Why Autonomy And Finances Are A Bad Mix For Staff And Family Employers

The former president and CEO of a wholesale produce market in Philadelphia has been charged with embezzling $7.8 million from the organization.

In 2018, the CEO abruptly resigned after serving as the CEO for 20 years. It was rumored that the federal government was looking into his and the company's finances as well as into connections to known local criminals.

The 60-year-old New Jersey resident faces multiple federal criminal charges.

According to federal prosecutors, the former CEO had full control over every aspect of the organization's expenditures and funds.

For years the CEO allegedly paid his personal credit cards and the rent on his New Jersey shore house with company funds. Prosecutors say he converted $1.1 million in checks from the organization's bank account into cash and used the money for personal purchases. He also allegedly caused $1.7 million in checks to be issued from the market's operating account to his friends and relatives.

The defendant hid his embezzlement by entering the payments as legitimate business expenditures for maintenance, snow removal, insurance, and legal fees, according to prosecutors.

Furthermore, prosecutors claim the CEO skimmed $2.6 million in cash from the pay gate at the market's parking lot. He allegedly used the cash to pay employees "under the table" and kept a substantial amount for himself.

The IRS also claims that the CEO evaded more than $2.1 million in federal income tax.

The former CEO faces a maximum sentence of 102 years in prison, a three-year period of supervised release, and a fine of $2,500,000. "Ex-president of Philly Wholesale Produce Market accused of embezzling $7.8 million" www.ai-cio.com (Mar. 11, 2021).

Commentary and Checklist

Family employers may give senior staff great autonomy as to financial matters. The more autonomy provided a staff member, the more opportunity to commit wrongdoing.

Family members should employ checks on all employees who work with financial matters and avoid providing “full control” to any staff member or contractor.

Checks include requiring at least two people to sign off on expenditures. Allow for third party review and audits of finances.

Here are some steps family employers should take to help prevent embezzlement:

·      Have a policy of financial oversight in place and train all new staff on your policy, notifying them that fraud is grounds for termination and criminal charges.

·      Employ a third party to audit all of your finances on a routine basis.

·      Do not entrust all financial oversight to only one staff member.

·      Require that staff with access to your finances take vacations periodically and have another person look over the financial record in their absence.

·      Make sure that staff knows that no one is exempt from your financial oversight policy, and that financial review is standard practice in the organization, not a sign of distrust.

·      Have a safe, third party reporting mechanism in place and make sure that staff knows who they should talk to if they suspect that fraud is occurring.

  ·      Encourage staff to report suspected fraud by keeping the identity  of informants confidential and investigating any reports of financial wrongdoing.

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