From Marquet International

Highlights & Conclusions from the 2012 Study

2012 was a blockbuster year for employee theft in the United States, accelerating over the shocking pace set over the past couple of years. In this report, we identified, researched and analyzed the details of a whopping 528 major embezzlement cases in the US, active in 2012.

This figure represents a scorching rate of more than 10 cases per week. It also represents a more than 11 percent increase in the number of cases over 2011 and a nearly 9 percent increase over 2010. The 528 cases from 2012 is the highest number we have seen in our 5 years of conducting this analysis.

The results outlined in The 2012 Marquet Report on Embezzlement, along with our analysis of embezzlement cases over the past five years, demonstrates that employee theft is alive, well and thriving in the current business climate in the United States. The uptick for 2012 may be the result of the fact that many of the embezzlement cases included in this report began immediately after the economic collapse in late 2008, just 3-4 years ago. If a poor economy is an incubator for would-be office thieves, this theory would also suggest that 2013 and beyond will also be banner years for major embezzlements.

Nevertheless, we have argued that there is always an ambient level of fraud, waste and abuse in organizations of all stripes, regardless of the strength of the economy.

We have also determined that poor economies, while certainly a driver for potential embezzlers, is not the only factor. Indeed, our data suggests that the primary motivating factor for perpetrators of major long-term embezzlements is to obtain and maintain a lifestyle far grander that what they would otherwise be able to attain. In many of these cases, the thefts actually began in good economic times, while they continued over many years. We have also noted that during boom years, embezzlement can easily go unnoticed since the victim organization may be making healthy profits and the perpetrator begins by taking relatively small, regular amounts that fall under the radar. Many embezzlers accelerate their thefts over time, leading to a higher probability of getting caught. Further, in a struggling economy, employee theft and other corporate frauds are more likely to be revealed since business stakeholders tend to be more attentive to finances and the bottom line.

All of this is to say that we would intuitively expect more embezzlement cases to surface in bad times than in good. But the bottom line is that people will always steal from their employers no matter what.

The following statistics are highlights based upon our analysis in The 2012 Marquet Report on Embezzlement:

• The average loss for 2012 was about $1.4 million; the median loss was $340,000;
• More than 2/3 of the incidents (68%) were committed by employees who held finance/bookkeeping & accounting positions;
• The average scheme lasted 4.7 years;
• The most common embezzlement scheme involved the issuance of forged or unauthorized company checks;
• Nearly 33% of the cases in which a motivating factor was known involve perpetrators who reportedly had gambling issues;
• Only 4% of the cases involved perpetrators who had a prior criminal/fraud history;
• The average embezzler in this study stole nearly $25,000 per month from their employer;
• Iowa had the highest Embezzlement Propensity Factor* followed by Hawaii, Rhode Island, Montana, Nevada, Wyoming, Illinois, Florida, Vermont and Missouri, respectively – identifying these states as having the highest risk for loss to embezzlement in 2012;
• The financial services industry suffered the greatest losses due to major embezzlements;
• Non-profits and religious organizations combined accounted for about one-eighth of all the major embezzlement incidents in the 2012 study;
• Nearly three-fifths (58%) of the incidents involved female perpetrators;
• Male perpetrators, on average, embezzled nearly 3 times as much as females;
• 84 percent of the cases involved individual perpetrators;
• The average adjusted age** of perpetrators at the commencement of their embezzlement was just under 43 years;
• 40 – 49 year olds were the most frequent culprits;
• Most major embezzlers appear to have been motivated by a desire to live a relatively more lavish lifestyle, rather than driven by financial woes;
• The average prison sentence was just over 4 years (49 months) for convicted major embezzlers; and,
• Colorado and Massachusetts had the weakest sentencing track record for major embezzlers in 2012.

* The Embezzlement Propensity Factor (EPF) is defined as the ratio of the percent of total losses for a given state to the percent of Gross Domestic Product that state contributes to overall GDP.

** The “average adjusted age” is the average age of the perpetrators in the study minus the average duration of the schemes in the study to represent the approximate age at which the average embezzler commenced his or her illicit activities.

Aggregated 5 Year Conclusions

An analysis of the data we have compiled on major embezzlements in the US over the past five years, from the beginning of 2008 through the end of 2012, which includes a total of 2,110 case studies, allows us to make some definitive conclusions, consistent with our prior findings:

• Embezzlers begin their schemes in their early 40s (42.7, on average);
• The average major embezzlement spans a 4.7 year period;
• By a significant margin, embezzlers are most likely to be individuals who hold bookkeeping or finance positions (67.1% of all cases);
• The financial services industry suffers the greatest losses from embezzlement (more than 26.2% of all losses in the data);
• Non-profits and religious organizations together account for nearly one-eighth of all the incidents (12.3% of all cases);
• Women are more likely to embezzle than men (62.4% vs. 37.6% overall in the data);
• Men embezzle significantly more than women ($1.9 million vs. $801,000, on average);
• The vast majority of embezzlements are caused by sole perpetrators (86% of all cases);
• Gambling is a clear motivating factor in driving some perpetrators to embezzle;
• About 4.5 percent of major embezzlers have prior criminal histories;
• The most common embezzlement scheme involves forgery or unauthorized use of company checks (35.5% of all cases in which the method was known). The next most common scheme involves the theft and/or conversion of cash receipts (21.2%), followed by unauthorized electronic transfers (12.2%)
• California has experienced the greatest number of major embezzlements over the past four years (266 cases or 12.5% overall), followed by Michigan (112/5.3%), Pennsylvania (101/4.7%), New York and Texas, both at (89/4.2%); and,
• The ten states with the highest risk for loss from embezzlement are in order of risk: Iowa, Vermont, Rhode Island, West Virginia, Massachusetts, Florida, Montana, Louisiana and Connecticut.

LINK: 2012 Embezzlement Report