Tipping the balance

Never assume guilt or innocence

By David Petterson, CFE

The initial evidence pointed toward an open-and-shut embezzlement case. But the author describes the assumptions that almost led to an innocent employee's downfall, and he details his fraud examination that revealed the truth.

In early 2014, Paul Knowles, a criminal defense attorney, approached me seeking help with an alleged fraud. He said that his client, Samantha Thompson, a 56-year-old married woman, had until recently been employed by Service Line Inc., a New Zealand-based not-for-profit community organization that provided home-care/sheltered-living facilities and services to adults with intellectual disabilities — "supported residents."

Thompson began working at Service Line in 2005 as a social worker. Over the next nine years she rose to area supervisor — responsible for the oversight of 10 to 15 staff and 20 supported residents at five group-care residential homes — before Service Line fired her. (I've changed all names in this article.)

She was soft-spoken with strong family values, punctual, hard-working and honest. If Thompson did something wrong, she was the first to acknowledge it, and she accepted criticism well. She was popular with her co-workers, although after the allegations were made against her, they were quick to distance themselves from her. They believed that because the police were called in, and she was charged with an offense, she must have been guilty. Management used the experience as a warning to all staff that if they breached the organization's trust then it would deal severely with them.

Part of her responsibilities was to oversee the personal trust (bank) accounts for the home residents, co-sign all checks of more than $200 with the supported resident and manage the expenditure budget for each residence.

In late 2012, a group of residents went on a trip to Spain. Thompson and three other caregivers accompanied the traveling residents, who shared the cost of the caregivers. Over several months, family members had deposited money to the traveling residents' trust accounts for their trip expenses.

A family member of a resident who didn't travel to Spain reviewed his trust account and noticed $1,600 had been disbursed from the resident's bank account with the narration in the trust cashbook entered as "travel." The family member complained to the head office of Service Line, which initiated an internal investigation. An in-house accountant based in another center carried out the investigation and reported to management that Thompson initiated the transaction.

Service Line extended the internal investigation back another two years after Thompson's supervisor reviewed Thompson's employment file and noted that management had disciplined her about 18 months earlier for not keeping accounting records up to date in one of the homes that was randomly audited. Many discrepancies began to surface, including inadequate receipt evidence of what residents' funds had been spent on, alleged purchases from favored suppliers and failures to comply with internal procedures surrounding the handling of residents' funds.

Thompson's manager interviewed her for an explanation without fully disclosing each allegation. The manager didn't indicate to Thompson before the meeting the extent of the issues. (Under New Zealand employment law, when a meeting has been called with potential disciplinary outcomes, employees are entitled to know the general subject of the meeting, the purpose of the meeting and to have explained to them the potential outcomes. Also, they're entitled to have a support person or union representative present.)

Further, the manager structured the meeting to discipline Thompson but not allege that she might have misappropriated supported residents' trust funds. The manager alleged that client trust funds were missing or unaccounted for. However, the stated purpose of the meeting was that the record keeping for the home was in question, rather than the real purpose, which was to discuss the record keeping in regard to client trust funds. The manager didn't mention at the meeting anything about the audit findings or the narrow focus of the investigation. Thompson didn't know until the last meeting that management was considering only her as a possible thief — if that's actually what had happened.

The manager held a second meeting with Thompson a few days later, at which she fired her. Service Line reported the matter to the police the next day.

The complaint to police contained the in-house accountant's report, notes from the meetings with Thompson and an assessment of the issues (from Service Line's perspective), including copies of the in-house manuals and procedures surrounding cash-handling arrangements for supported residents.

Six months passed before police contacted Thompson to arrange an interview. In the meantime, the company instructed its in-house accountant to extend her investigations. The accountant found more record-keeping discrepancies. 

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