Chief Financial Officers, Account Managers and bookkeepers all, to vary degrees, are trusted employees who have access to corporate funds. Access to company funds, with little or sporadic oversight, can leave a company vulnerable to a variety of fraudulent schemes to obtain funds those employees were not entitled to. Common schemes include:

  1. The trusted employee setting up fictitious companies as suppliers of goods and materials and creating false invoices for payment.
  2. Another scenario involves the trusted employee engaging in a kickback scheme with an actual outside vendor/supplier to inflate invoices and “kick back” a percentage of the funds received from the company.
  3. Other schemes simply involve a trusted employee giving themselves bonuses and other unauthorized forms of compensation.

These schemes can go undetected for years and often result in the loss of hundreds of thousands to millions of dollars. They are usually detected when the company experiences a significant downturn in revenue, a verified audit, or the potential sale of the company requiring a close examination of the books and records.

When such schemes are discovered, the employer or counsel will usually retain a forensic accountant to uncover the extent of the fraud. Counsel will often advise the employer to confront the employee and convince them to pay back as much of the stolen funds as possible before notifying law enforcement. The employer may lead the employee to believe that they want to work with them to recover the funds and to make the company as whole as possible without the need for attorneys, litigation or law enforcement. Many employers will suggest that the employee “cooperate” and voluntarily turn over their retirement funds, monies in their family checking and savings accounts, and sell their home and other valuables in order to pay back the funds that were improperly taken.

What an employee needs to know is that they should first retain experienced criminal defense counsel to assist them throughout this complicated process. This is critical for a number of reasons.

First, anything the employee says to the employer or their counsel is likely an admission against interest and can be used in a future criminal prosecution.

Second, the employee needs the advice of counsel about the potential benefits versus risks of acknowledging the theft and the repayment of all or part of the monies taken prior to any potential criminal case.

Third, the employee needs their own attorney to deal with the employer to make sure that any monies repaid are handled correctly and that retirement funds are not simply liquidated without sufficient funds remaining to pay the interest and penalties usually due for early withdrawal.

Fourth, despite any conversations or assurances that law enforcement will not be contacted if the employee returns the funds, there is nothing that can bind an employer to such a promise. Any assurance not to report is against public policy and unenforceable as a matter of law.

Seizure of bank accounts, assets and real property through civil litigation is a very time consuming and costly endeavor. Once law enforcement is involved, prosecutors are more focused on the criminal charges, while restitution and forfeiture are a secondary concern. Consequently, most employers try to recover as much money as they can before notifying law enforcement. It is much easier for the company to recover funds with the cooperation of the former employee. Thus, it is critical for the employee to retain experienced criminal defense counsel at the outset.

Stahl Criminal Defense is here for all your criminal legal needs. We are experienced in all types of complex criminal matters involving a many types of electronic evidence. To contact the firm’s NJ office, call 908.301.9001 and to contact the firm’s NYC office, call 212.755.3300, or email Mr. Stahl at rstahl@stahlesq.com.