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It all starts with the smallest financial reverse

3 weeks ago
David Surdam
Employee theft

Embezzlement—“theft or misappropriation of funds placed in one’s trust or belonging to one’s employer ( dictionary).” 

Embezzlement is a friendly-sounding word, not harsh like “extortion.” Employers, however, have to guard against even trusted employees. The newspapers frequently report long-time employees, who embezzled money over a number of years. In many cases, the employee had overspent, sometimes out of a desire for fancy consumer items and sometimes out of desperation to cover unanticipated medical bills or car repairs.

Benjamin Franklin was famous for his “For want of a nail…a kingdom was lost” verse, whereby a trivial event triggers a dramatic catastrophe. I suspect many cases of embezzlement began with a relatively small expense. Those employees who embezzled large amounts to maintain a lavish lifestyle above their incomes usually had difficulty concealing such a contradiction between lifestyle and salaries.

A seemingly trivial financial reverse is a car breakdown. Many Americans, and not necessarily just people earning low incomes, would have difficulty paying an unexpected car repair. A $750 bill may seem insurmountable to them. Without recourse to friends and families with loanable funds, these Americans may be unable to repair their car and travel to their jobs. An unsympathetic boss might even fire them for missing a shift or two. After a week or two of unemployment (state unemployment payments require a waiting period), the newly-unemployed employee can rack up unpaid expenses. With a little imagination, one can see how such a trivial situation can snowball into a financial crisis.

Facing $1,500 or so in accumulated unpaid bills, people may begin to feel despair. Getting out of such a financial hole on even a $15 or $20 per hour job may be daunting. If a person operates a cash register, he or she may be tempted to skim off money each shift. I once worked for a retail store, and one of the accountants described ways people shortchanged the cash register. Bookkeepers or people authorized to use company checkbooks have access to company funds.

Desperate employees may initially intend to “pay back” the embezzled funds, but events often spiral out of control, as subterfuge succeeds subterfuge to disguise their embezzlement. One can imagine the stress involved in concealing embezzlement for years, as some perpetrators have done.

How can you avoid the temptation to embezzle money? Good money management skills are critical. The advice to maintain three or six months’ worth of living expenses in a liquid account remains sound. There is security knowing that you are prepared to deal with unexpected expenses.

Readers likely know that many employers screen prospective employees’ credit ratings. On the one hand, employees could argue that employer investigations of credit scores are an invasion of employees’ privacy, but a low credit score may signal an employee’s potential temptation to embezzle money.

Many readers of this blog piece may be graduating soon and will experience an upturn in their discretionary income. There are plenty of attractive ways to spend your new income, but I would advise only gradually upgrading your material lifestyle. The author admits to deviating from such advice, having spent money upon graduation to buy a lavish stereo system, and only thereafter starting to save money. Living beneath your means for a few years is easier upon graduation, before you’ve become accustomed to a higher standard of living. Those extra thousands of dollars that you save early on will make you a better credit risk and more attractive employee, as well as give you financial security.

Embezzlement is a friendly sounding word, but it is an insidious breach of ethics. With prudence, you should be able to avoid being tempted to embezzle.



Headshot of David Surdam

David Surdam

David Surdam received his Ph.D. in Economics from the University of Chicago. His dissertation, "Northern Naval Superiority and the Economics of the American Civil War," was supervised by Nobel-Prize Winner, Robert Fogel. Professor Surdam has taught at the University of Chicago, Northwestern University, Loyola University of Chicago, and the University of Oregon.

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Submitted by Alissa Wade on
Within the article above a definitive conclusion is drawn to conclude this post, that embezzlement is an "insidious breach of ethics." While I agree on the point implied that it is wrong to embezzle. The phrase "wording matters" applies to this scenario. Ethics are many things to many different people and can change depending on the context of culture. By using ethics in the broad sense, as it is above, the word ethics implies that this topic could be debated. Ethical approval or disproval implies different actions are permitted or not permitted. Embezzlement in a company should be unthinkable, it is against many goals of business practices to allow and/or overlook embezzlement from an employee. It is not an ethical conversation, for it is not debatable, it is strictly against the goals of businesses. Therefore, I believe that this article would have more impact and depict the true ramifications of this transgression more accurately with different wording.

Submitted by Lexis Powell on
When we learn about embezzlement in school, many of the stories that we hear about are the BIG ones. The ones were the CEO started to realize his company was going over and stole money that wasn't his from the business, or the accountant forging numbers on the books and pockets hundreds to millions of dollars. Personally, I have never thought about the everyday person looking to embezzling for a way to get out of situation. It is an interesting take on the fact that the majority of Americans can not even think about what would happen if a small unexpected expenses pops up. Therefore, these unexpected expenses make people fall down a long path looking for a way out and these are the majority of situations that happen in our economy not the big ones. If you do what you say by saving up for these things, this avoids the temptation and hopefully makes you not even have to worry about it. Great article!

Submitted by Adrienne Tebbe on
When I initially saw this article I was immediately intrigued, I always find it interesting why and how people embezzle. I also thought of Rita Crundwell, who embezzled millions of dollars as a City Comptroller from Dixon, Illinois for 2 decades. There was a documentary on her situation on how she stole millions and really, it was a pretty simple scheme. It boggled my mind on how the city administration or the citizens had no clue where the money was going and how she kept this a secret for this long. As a soon to be graduate, I think examples like this not only teach you the consequences you face, but also warning signs to look out for in company. But, I do like the point of unexpected expenses could make someone embezzle just a couple dollars, and then it becomes a snowball effect. One dollar becomes one hundred dollars, and so on. Fascinating Topic!

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Submitted by Colin J Kirchhoff on
This article was quite interesting because it helps remind us how embezzlement is one of the most unethical actions one can do for their company. But also how some people are able to get away with it for years without getting caught. It's something everyone in the company, regardless of position/status should keep an eye out. But I also think it's interesting because it's very relevant for people such as me who will be graduating this May. As stated, we will be given more discretionary income than we have been used to. For me personally, when I saw my starting salary for my job after graduation, my eyebrows lifted off my head. It all comes down to how well you manage this amount of income. I agree that we should still be cheap and "live beneath your needs" as the article had stated. Overall a great, quick read with excellent information!

Submitted by Carter Hartwig on
This is a very interesting blog post about embezzlement and how relatable it is to college kids ready to enter the business world. For someone like myself, I do not know how people can live with the guilt of skimming off a business's register or bank accounts as I would be a nervous wreck if I did something like that. It is always interesting to me how people start stealing minimal amounts and gradually get up to considerable amounts of money over time. A majority of those types of people get comfortable taking little amounts and start taking bigger risks because they believe they won't get caught. Another good point mentioned in the blog post is for postgraduates fresh out of college, should try and live below their means for a couple of years, in order to get a feeling of what it is like making a solid income. I think this is very important but also very hard for a lot of people to do because most college kids are tired of living the "broke" lifestyle and want nicer and newer things.