside audit can also works wonders.

But deterrence isn’t as easy when it comes to elected officials because, once their budgets are approved, the Internal Control Statute confers the capacity for them to spend that money in any legal way they see fit. And even though they’re ostensibly tasked with catching on, the vast majority of city councilmen and county board members lack the time and forensic financial skills required to detect something as simple as a few unauthorized credit card charges. I think it will take a far more elaborate system of checks and balances to better deter elected official malfeasance.

My point here has been to offer some sort of explanation for how and why these kinds of business/government thefts happen, because once we better understand the mental process involved, we can apply some reasonable countermeasures.

Human beings never fail to be a fascinating proposition.

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