Staff And Credit Card Misuse: Steps For Preventing Fraud

An actor filed a lawsuit against his former staff member, seeking six million dollars in damages.

The actor alleges the former staff member used the family employer's credit card to pay for personal expenses, including groceries, Uber trips, dry cleaning, dog sitting, luxury hotel rooms, and meals not related to work, as well as cameras, iPhones, Pilates classes, and flowers. The alleged "spending spree" lasted four years.

Among the expenses the actor says his staff member illegally charged to the employer's card are $2,600 for a stay at the Montage Hotel on a trip to Los Angeles; $156 for dinner at Nobu; $604 for a meal at the upmarket eatery; $729 for a rental car; and several hundred dollars more on cabs. The actor claims the staff member also "helped" herself to petty cash.

The actor also accuses the former staff member of stealing seven-and-a-half million of his frequent flyer miles, worth $300,000, over a two-year period. He claims she used three million for personal travel and transferred four-and-a-half million to her personal account.

The defendant started as the actor's personal assistant and then worked her way up to Vice President of Production and Finance at his production company before resigning.

The former staff member denies using the company credit cards improperly and questions if she even made the purchases listed.

She is suing the actor for $12 million based on allegations of gender discrimination. In her lawsuit, the former staff member claims the actor subjected her to a toxic work environment, where she was labeled a "b****," and was spoken to in a "hostile, abusive and intimidating manner." Both lawsuits are ongoing. "Robert De Niro questions former employee's spending" (Jan. 05, 2022).

Commentary and Checklist

Family employers should have a system of financial oversight, with specific written limitations for staff who must use the organization’s credit cards, to limit types of purchases and amounts. Require staff to receive prior authorization before making purchases over a certain amount. Timely submission of receipts for all purchases should also be required.

It is important to have the expenditures reviewed frequently to prevent what is described in the source article. Have a third-party review and manage expenditures with an eye toward looking for any dishonest or fraudulent behaviors.

Here are some best practices for preventing credit card fraud:

  • Develop, distribute, and enforce a policy promoting honesty and integrity, and prohibiting embezzlement and employee theft. Have all employees acknowledge in writing their receipt and understanding of the policy.
  • Develop policies/procedures regarding the use of organization credit cards.
  • Strictly limit the number of credit cards issued.
  • Provide a credit card solely for the purpose of allowing an employee to perform their work more effectively.
  • Place a credit limit on each card.
  • Set the credit limit to the monthly credit amount the employee needs to perform the job effectively.
  • Employees issued a credit card should acknowledge by signature your policies/procedures regarding credit cards.
  • Employees should acknowledge in writing that an organizational credit card is a tool to assist with performance and not a benefit of employment or job-related perk.
  • List what is considered acceptable credit card purchases in your policy/procedures.
  • Require written pre-approval for any purchases outside the norm.
  • Require employees to acknowledge their credit card expenditures and provide an explanation of the expenditure, if necessary.
  • Prohibit the use of an organization credit card for personal expenses.
  • Prohibit employees from using credit card cash advances without approval.
  • Require original receipts for all purchases over certain amounts on organization credit cards within 30 days of purchase.
  • Require employees to immediately notify the organization and the credit card issuer if a card is lost, stolen, or compromised.
  • Consistently discipline employees that do not follow credit card policies/procedures including, but not limited to, suspending, or terminating credit card privileges.
  • Perform due diligence on all employees issued credit cards, including criminal background checks.
  • Do not provide credit cards to employees with a history of embezzlement, fraud, or other fidelity crimes.
  • Review monthly all statements directly from the credit card issuer.
  • Do not allow employees to approve their own credit card expenses
  • Designate a third-party unaffiliated employee to manage credit card expenditures including collecting receipts; reviewing statements; comparing receipts to the statements; making certain that purchases made were used for the benefit of the organization; and to flag any questionable purchases for management review.
  • Require management to review and approve all credit card purchases.
  • Set alerts to provide notices of credit card purchases.
  • Notify credit card issuers immediately when employees with organization credit cards are no longer employed; no longer granted authority to use a credit card; or when a card is reported lost or stolen.
  • Limit automatic payments via credit cards to vendors and closely monitor credit card activity to such vendors.
  • Closely monitor credit card expenses to identify suspicious or unusual purchasing activity.
  • Select a credit card issuer that provides online statements; allows for credit limits by card/employee; and provides for 24/7 monitoring, including spending alerts and fraud protection.
  • Closely review all credit issuer agreements to determine your exposure and responsibilities in case of fraud.
  • Provide a means for employees and others to report suspicions of wrongdoing-including employee embezzlement and/or theft-easily, safely, and without retaliation.
  • Consider a third-party mechanism for employees, vendors, and other workplace participants to anonymously report suspicions of credit card fraud.
  • Investigate all suspicious or unusual credit card expenses in a timely and professional manner.
  • If an investigation is warranted, use a person trained in investigating employee crime, theft, or embezzlement and/or a person experienced in forensic accounting.
  • If embezzlement or fraud is detected or reasonably suspected, consult legal counsel immediately.
  • Do not terminate a person or make accusations of fraud or other fidelity crimes without seeking information from law enforcement and advice from an attorney.
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