Managers Commit 85% of Embezzlement Cases, Survey Finds

Eighty-five percent of embezzlement cases were committed by someone at the managerial level or higher, according to a new survey of chief financial officers, controllers and accountants commissioned by Hiscox, a specialist insurance company based in New York.

Nearly four out of 10 of the survey’s respondents said they experienced two or more cases of embezzlement during their careers, reported the Hiscox survey.

Thirty-three percent of the theft perpetrators worked in the accounting or finance department, 31% percent of the theft cases went on for three years or longer and 70% of the embezzlements lasted for more than a year. Nearly 80% of the embezzlements included more than one person, and the average number of persons involved with internal fraud cases was three.

While most embezzlers do not start out at the company with any intention to steal, they typically start taking money because they fall into a financial crisis. At first, they may justify the theft as a loan and intend to pay it back, the survey reported.

However, some employees start stealing because they become disgruntled with the company and feel they are entitled to more money than what they are receiving in salary.

The average number of years an embezzler has worked for a company is about eight, according to survey results.

“Often the embezzler is surprised at how easy it is to steal from their employer,” the survey report said. “They may bring other like-minded employees and create a more sophisticated scheme.”

Some of the most common methods of embezzlement include inaccurately reporting spending, creating fictitious vendors, overstating payments made, taking cash that the company maintains for day-to-day operations, diverting payments made to the company into personal accounts, writing company checks to personal accounts and even paying fictitious employees.

Sixty-five percent of the embezzlements are detected by someone within the company that noticed something was amiss.

The survey report estimated that the average amount embezzled was nearly $360,000.

The funds recovered, however, through settlements, restitution or insurance occurred in only 39% of the cases.

Forty-five percent of embezzlements led to criminal charges and 58% of these cases resulted in a conviction.

“Companies that were victims of embezzlement lost far more than money,” the Hiscox survey report stated. “They lost customers, had more difficulty attracting new customers and lost business partners. They admitted that embezzlement negatively impacted the company’s reputation.”

Wakefield Research in Arlington, Va. surveyed approximately 200 professionals who work full time as a CFO, controller or accountant at a company where embezzlement occurred. The survey’s margin of error was plus or minus 6.9%.