embezzlement

Embezzlement is financial fraud and is often executed in a way that is premeditated, systematic and/or methodical with the explicit intent to conceal the activities from other individuals, usually because it is being done without the other individuals’ knowledge or consent. Embezzlement “often involves the trusted individual embezzling only a small proportion of the total of the funds that he/she control in an attempt to minimize the risk of the detection of the misallocation of the funds or resources. When successful, embezzlements continue for years without detection. It is often only when a relatively large proportion of the funds are needed at one time or they are called upon for another use that the fraud is discovered (Wikipedia). This essay will present John F. Doorly’s and Minnie Mangum’s schemes as examples of embezzlement and discuss preventive measures.

Starting in 1973 as a clerk, John F. “Jack” Doorly rose to the level of chief operating officer of the trust management company Tenens Corp., dba Essex Street Associates where he managed the assets of more than 100 heirs of the late Boston-area industrialist, Frederick Ayers, for 33 years and gained their trust and confidence to the point that his operations were not scrutinized in any meaningful manner (Marquet).

According to court records found by Marquet, Doorly spent the last seven years systematically transferring trust funds to his own accounts, had personal credit cards paid for by the company and overcharged the trusts for his services and expenses, all of which totaled to $61 million. In order to conceal his schemes, Doorly sent fraudulent statements to the Ayer family members. He also used these to deceive the outside auditors and limited the scope of their au...

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...y (Marquet).

Internal controls such as separation of duties are common defenses against embezzlement. This significantly reduces the change of theft, because of the added difficulty in arranging such a conspiracy and the likely need to split the proceeds between the two employees, which reduces the payoff for each. Another obvious method to deter embezzlement is to regularly and unexpectedly move funds from one entrusted person to another when the funds are supposed to be available for withdrawal or use, to ensure that the full amount of the funds is available and no fraction of the savings has been embezzled by the person to whom the funds or savings have been entrusted (Wikipedia). If the companies that Doorly and Mangum had implemented just one of these techniques, it would have been harder for them to be victims of embezzlement.

Works Cited

wikipedia

marquet