The client, Mr. E., is a wealthy business man who owns a couple of ranches, a home in Los Angeles, and one in Las Vegas; but he prefers to spend as much time as possible at his home in Sun Valley where his two daughters and their families live.
In an effort to help one of his daughters, who was an alcoholic, he decided to build a very nice retail shop in Ketchum, the town nearest to Sun Valley where she and her mother, Mrs. E., could set up an exclusive gift shop. The thought was that the mother and daughter could bond while traveling Europe buying antiques and other very nice items to sell in the shop. This turned out to be a success when the high-end exclusive shop became a favorite of many movie stars and other wealthy people. I recall seeing a set of napkin rings; each individual ring was priced at $1,250.00. A lot of money came through that little shop.
A little over a year after the shop opened I received a call from Mr. E. requesting that I meet him at his home office in Sun Valley as soon as possible. He requested that i bring one of my senior forensic accountants with me.
Upon arriving, we learned the following: it seems the daughter and wife enjoyed very much very much their buying trips to Europe , but had little or no interest in running the shop day-to-day. Therefore, Mrs. E. had hired her hairdresser to run the shop and keep the books. Mrs. E. had known her for several years and felt no need to get a resume or check her background. The new manager hired two local young ladies to work in the store keeping the inventory displayed nicely and giving the customers excellent personal service. They also had one part-time employee who worked the stock room and did most of the actual bookkeeping.
This part-time girl found an American Express invoice hidden behind the sink under the counter in the break room where they kept the coffee pot. Concerned with this unusual finding and suspicious that something was probably wrong, she went to the home of Mr. and Mrs. E. after work that day to share her finding with Mrs. E., as Mr. E. was out of town. The next day, Mrs. E. confronted her friend and former hairdresser, the manager. It was not a pleasant meeting. The manager was irate that anyone would even questionn her as if she had done something wrong. The meeting ended with Mrs. E. leaving in tears and quite upset. Thus, we were called in by Mr. E. to get to the bottom of the situation.
With that little bit of background, my forensic accountant and I met with the staff. While the accountant reviewed the books, I began interviewing the two sales ladies and the part-time employee who had found the American Express invoice. I interviewed each of them separately then met with the local Police Chief to explain what we were doing and to set up a meeting with the District Attorney for later in the week. I received assurances of cooperation from both.
Over the next few days we learned the following. Things get boring during the slow season. The manager decided to redecorate her home – with merchandise from the store – it was obvious to her that the owners didn’t care because they were never there. The two sales girls saw what was going on and wanted in on the action. Apparently, to keep them quiet and to share in the spoils, the manager agreed. It became a feeding frenzy. I could only think of the rushed excitement of the gold fish when it’s time for the daily feeding.
The three of them ran into logistical problems since some of the items they “needed” at home were too large to fit in their cars and no one had a pickup. But not to worry – manager to the rescue. Mr. E. had told the manager that since his two friends had sold their local bank to a big bank chain, he wanted her to open the business account at his friend’s new bank down the street. He thought she understood that she was to close the old account. She did as she was directed and opened the new account, but deposits were going into both banks, at her discretion.
To solve the problem of getting merchandise to their homes the manager opened an American Express Business Account and got cards for each of the three of them. They could now do online shopping and have the merchandise delivered to their homes and the invoice paid with checks drawn on the original bank account.
The three ladies were all friends, especially the two sales people. One of them got scared and started recording their conversations, especially after we got to town. During her second interview she broke down and made a complete written confession and went home to get her recordings and gave them to me. She talked to her friend, told her of her confession, and the second lady then determined that she would be allowed to give me her written version of what happened. I granted her demand and took her confession.
With this information and the documentation to collaborate it all with the findings of my forensic accountant, it was rather easy to get the written confession of the manager, especially after we found she had paid for her daughter’s wedding and airline tickets for a family guest – all on the company American Express card. They each took us and the police to their homes to surrender the stolen merchandise. Their unhappy husbands each got to load it all up and return it to the store.
We worked with the local police and the District Attorney and each of the three were convicted and received six months in the county jail and full restitution for everything they had stolen that could not be returned, like airline tickets, the cost of the wedding, etc.
I am happy to report the shop reopened under new, highly-qualified professional management with a professional sales staff using an excellent CPA and auditor. Mr. and Mrs. E. are very happy clients.
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