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Nepotism And Embezzlement: The Increased Financial Risks Of Hiring Spouses

A Chaves County, New Mexico court recently sentenced a 44-year-old man to 10 years in prison, to be followed by five years of probation.

His wife received a sentence of one year in prison to be followed by five years of probation. The couple pled guilty to multiple charges including racketeering, embezzlement, tax fraud, and conspiracy to commit tax fraud as part of a plea agreement in the case.

The felons must also repay the money they stole from their employer, the Cattle Baron Restaurant, and pay the New Mexico Department of Taxation & Revenue for unpaid taxes on the stolen money. Because the couple has dependent children at home, the judge allowed the husband to begin his prison sentence after his wife completes hers.

Prosecutors say that between 2012 and 2016, the couple diverted more than one million dollars from the Cattle Baron's payroll accounts and placed the money into their personal accounts.

The husband was the office manager and comptroller at Cattle Baron during this time and transmitted, without authorization, $1,110,832.81 in electronic direct deposits from Cattle Baron's Wells Fargo Bank business payroll account into bank accounts controlled by him and his wife. His wife was the payroll coordinator and admitted moving the money into various accounts they owned after her husband made the initial illicit deposit.

Prosecutors say the couple used the money for lavish spending, including new vehicles, vacations, and casino gambling. "Couple sentenced in Cattle Baron embezzlement" www.kob.com (May 26, 2022).

 

Commentary

Only after four years was the above scheme discovered when the employer hired another person to replace the husband.

A “husband-wife” team stealing from an employer is rare, but that is because most employers avoid hiring spouses and, if they do hire spouses, they do not put them in the same department, let alone managing financial matters.

In the above matter, the employer obviously trusted the couple, but because they worked closely together managing the organization’s finances, they were able to commit and cover-up their crimes more easily. 

One method for spotting embezzlement is to create permanent "footprints" in the financial system that cannot be erased so that there is always a clear audit trail. This could include keeping corporate checks under lock and key, with a check log clearly showing who is in control of and responsible for which check series, numbering invoices, or making sure that all financial software is set up with individual logins for any team member who needs to access to that information. Be sure that the software permanently tracks any changes to the accounting and who made those changes.

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