August 19, 2018
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As Maine embezzlement arrests jump, experts say warning signs often missed

Ashley L. Conti | BDN
Ashley L. Conti | BDN
Suzanne Kelly, seen in this August 2016 photograph, was the victim of embezzlement between 2001 and 2002.
By Judy Harrison, BDN Staff

More than a decade has passed since Suzanne Kelly’s real estate management firm in Bangor lost more than $45,000 to an employee’s repeated thefts.

But even though the business has recovered financially from the embezzlement, the fact that it happened still stings, she said.

“We really were shocked,” Kelly said. “It was a miracle really that it was discovered. We could have lost everything.”

She and her husband, Bob Kelly, also own House Revivers, which has rehabilitated several buildings in downtown Bangor. The former employee started working for them as a high school student answering phones and slowly began taking on more responsibility, Suzanne Kelly said. She worked six years for the firm but took the money over the last two, between 2001 and 2002. She mostly took cash but also wrote some checks out to herself.

The former bookkeeper was indicted on a Class B theft charge by the Penobscot County grand jury in June 2003, according Bangor Daily News archives. She pleaded guilty and was sentenced to four years in prison with all but 180 days suspended to be followed by four years of probation. She also was ordered to pay $45,058 in restitution but was never able to pay it all back.

The Kellys asked that their former employee not be named since the embezzlement took place so long ago. They figure she has since moved on with her life, but Suzanne Kelly spoke about their experience as a warning to other small-business owners.

“We trusted her and didn’t have a second pair of eyes on things as we should have,” Suzanne Kelly said.

The Kellys were hit by a crime that has become increasingly common in Maine, with victims ranging from small businesses like theirs to municipal governments, banks and nonprofits.

The number of people charged with embezzlement in Maine rose dramatically from 2015 to 2016, spiking nearly 46 percent to 67 individuals, according to the most recently available state crime statistics. That most likely vastly underestimates the number of people stealing from employers, organizers and loved ones because the majority of embezzlement cases aren’t reported to police, an expert said.

It is difficult to obtain complete numbers on how many people are charged each year in embezzlement and fraud cases because they are prosecuted by three different offices — the U.S. attorney’s office, the Maine attorney general’s office and local prosecutors’ offices. The state also does not track convictions in those cases, and no single organization compiles the amount of money lost to fraud and embezzlement in the state.

But the general increase continues a trend of rising embezzlement arrests that began in 1994, the first year for which crime statistics, compiled by the Maine Department of Public Safety, are available online. That year, 13 people were charged with the crime of embezzlement, defined as the misappropriation or misapplication of money or property entrusted to one’s care, custody or control. By 2015, that number had tripled to 46.

Telltale signs

The reason for the increase is unclear, but Bob Brown, a Bangor fraud expert, speculated that better training of police in how to investigate white-collar crimes, prosecutors’ willingness to prosecute more often, and increased training of employees about recognizing the signs of fraud have contributed.

Brown is a founding partner of The CPA Solution, which specializes in fraud detection and prevention, and forensic accounting. He said the risk signs can be obvious but also easily overlooked by trusting employers and/or co-workers.

The average embezzler is white and middle-aged with no criminal history, according to a profile prepared by Christopher T. Marquet, an international consultant on fraud, in a 2013 report. Women were more likely than men to embezzle, and embezzlers most likely held financial positions within an organization or were entrusted with the finances of other people, he found.

As identified by criminologist Donald Cressey, the telltale signs of an embezzler include: a real or perceived financial need; a rationalization for taking the money with the intent of paying it back; and a lack of oversight or internal control over the person controlling the funds.

Former Westbrook tax collector Ann Marie Williams, 53, of Falmouth exhibited all of the risk signs, but apparently no one recognized them until it was too late. Last month, she completed a six-month sentence in federal prison for stealing $118,000 from the city.

She attributed her actions to post-traumatic stress disorder; physical and emotional abuse by her now ex-husband over the course of their marriage; the financial and emotional demands of single parenthood; and guilt and “depression due to a misplaced sense of responsibility for the dysfunction that befell her and her children after the divorce.”

Williams admitted last year in U.S. District Court in Portland to skimming cash deposits from Westbrook. She told investigators that when she first took the money, her intent was to repay it. Her thefts took place between July 2015 and April 2016, according to court documents.

At her sentencing, Williams offered some insight into the mind of an embezzler, according to a transcript of her formal statement to the court.

“My heart is broken,” she said. “I’ve hurt my children that I love the most. I gave them things that I thought that they needed when they only needed me. I will spend the rest of my life making sure that they know that I’m there for them and that they don’t need things.”

Williams also told U.S. District Judge D. Brock Hornby that she deeply regretted her actions.

“My words cannot begin to express the emotions that I feel or the pain that I have caused. The fact that I abused that trust of so many good people, that will haunt me every single day.”

Assistant Attorney General Leanne Robbin, who prosecutes embezzlers in state court, said that the majority of defendants steal out of “greed and a sense of entitlement.”

“In my experience, a majority of embezzlers are just people living beyond their means who feel they are entitled to the money because they aren’t paid enough or appreciated enough,” she said. “Their rationalization for taking the money trumps any sense of wrongdoing or the possibility that they could be prosecuted.”

Most people charged with some form of embezzlement in Maine over the past five years worked for municipal governments, banks or credit unions, nonprofit organizations, physicians or agencies that receive state or federal funds, according to media reports. Others prosecuted were accused of financial elder abuse.

The higher-profile cases include former Belfast attorney William L. Dawson Jr., 63, who pleaded guilty to looting nearly $500,000 from the bank accounts of two elderly clients. Gov. Paul LePage commuted his sentence in May after Dawson had served about a year in prison.

Julie A. Smith, 58, of Skowhegan, a former clerk at the Somerset County district attorney’s office, was sentenced in August 2016 for stealing more than $90,000 intended to reimburse crime victims.

People who steal from employers in the private sector are less likely to be prosecuted than those working in the public sector, according to Brown, who has presented seminars at Maine Municipal Association conferences to help city and town officials avoid being victims of embezzlement. Over the years, officials in Anson, Newburgh, Fort Kent, Norway and Westbrook have implemented tighter controls on how money was handled after thefts were discovered, according to media reports.

After a theft is discovered, the loss is written off, the employee is fired and, sometimes, moves on to another firm to steal from the new employer, Brown said. Occasionally, a business will sue a former employee in an attempt to recoup losses.

The Association of Certified Fraud Examiners estimates that the typical organization loses 5 percent of revenues to embezzlement in a given year, according to a report it issues each year that compiles survey results from its members. The global losses last year exceeded $6.3 billion. The median loss for all cases was $150,000, with 23.2 percent of the cases causing losses of $1 million or more.

“The longer the fraud lasted, the greater the financial damage it caused,” the report said.

In Maine, smaller municipalities and small businesses appear to be more vulnerable to embezzlement because they tend to have fewer employees and those workers are trusted and given a great deal of financial responsibility, Brown said.

“Most of what we handle gets settled in a conference room rather than a courtroom,” he said.

Lessons learned

Suzanne Kelly said she and her husband made many of the mistakes Brown warns his clients about.

In addition to stealing cash, the former employee failed to mail out checks to pay real estate taxes and, because that employee also picked up the mail, the Kellys did not see late notices from municipal tax offices.

“The person who does this kind of thing creates a sort of chaos [of documents] so that you really are not able to find things,” Suzanne Kelly said. “He or she is the one that you go to get that information. They want it that way so that every time you try to get things organized and structured, it doesn’t stay that way because that’s a danger to that person if you know what’s going on.”

Suzanne Kelly said the former employee apparently took the money to help family members who relied on her.

“I think she, in her head, she justified this as something she had to do for whoever and she really thought she’d be able to pay the money back,” she said.

The theft was discovered when the Kellys’ maintenance man had to go on light duty after a mild heart attack. He began comparing monthly bank statements to deposits slips that the employee had left in the office, and found discrepancies, according to Suzanne Kelly.

The Kellys went back through their records for the entire time the employee worked for them and documented the thefts. They also made a recording of the former employee’s confession, then took that and the records to authorities within months of discovering the crime.

A Kelly family member now works as the company bookkeeper. Paperwork in the office is organized in binders and labeled so anyone who needs to find documents can do so easily. Bank receipts are stapled to the copy of the deposit slip and bank statements are reconciled with checks and deposits monthly.

“Going to the police was really was never a question for us,” Suzanne Kelly said. “That’s what you do. Somebody does that to you, that’s what you do and it’s going to be public.”

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