1. Small Enterprise Embezzlement Presented by: Michael “MIKE” Leonard Michael Leonard & Associates

2. Primary Causes Fraud Triangle

3. Nature of Entrepreneur Forces at work –Expert at the Business –Not an Expert in Business

4. Nature of Entrepreneur It’s all in the family –Many employees are family –Others become like family –Trust is the way of business

5. The Usual Suspects Office Managers Book Keepers Trusted Employees

6. Common Factors Access to Assets Knowledge of operation Ability to conceal

7. Methods Cash Thefts –Petty Cash –Cash Register –Deposits

8. Billing Schemes False work orders Fake invoices Dummy Venders

9. Inventory Theft Theft of merchandise Allowing friends to steal Returns of stolen merchandise

10. Cooking the books Checks –Checks payable to suspect –Checks paying suspect’s bills –Checks buying things for suspect

11. Cooking the books Debit / Credit Cards –All the same stuff - plus –Refunds & Returns –Internet activity

12. Cooking the books ACH –Automatic Clearing House Wire Transfers Electronic Bill Pays Electronic Checking

13. Concealment Hide the original theft – suspect doesn’t want to get caught Hide the on-going theft – suspect want to continue to steal

14. Discovery Discovery by Accident Discovery by TIP Discovery by internal controls Discovery by external audit

15. Investigation Gathering Information Interview Witnesses Interview Suspects Prepare a Report

16. Obtaining Financial Records Who’s records –Victim –Suspect –Third Party

17. Obtaining Financial Records Banks & Financial Institutions Credit Card Companies County Recorders Escrow Companies Vender Records

18. Interviewing Witnesses Employee Co Workers Non Employees

19. Interviewing Suspect HR Concerns Government Involvement

20. Case Preparation When to get police involved –How Easy is your case to understand –How sophisticated are your local police at the patrol level –How much is a successful prosecution worth to you

21. Case Preparation Play to your audience –Police Officer –Police Detective –Charging D.A. –Prosecuting D.A. –Defense Attorney –Defense Expert Witness –Judge & Jury

22. Reports made SIMPLE (not easy) Diagrams Exhibits Photos Flow Charts

24. Outcome- the Cycle Continues Costs versus Benefits –Termination versus Prosecution –Restitution versus Recovery

25. Outcome- the Cycle Continues Light Prosecution –It’s only stealing, nobody was hurt –Unattractive Victim –Sympathetic Suspect

26. The New York Times 7/3/08 Accountant Charged in $2.8 Million Theft From Company Mr. Hoeffner, 47, of Beechhurst, Queens, was charged on Wednesday with grand larceny in a ruse in which prosecutors said he stole $2.8 million. He faces 20 other charges and could spend up to 25 years in prison if convicted. On Jan. 30, Mr. Hoeffner was sentenced to community service and probation and ordered to pay restitution for a similar embezzlement plan in which he stole nearly $400,000 when he worked for a different construction company…..

27. Suggestions for Improvement Discussion

28. Contact Information Mike Leonard Michael Leonard and Associates 1415 Fulton Road #205-222 Santa Rosa, CA. 95403 707-755-1684 michael@:LeonardFraud.com