A Maine restaurant and lobster wholesaler sued a former employee, three other defendants, and their company for embezzling lobsters.
The employer alleged Matthew Bellerose, a former employee and part-owner, shipped lobsters from the organization without generating shipping labels or invoices. As a result, the organization did not receive any payment for the lobsters. According to the lawsuit, Bellerose shipped nearly $1.5 million worth of lobster.
The employer alleged that Bellerose and his partner, Vincent J. Mastropasqua, created an entity called East End Transport to receive some of the shipments that they later sold.
The employer sued the partners, Bellerose's wife, Mastropasqua's brother, and East End Transport. Because the civil suit alleged a criminal conspiracy, the employer was able to seek recovery of triple its losses in damages.
Bellerose, who was in charge of order fulfillment and shipping operations, started working for the employer in 2009. The employer offered him a 20 percent share of the business in 2017. According to the lawsuit, Bellerose admitted to embezzling, and said he did so to pay for his share. The employer terminated him in 2018.
A federal judge recently ordered East End Transport to pay more than $4.5 million. However, it is unclear if East End Transport has any assets to cover the awarded damages. Edward D. Murphy "Judge orders company sued in lobster embezzlement scheme to pay $4.5 million" pressherald.com (Aug. 08, 2019).
In this matter, the embezzler resold inventory for the purchase of paying for his shares in the employer's organization, allegedly. So, if true, the embezzler also fraudulently accumulated shares in the company.
Even if you win a lawsuit against an embezzler, it may be impossible to actually collect damages. The only way to avoid large and costly losses is to stop embezzlement before it occurs.
To reduce the risk of inventory theft, have several employees routinely monitor inventory levels. Encourage all employees to report any suspicions of missing inventory and immediately investigate. Your auditor should look for signs that the books have been manipulated to cover up missing inventory.
Employers that sell products or services to customers must also have a system for ensuring that all items "sold" are actually paid for and received by legitimate customers. Require an employee in accounting to confirm receipt of payment and sign off on shipments before they are sent out by the shipping department. Have a third-party auditor routinely check shipments and payments received to confirm that they balance.
If your organization provides services rather than goods, implement the same protections to confirm payment before providing services.
Similarly, it is important to create a system of oversight to confirm that all contractors and vendors are legitimate and actually provide that for which they are paid.
Invoice names and information must be accurate. Embezzlers may create a fake organization with a name that is very similar to one of your vendors. In that case, small details can signal that the invoice is fraudulent. Train all employees on how to report suspected internal or third-party fraud.
Require at least two individuals, ideally in different departments, to sign off on payments to reduce the risk of fraud and collusion.