One Employee

A $30,000 discrepancy was not the clerical error they assumed it would be.

This case study describes how just One Employee used nine different methods to drain the profits of a family-owned business.

The Cider Mill offers a warm dining experience on the west side of Syracuse, a welcoming oasis in an area where chain restaurants prevail.

The owners Dan and Teresa Seeley and their staff are like family. The Seeleys go above and beyond to help their employees succeed in life. They support their work family in so many ways, such as writing letters of recommendation, hosting them at their home, giving them a place to stay when needed, and introducing them to their friends who can help them fulfill their aspirations. Tight knit would be an understatement to describe the bond that exists between the Seeleys and their Cider Mill family.

So, it was not alarming when their accountant called them in late October to advise of a $30,000 discrepancy from the prior year. The Seeleys also run a successful catering business and they assumed the discrepancy would be found as a deposit error and the catering business would show the offsetting overage.

Dan and Teresa both operate and work in their businesses and engaged this writer’s assistance to track down the discrepancy so they could continue to focus on running those businesses as normal.

What happened next was anything but normal. A review of their Point of Sale (POS) found several behaviors that reduce or negate sales at a level and frequency that weren’t normal for their business. Once confirmed, I called them with the unpleasant and shocking news. “I’m sorry to be the one to tell you, but there appears to be fraudulent activity happening in your restaurant”. How, they thought. “We don’t even allow our servers to remove items from checks or apply discounts without a manager’s approval.” If there was to be a silver lining, it was that One Employee was at the center of it and most of the other employees didn’t know and weren’t part of it.

You see, the POS activity was just the loose end of a thread that led to the full unraveling of widespread fraudulent activity. As a matter of fact, the anomalous activity found in the POS data had nothing at all to do with the $30,000 discrepancy reported by their accountant. It was, however, an accurate compass for the direction I needed to go next.

What I found, was nearly every aspect of the Seeleysrestaurant business had the hand of One Employee touching it fraudulently, without their knowledge. In addition to the POS, their payroll expense, food costs, bank accounts, cash, inventory and even their reputation was ransacked and put at risk at the hands, and for the benefit of One Employee.

In all, there were nine different methods of fraudulent activity found. Each one of them a means to siphon the hard-earned profits from the business into the proverbial pocket of One Employee. Two of those nine methods tied directly to the $30,000 discrepancy.

So, who was the One Employee? It was the “loved by all”, “trust him with my life”, “such a good guy”, “always so thoughtful”, “right hand man”, “jack of all trades”, “friend”, “there when I need him”, General Manager, who used his position, access and the trust placed in him to perpetrate fraud against the Seeleys business for his personal benefit.

It all made sense now. You see, unbeknownst to others the Seeleys had been discussing whether running the restaurant was a viable business. They’d had to borrow from their catering business to keep the restaurant afloat despite having a full house every night and favorable reviews. Had they not had the resources to pull funds into the restaurant they surely would have lost their business before this fraud was discovered.

The Seeleys were devastated, embarrassed, and deeply dismayed. “How could we let this happen?” “Why would he do this to us?” “We thought of him as family” were just some of their many reactions when they learned of this betrayal of trust. Most frustrating to them was that the activity was happening right under their noses. You see the Seeleys were not absent owners; quite the contrary, they were ever-present in the day-to-day activities of their restaurant. The reality is they simply didn’t know what they didn’t know. They got into this business because of their love and skill in providing a great dining experience. They were not data experts, accountants or loss prevention experts. And speaking of accountants, their accountant identified a discrepancy for the prior year’s business, that was caused by only two of the nine methods of fraud identified. There were seven other methods of fraud that never would have shown up on the accountant’s radar.

Out of bad, comes good. Today the Seeleys still enjoy a packed house every night and favorable reviews. They still embrace their Cider Mill family and help them achieve their goals. They were not soured by this experience, but they instead heeded the lessons learned from it. They implemented recommended controls to better highlight anomalies. They established benchmarks to know where they were and metrics to gauge where they are. They hired experts to do the work they can’t or don’t want to do. And they established segregation of duties to prevent this level of fraud from happening again.

While this was a painful experience for the Seeleys they have turned it into a crusade of sorts to share their story with others in the hopes it saves another small business owner from losing it all at the hands of One Employee.

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