The Richmond Times-Dispatch reports that the former CEO of a Virginia credit union has been sentenced to one year in jail for embezzling more than US $50,000, which he used to compensate his divorce lawyer, buy luxury items, and pay COBRA health insurance premiums for his girlfriend. According to authorities, the former CEO accomplished most of the theft by charging personal expenses to a company credit card or by having bills for personal expenses paid through the credit union’s accounting department.

Lessons Learned

This situation highlights how theft by a senior official can harm everyone — including employees. It also illustrates how control weaknesses can create an opportunity that, as a result of pressures, can lead to wrongdoing. Prosecutors noted that employees who suspected the wrongdoing were afraid they would lose their jobs if they confronted the CEO.

Although fraud can be perpetrated at any level in an organization, it often is more difficult for employees who suspect wrongdoing to report potential fraud committed by senior employees or executives. Organizations need to have an internal auditor, an audit committee, a hotline, or other means to report suspicions available to employees. Internal and external auditors should be aware of situations where employees have little or no means to report suspected wrongdoing and strive to provide them with an appropriate reporting mechanism.

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