Suspect a High-Level Employee of Theft? What Are Your Options?

If you're a business owner, you understand all too well the importance of reliable and honest employees. Even if you're a jack-of-all-trades and can handle just about everything from complicated financial transactions to ordering new office supplies yourself, being able to delegate these tasks to someone you trust can give you the freedom and time you need to make bigger-picture decisions about the future of your business. Because of this, the first time you suspect an employee of theft can be a gut-sinking moment, whether this theft is petty in nature or involves larger-scale embezzlement or even bank fraud. What should you do if you find yourself in this situation? Read on to learn more about quickly and surreptitiously investigating employee theft and building an airtight case against the suspect to improve your odds of receiving court-ordered restitution or securing a criminal conviction.

Where should you begin if you suspect an employee of theft?

Your first step will depend on a few factors—the type of theft you suspect, the type of business you run, and any professional reporting obligations you may have. For example, someone who runs an insurance agency and suspects an agent of double-billing clients or companies may be required to report these suspicions to the state's insurance licensing agency before taking any other action; continuing an independent investigation without alerting the authorities could subject the business owner to additional liability. If your business provides professional services in the legal, financial, or insurance arenas, you'll want to check your relevant federal and state codes of professional conduct to ensure you're permitted to continue investigating on your own before notifying anyone or taking specific actions to stop further theft.

You'll also want to carefully review your business's insurance policy or policies to determine whether they cover this situation. Although employee theft can be a compensable loss under many insurance policies, giving you some recourse for the lost funds, you're often required to take certain actions quickly after your discovery (or suspicion) of the theft in order to avoid having your claim denied.

On the other hand, those who have no professional reporting obligations and who don't plan to make an insurance claim on any missing funds are free to continue their investigation into this theft on their own. Having a solid case assembled before confronting your employee with your suspicions will minimize your risk of being sued for wrongful termination or defamation and can give your local prosecutor all the information he or she needs in order to press criminal charges.

What are your best investigative options?

For all but the pettiest of thefts (which can usually be broken open by installing one or two security cameras), enlisting a forensic accountant may be the most efficient first step toward uncovering the scope and extent of employee theft. A forensic accountant can dig deep into your business's finances to uncover any discrepancies that a less-trained eye could miss—perfect for situations in which the suspected thief is an expert in covering his or her tracks.

If the employee you suspect of theft is also the employee responsible for managing your company's books, utilizing a forensic accountant can give you the added edge of pretending the review process is a more typical IRS audit or an audit performed by a state licensing agency to avoid tipping your employee off to your suspicions.

Once your business's finances have been thoroughly reviewed, the forensic accountant will provide you with a written report and exhibits demonstrating any discrepancies found. This can give you the information and data necessary to continue your investigation on your own or confront your employee and demand an explanation (or resignation).

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