BY MICHAEL COHN JANUARY 18, 2010
Davis-Lynch, a Pearland, Texas-based maker of oil field equipment, had $14 million embezzled from the company accounts over a decade’s time, according to a federal lawsuit filed against 18 employees, including the head of the accounting department.
It’s just the latest case of embezzlement by accounting workers. A study released last week by Marquet International found that two-thirds of embezzlement cases last year involved employees who held finance and accounting positions (see Accounting, Finance Workers Most Likely to Embezzle). In the case of Davis-Lynch, accounting department supervisor Nancy Moreno, a 12-year employee who ran accounts payable and receivable, was named in the suit, along with three other employees who worked in the department under her supervision, according to the Houston Chronicle.
Other defendants included several of Moreno’s family members and relatives. The scheme involved dummy companies with names that resembled those that Davis-Lynch already did business with billing the company for services. Davis-Lynch executives would then be tricked into signing checks to them, or their signatures would be forged. Some of the defendants also owned companies that would perform some services for Davis-Lynch but would continue to bill for services they didn’t perform.
According to the Marquet study, the average embezzlement scheme lasted four-and-a-half years. In the Davis-Lynch case, the checks issued under the scheme date back to at least May of 2000. That’s not a surprising amount of time for a scheme to go uncovered, particularly when it allegedly involved at least four members of the accounting department.
The case in some ways is reminiscent of the D.C. Tax Office scandal, in which a group of employees and supervisors, and their family members, were involved in stealing $48.1 million by filing phony property tax refunds (see D.C. Tax Scam Ringleader Sentenced to 17 Years). When employees cover up for other employees, and get extra help from family members, accounting fraud and embezzlement become that much easier to get away with for a time, until ultimately and inevitably it gets uncovered by somebody.
