Take the Money and Run: White Collar Crime at Dhr Patio Homes, Llc

Article excerpt

CASE DESCRIPTION

This is a field-based disguised case which describes how a small family business deals with crimes committed by a trusted employee. The problem for the characters in question is how to deal with their most trusted employee, someone they treated like a family member, who they discovered had stolen nearly $25,000 from them over a two year period. Several factors complicate the owners' decision as to how to proceed: the person in question was their most tenured employee and had become part of the family, the employee and his family were renting a house built by the protagonists for the employee until the employee could establish his own credit, and the employee's brother worked for the firm. The case has a difficulty level appropriate for a sophomore or junior level course in business ethics or small business management. The case is designed to be taught in one class period (may vary from fifty to one hundred minutes depending upon the course structure and the instructional approach employed, see instructor's note) and is expected to require between four to eight hours of outside preparation by students (again, depending upon instructor's choice of class preparation method).

CASE SYNOPSIS

Derived from observation, field interviews, and e-mails, the case describes how two college professors operating several businesses were confronted with the fact that their most senior and competent employee appeared to have purloined nearly $25,000 in company funds. The employee in question, Alan Thompson, was originally hired with his wife Wilma to finish basements in Davis and Hodgetts' rental units. This project was such a success that as the business moved into private home construction Alan became the defacto on-the-job contractor. Growth in their business cost them their bookkeeper and they secured the services of James Carroll, CPA for the firm. When examining the firms' books, Mr. Carroll noticed that certain expenses were either for personal items or duplicates for similar expenses incurred a short time ago. An audit indicated that Alan Thompson was the culprit for these expenses as well as the fact that several charge card receipts had a signature that was not Mr. Thompson's. Davis and Hodgetts had to decide what if any legal action would they take, if they wanted to try to recover any of the stolen funds and if so, how; and how do they want to confront Alan with their findings?

INSTRUCTORS' NOTES

According to Justice Department estimates, nearly 30% of the nation's employees are hardcore pilferers, and up to 80% will steal if no active security measures are in place. Internal theft is costing businesses more than $60 billion a year. The impact of stealing on small business is especially telling: US Chamber of Commerce statistics show 50% of the failures within the first year of business can be linked to sticky fingers.l Formby and Williams noted that "there are 2 types of internal theft - theft of cash and theft of merchandise. Opportunities for theft of cash are available at the cash register, in the credit department, or in payroll or other bookkeeping functions. Merchandise thefts can range from employees taking small items home in their pockets to complex operations. The following factors can determine the extent to which internal theft problems may be correctable: 1. The employer must be aware of the problem. 2. The employer must realize that anyone is a possible offender. 3. The employer must be willing to make security revisions. 4. The system must be evaluated constantly."2

Since employee theft has been well documented over the past twenty years and received much press coverage as of late, thanks to the Enron debacle, one would have thought that theft in the workplace would be expected, detected, punished, and eventually minimized. However, Joshua Kuarantzick indicated that nothing has changed in terms of employee theft in the post Enron era. "Lying and dishonesty simply have become a much more accepted part of business - and of American life. …