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Is Your Business Ripe For Embezzlement?

Most successful small business people have one thing in common. They excel at running the production of the business, be it products, services, or being value added retailers, but they hate to manage their business.

According to the Small Business Administration (SBA), if you have reached the 4 year mark, you are in the 50% Club. At 6 years, you are in the 40% club of businesses that have been successful.

So here’s the scenario: you are making money, but the management of the business is getting in the way of expanding. You decide to hire a financial person to run the routine stuff necessary for any business to function. You hire a “miracle worker” who takes over accounts receivable, starts getting your customers to pay their bills, keeps your suppliers happy and fires the payroll service as they can handle it, saving you money.

You are ecstatic, and you get to do what you love – build your business.

Believe it or not, you are ripe for embezzlement. Here is what can happen.

Your “miracle worker” gets you to sign over signature authority for the checkbook. Initially, this is just for checks for $500 and under; then, you come up with the brilliant idea of allowing this person (who after all, is doing such a great job) to sign all checks regardless of amount.

The miracle worker is so good that answering the phone and mail sorting and handling become their added responsibilities. It relieves you of that chore, saves you time and brings organization to your office. All is right with the world, you are told everything is great-it’s a banner year.

Then, one day your miracle worker is out ill. You end up answering the phone, and are startled by creditors’ calls telling you the bills are not getting paid. You open the mail, and it is full of overdue notices from creditors, the IRS, and your biggest account.

When the miracle worker returns to work they explain it all. The other companies are overreacting to checks lost in their internal processing. They’ll get it all straightened out and have a full report upon your return from a business trip. However, instead of a full report, you find the financial records, computer, checkbook, receipts, tax records, and personnel folder for your miracle worker have vanished. You immediately try to reach your miracle worker, but they cannot be located.

You then call the local law enforcement and file a report. They do the best they can, but it is now your word against the “miracle worker” who has hired a lawyer. The attorney sends a threatening letter stating you have no proof of wrongdoing and they intend to sue if any action damages their client’s professional reputation. Local law enforcement is already swamped with white collar crime investigations, and it will be at least a year before they will be able to act on your complaint.

Now where do you go for help?

Most small businesses just give up as they figure they will never recover the embezzled funds anyway and they become busy just trying to save their remaining business. Do not be silent – criminals are counting on that!

There are multiple levels of investigation beyond filing a report with your local law enforcement division.

Report the crime to the US Post Office as there is a better than even chance that the US mail was used in this criminal action. Postal Inspectors have their own investigative methods.

Report the crime to the county sheriff and prosecutor’s offices. They are a separate law enforcement entity, and may be looking at other activities involving your “miracle worker” that local law enforcement has no knowledge of. Also, within certain constraints, the FBI will investigate white collar crime. There is a dollar limit that needs to be crossed before federal officials will get involved, but it costs nothing to ask for their help.

Get every level of tax officials from the IRS down to the city (if applicable) informed of your problems. They have their own investigators and access to records that others do not have.

Be sure to include your banker in any fraud investigation. Banks have their own internal investigation resources and while they may not release any internal audit information to you personally, they do cooperate with law enforcement.

Also, call your local SCORE office or go to SCOREWorks.org and ask for free business counseling. SCORE is a nonprofit association dedicated to entrepreneur education and the formation, growth and success of small business nationwide. They will help get you back on your feet, and will give you advice that will help prevent this from happening again.

Now, what exactly can you do to prevent this problem? Several very easy steps will save you a ton of headache later.

1. Run your business! Look at and understand the weekly financials.
2. Have someone other than your miracle worker open ALL the mail and review it. Instruct that any late notices from vendors be brought to your attention immediately.
3. Have someone other than your miracle worker answer the phones. Keep a phone log of all incoming calls so you can track vendor relations.
4. Force your miracle worker to take vacation at least twice a year.
5. Implement internal controls by having duplicate paper.
a. One copy follows money to receivables file or cash sale.
b. The second copy goes to bookkeeping to record the transaction.
c. Periodically, compare these records to ensure the numbers match.
6. When delegating, check writing authority, limit the amounts to $500 or less.
7. Do not give payroll advances. It is too easy to skip the repayment.
8. Watch for duplicate payments to the corporate credit card bill.
9. Spend the money on an external audit by a different accounting firm than the one you are currently using, if you are using one at all. If your miracle worker says this will be a waste of time and money, change the locks on the door and call an auditor ASAP!

There are many more items you can and should implement to safeguard your business, but this list will give you a good start. If you recognize yourself or a friend’s business here, call and get help immediately.

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What Are the Different Types of Criminal Law Cases?

Criminal law covers all offenses by an individual against the State. A crime is always against the State, and when a criminal is punished, it is a retribution for the State. There are several types of criminal law cases that are tried in the courts. These crimes are generally categorized into General Offenses, DUI/Traffic Offenses, Sex Offenses, White Collar Crimes, and other miscellaneous offenses that can be tried in courts.

General offenses include aggravated assault, kidnapping, manslaughter, robbery, murder, embezzlement, false statements, perjury, resisting arrest, theft, among other crimes that fall under general offenses. Crimes that fall under traffic/DUI are drag racing, aggravated driving, aggravated DUI, driving on suspended license, endangerment, reckless driving, extreme DUI, and misdemeanor DUI among others.

Sex offenses are those committed against the chastity of the person. Whether you are a man or a woman, so long as you were offended in some way in relation to your person, pertaining to your gender, the act itself can still be considered as a sex offense. This includes sex abuse, molestation of a child, sex assault, public sexual indecency, computer crimes, failure to register as a sex offender, and public misconduct with a minor.

White collar crimes are those that are considered as environmental crimes, fraudulent schemes, extortion, money laundering, professional licensing issues, regulatory crimes, and racketeering.

Even with the diversity of crimes that are adjudicated daily, once you are charged with any of these crimes, or you happen to be a victim, you should seek out the counsel of a good lawyer to defend you and your rights in the proper court of law. While it is true that anyone can file a criminal case in the courts, it is imperative for you to seek the advice of a good criminal lawyer. If you were the victim, and you happen to find yourself terribly abused, you always have the option to seek redress in court. And, if you are the one arrested because of a criminal charge, you are also entitled to equal protection by the court since you are still presumed innocent until the court has convicted you of the crime being charged.

Crimes against the person per se, such as murder, vehicular manslaughter, assault, and rape usually involve a greater degree of punishment since life was directly inflicted upon. Although in rape, depending on the circumstances, life may have not been taken but the injury caused is always for a lifetime. More often, these cases capture the public interest than petty crimes such as shoplifting or drug possession. On the other hand, robbery, perjury, and computer crimes are adjudged based on the degree of damage that the criminals have caused either against the person or the property.

Mafia and the Law of RICO

One of the American Government’s most important tool in the fight against the Mafia and organized crime in general is RICO. RICO isn’t a military wing or special police branch . It is a law – the Racketeer Influenced and Corrupt Organizations (RICO) Act, Title 18, United States Code, Sections 1961-1968. It was passed in the year 1970 specifically with the intentions to help fight the Mafia. It does this by enabling prosecutors and the law to go after entire organizations instead of just individuals.

Racketeering is making money through an unlawful enterprise. Almost any crime falls under racketeering. Under RICO, a person who is a member of an enterprise that has committed any two of 35 crimes-27 federal crimes and 8 state crimes-within a 10-year period can be charged with racketeering. Those found guilty can be fined up to $25,000 and/or sentenced up to 20 years in prison per racketeering count. In addition, all the cash earned through the racket has to be forfeited and is confiscated by the government. It provides for extended penalties for criminal acts performed — for example, bribing a union leader, killing an uncooperative business owner and extorting money, all of them add up to racketeering. Furthermore, members of the Mafia may be prosecuted for racketeering even if they weren’t specifically involved in individual crimes. This removed one of the most common and basic defense tactics of Mafia Dons. They used to send low-level soldiers and new-recruits to commit the actual crimes so they themselves could never be prosecuted.

Under the law, racketeering activity means:

1. Any violation of state statutes against gambling, murder, kidnapping, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in the Controlled Substances Act);

2. Any act of bribery, counterfeiting, theft, embezzlement, fraud, dealing in obscene matter, obstruction of justice, slavery, racketeering, gambling, money laundering, commission of murder-for-hire, and several other offenses covered under the Federal criminal code (Title 18);

3. Embezzlement of union funds;

4. Bankruptcy or securities fraud;

5. Drug trafficking;

6. Money laundering and related offenses;

7. Bringing in, aiding or assisting aliens in illegally entering the country (if the action was for financial gain);

8. Acts of terrorism.

RICO was the biggest blow to the Mafia and caused it immense damage. In many cases, the threat of a RICO indictment forced defendant Mafia members to plead guilty to lesser charges because the seizure of assets would have made it difficult to pay for a lawyer. Despite its harsh provisions, a RICO-related charge is comparatively much easier to prove in court, as it focuses on patterns of behavior as opposed to criminal acts.