Volume 47, Issue 10 - October 2012

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When Bad Things Happen to Good Shops
How to Thrive Amid Adversity and Take Preventative Measures
by Penny Stacey

Unfortunately, it’s become a common headline: “Glass shop employee embezzles thousands (or more).” No one thinks it can happen to them, but what happens when it does? How can this be prevented, and how can shops thrive amid such circumstances? Read on to see how some shops have done just that.

In June 2011, Ken von Roenn, president and director of design for Louisville, Ky.-based Architectural Glass Art Inc. (AGA), discovered that the company’s chief financial officer, Latrisha Riedling, had been stealing money from the company. Indeed Reidling had stolen around $750,000. She had been with the company since 2005 as a bookkeeper and had been promoted to chief financial officer in 2008.

Von Roenn noticed the company was losing money, but wasn’t sure why at first. “It was just illogical, and I thought ‘something is not right here,’” he recalls. “I thought, ‘what are the possibilities?’ I thought, ‘if someone was going to steal from us, what would be the easiest way?’ And I thought the easiest way would be to falsify the payroll since that was something I didn’t look at. I called our payroll service and had them fax me the payroll. I started looking over it and saw her husband’s name on the payroll.”

He soon found out that the theft didn’t end there. “Once we opened that door, we started uncovering all sorts of things,” says von Roenn. “She stole in every way conceivable.”

For example, von Roenn would deposit any cash that came into the company into her own account, and she would duplicate the company’s deposit slips so what the owners saw was not what was provided to the bank. “We got the deposit slips from the bank and saw the disparity,” he says.

Even amid finding this, though, von Roenn says he was concerned for his employee. “When we discovered it we didn’t [initially] know the severity of it,” he says. “There were two opinions—my daughter’s was to prosecute her and mine was to find out the severity and work out a payment plan. I didn’t want her to go to jail.”

Von Roenn gave Riedling an ultimatum: tell the truth or go to jail. “I told her, ‘you have to tell me the truth and you have to tell me now,’ and what she told us was not true, so I told her we were going to look into the books,” he says. “Within about three hours it went from $300 to $275,000.” The final total was more than $750,000.

The Company Today
More than a year later, the company is thriving—despite the major strain placed on its financial standing.

“Financially we’ve just had to really tighten our belts and focus on the way that we do things,” says von Roenn. “I think there’s a silver lining to every cloud, and when this happened it really forced us to accelerate some plans we’d been working on for a number of years.”

It also has created a sense of teamwork at the company. “Everyone in the company really pulled together and it’s brought everyone closer together,” he says. “We’ve all felt that the theft occurred to each of us, not just some anonymous company. Each of us individually has suffered.”

Looking back, would von Roenn have done anything differently in his hiring of Riedling? Not really, he says. “In going back and looking at everything, we did everything right,” he says. “We checked her resume, we called her references and we even checked her criminal record and nothing showed up as any concern.”

Shortly after his company discovered her theft, though, they say they learned this was not Riedling’s first time to be accused of such theft. “She’d stolen almost the same amount from another company that she’d not put on her resume,” he recalls. “We found and out and talked to them and discovered that they learned of it on a Friday and talked to her on a Friday afternoon, and on Monday afternoon they came in and their whole computer system was crashed and they couldn’t prosecute her for anything.”

In looking back at the hiring process, AGA management had called all of Riedling’s references. “The only thing we overlooked was that she had told us that during a period of about five years she was working as the bookkeeper for her husband’s company and staying at home with her daughter,” says von Roenn, “when, in fact, during that period she was working for this other company. We did check, though, and found that her husband had a construction company and she was a co-owner and it was incorporated.”

Looking at Reidling’s time with the company, its bookkeeping habits were deemed to be in line as well. “The police actually said that we had one of the best systems of any company they’d ever seen that had been embezzled,” says von Roenn. “It’s just that she knew where the creases were and could figure out how to disguise things.”

What’s Changed
Despite a good system, von Roenn says the incident with Riedling definitely encouraged the company to change some procedures. “We now involve our accounts more than we did before, but the one thing I was really concerned about was the whole issue of trust,” he says. “For us, trust is really a pretty big deal of who we are, and we’re a small company. Everybody has a responsibility and they’re given a lot of latitude to do things the way they should be done. I didn’t want to change the way we are and the way we do things. I wanted people to feel I still trusted them. That part is still the same, we just added a few more checks and balances in the system—nothing really major, though.”

Von Roenn also has spent a good deal of time encouraging his staff not to let the incident hurt their morale. “The thing I realized immediately was the first inclination was to feel a lot of anger, and that anger and all of that negativity is really, really bad for the organization,” he says. “In the beginning I got everyone together and told them ‘you are going to have to stop all the negativity and put all the anger away and you’re going to have to find a way to forgive and let it go. All of the negativity and anger was actually hurting the company. It wasn’t going to make us any better; it wasn’t going to change one aspect of what we were doing.”

Today, the incident is behind both AGA and its leaders. “It’s over, it’s done,” says von Roenn. “It hurt the business a lot. It put us behind, no doubt. We are making the best of it, and we’ll come through this and we will be a better company. It’ll just take us a little longer to get there.”

Expert Outlook
So how can you avoid theft? Industry expert and business consultant Paul Bieber says no theft is 100 percent preventable, but there are steps you can take, particularly when hiring someone who will be dealing with money at your company.


• Complete a thorough interview and background check. “The applicant has to be able to account for the last 12 years of employment,” says Bieber. “If there were any gaps in his employment, you want to understand those gaps.”
• Check references. “The owner should speak personally with the candidate’s references,” he suggests. “Don’t delegate this because it’s an important position to hire.”
• Bring in your accountant. “The accountant can verify the actual skills of the CFO, which goes a long way to prove that he is what he says he is,” says Bieber.
• Talk to your insurer. “You want to verify all people who handle significant amounts of money,” says Bieber. “They should be bonded, and talk to your local insurance agent to understand the costs, the deductible and the coverage. For example, you may be bonded against theft from checking but not petty cash.”

And how to recover? “If the person just gambled and lost all the money, you’re out of luck,” says Bieber. “But you can sue them in civil court and if you win you’ll get an attachment on houses or cars. If they have no assets, you’re out of luck. If the person went out and bought a vacation home, you can take it. But if they’ve just spent it on casinos and booze, you lose.”

 

Left with $4,000 in the Bank
When Dennis Clark, president of Lafayette, Ind.-based Lafayette Glass Co., discovered that a now former employee had allegedly stolen in excess of $100,000 from the company, the business was left with just a mere $4,000 in the bank and approximately $70,000 in overdue accounts payable.

Clark’s company was saved because he had saved up enough personally to be able to invest back in the business. “We’ve been in the business for 66 years and we’re well-respected with our creditors, and they even offered to give us assistance, extended times and so forth, but I didn’t need to do that,” he recalls. “Had I not been in a financial position where I could put more money into the company we probably would not have been able to do this.”

What Clark discovered was that the employee, Christina Denny, had allegedly been stealing from the company in a variety of ways. Denny had been with the company for 19 years. “Naturally, we trusted her,” Clark says. “We brought her through the ranks, so to speak, and she was almost like a daughter to me … We know it’s been happening since 2001. I think it started out that she was taking a little bit and then a little more, and then she started taking everything she could get her hands on.”

The company discovered the alleged theft in 2009 and contacted the local police, who eventually turned the case over to the state. “They subpoenaed all of her bank accounts and credit cards and they’re the ones who really found out all the things she was doing,” recalls Clark. “We would probably not have realized that it was anything near that kind of money.”

As in many cases of embezzlement, Denny’s alleged theft took on several forms, according to Clark. For example, she was taking all of the cash that came into the company on a daily basis and only was depositing the checks that arrived. “[She also was] padding the payroll,” says Clark. “She had two brothers who worked here, and she padded one of the brothers’ payroll records—for a total of $30,000 over the years.”

When Clark first heard accusations from another employee that Denny had been stealing, he didn’t believe it. “I told him, ‘you can’t just accuse someone of something like that; you’ve got to have proof,’” he recalls.

Shortly after, the employee stayed afterhours and allegedly caught Denny stealing $750 from the company’s safe.

What’s Changed
Today, Lafayette Glass Co. has made one main change to prevent possible theft—or at least reduce the risk for it—in the future. “I have a son, Chris, who’s in the business, and all checks have to be signed by either him or myself,” says Clark. “No one else has any check-signing authority.”

He promoted an office assistant to bookkeeper, but she doesn’t have check-signing authority the way Denny did. “It’s sad that you can’t trust people to do the right thing, but that’s the way it is.”

He warns others that trust often is overrated unfortunately. “Don’t be so trustworthy of all your employees,” says Clark. “I trusted [Denny] too much and I put too much control in her hands. I never would have expected this from her. It just goes to show you that not all people are honest.”

The company doesn’t expect to get any retribution for what has occurred, unless a civil suit is filed against Denny.

Penny Stacey is the editor of USGlass magazine. She can be reached at pstacey@glass.com. Read her blog at http://penny.usglassmag.com, follow her on Twitter @USGlass, and like USGlass magazine on Facebook to receive the latest updates.


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