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Million Dollar Embezzlement By Credit Card: What Family Employers Should Consider

An accounting manager in charge of monitoring credit card use for her employer, and who had a company credit card herself, used her position to embezzle $4 million worth of iPhones and iPads.

In 2011, the accounting manager, who worked for an IT solutions organization in Toronto, purchased one iPad with her company credit card. She then listed it for sale on Kijiji, an online classified ad service owned by eBay. A buyer met her in a mall parking lot and paid her cash for the iPad. He asked if she could provide more Apple products.

Over the next 30 months, the accounting manager purchased 5,321 iPads and 4,942 iPhones with her company credit card. She sold the Apple products to the buyer in batches, sometimes 20 products at a time. The accounting manager kept the cash from the exchanges.

No one at the organization knew that the accounting manager had purchased more than 10,000 Apple products with her company credit card until an outside consultant came in to prepare the organization to go public in 2016. The consultant discovered that the accounting manager not only made unauthorized purchases of iPads and iPhones, but also used her company credit card to buy season tickets for the Toronto Raptors, make cash gifts to friends, and pay for a trip to Las Vegas.

The employer is suing the accounting manager as well as the man who bought the Apple products from her. Lee Mathews "Accountant Bought and Sold $4M in iPads and iPhones on Company Credit Card" geek.com (Apr. 08, 2019).

Commentary and Checklist

Family employers should only give credit cards to staff members who make a large number of work-related purchases. For example, a governess who buys dinner for your children every day will likely need a credit card for convenience. However, if a staff member only occasionally makes a purchase—for example, a housekeeper who buys cleaning products once a month—then a better option is to have your household manager make such purchases.

Before providing staff with credit cards, train them on proper credit card use. Provide staff with a written list of the types of purchases they can make with their company card, as well as a spending cap for each type of purchase. For example, if a personal assistant is charged with providing food and drinks for meetings, state what constitutes a meeting (whether staff meetings and birthday parties qualify, or only meetings with external clients) and the maximum amount the assistant can spend for breakfast, lunch, afternoon, or dinner meetings.

Provide a reporting mechanism whereby staff can report any suspected wrongdoing, including credit card fraud. During training sessions, encourage staff to report suspected fraud committed by others in the organization. Tell staff that fraud can lead to termination and legal action.

Keeping a close eye on purchases made with staff credit cards is also important to spot possible identity theft. When discussing proper use of credit cards, family employers should also train staff on ways to reduce the risk of third-party fraud by only making online purchases on well-known, secure websites and immediately reporting a lost or stolen credit card.

Here are some additional tips for family employers to follow when they provide credit cards to staff:
 

  • Encourage staff to ask you before making any purchases that they are unsure about.
  • When you notice purchases that fall outside of the written guidelines, immediately talk to staff about them.
  • Do not allow a staff member to make any personal purchases with the card.
  • Require staff to submit all receipts for purchases made with the credit card and denote the reason for the purchase.
  • Check receipts monthly to make sure they match up with actual credit card spending and that all purchases were made for approved purposes.
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