Take the Money and Run: White Collar Crime at Dhr Patio Homes, Llc1

By Sherman, Herbert; Rowley, Daniel J. | Journal of the International Academy for Case Studies, January 1, 2007 | Go to article overview

Take the Money and Run: White Collar Crime at Dhr Patio Homes, Llc1


Sherman, Herbert, Rowley, Daniel J., Journal of the International Academy for Case Studies


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?

"Jim, " Richard Davis managing partner of DHR Patio Homes, LLC shouted in disbelief, "are you trying to telling me that over the past two years my right-hand man and foreman, Alan Thompson, has embezzled nearly $25,000? " "Figures don't lie but liars figure, " retorted James J. Carroll, CPA, the new accountant for the firm. "I've audited your three firms ' accounts for the past two years and found that purchases have been charged to Thompson 's corporate credit card that either have nothing to do with the business, like the purchase of a Christmas tree, or seem implausible, like buying gasoline six times in the same day for the same vehicle. Worse, I 've noticed that for several purchases the signature on the receipts do not even come close to matching the signature on the back of the corporate credit cards. I think someone who is not authorized has used this card - that's not only embezzlement, my friend, that's credit card fraud and forgery!"

COMPANY BACKGROUND & HISTORY

Davis and Hodgetts owned three firms: D & H Management LLC, DHR Construction LLC, and DHR Patio Homes, LLC. see Figure 1, below.

Business #1

D & H Management LLC was started in August 2002, when the Dow Jones Industrial Average dipped under 8000. Davis and Hodgetts, friends and coauthors, were lamenting their ever shrinking retirement funds. Neither was getting any richer on a faculty member's salary nor did they expect any windfalls from relatives, their book sales, or lottery tickets. As Hodgetts was fond of saying "America believes in education: the average professor earns more money in a year than a professional athlete earns in a whole week. …

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