Foresters Employee Steals $4M from TIMO

Foresters Employee Steals $4M from TIMO

I ran across a very recent article (May 21, 2019) by Field Walsh from TXK Today which described a lawsuit filed in Texarkana federal court accusing a local couple of stealing more than $4 million from the wife’s employer at a forestry consultants office that was hired by a timberland management company.

I’ll go through the details of the cases below, but I want to say first that I know this is a tough issue. Fraud from employees is not only painful financially but to us as people in relationships as well. Betrayal is a personal hurt. We trust our employees. That trust is usually warranted and well earned. However, in some cases, studies show that trust just isn’t always well-founded. We’ve talked about this before, but this article reminded me that it doesn’t hurt to revisit the issue again. Remember trust is not an operational control.

In this newsletter, I’ll summarize the original case and then update you on the events following the original article.

Finally, I’ll revisit an article I presented in an earlier newsletter from Fast Casual on September 17, 2012 written by D.B. Libhart. This article addresses the issue of employees and theft and the employers who are too naïve to see it. In spite of staggering statistics to the contrary, many company owners are still convinced their employees don’t steal from them. I’ll end this newsletter with some rationales from that article about the excuses we have about our employees


The Case – Timberland Management Company and the $4M Theft by an administrative employee

A Timberland Management Company (TIMO) that provides timberland investment advisory and management services to timberland investors. The TIMO hires forestry consultants to provide “technical, administrative, and field management services” to its clients. The consultants in turn retain contractors to perform work in the field.

The direct victim of the theft was a forestry consultant working for a TIMO. The suit was filed against April and James Thompson by the TIMO. April was an employee of the forestry consultant.

Here’s how invoices are processed through these companies.

The contractor (James Thompson in this case) submits invoices for services rendered to the consultant. Personnel at consultant’s office then enter the invoices for payment through the TIMO’s electronic invoice processing system. The invoices are then paid by the TIMO to the contractors (James Thompson) from the applicable client’s funds held in bank accounts controlled by the TIMO.

Sadly, the contractor (James Thompson) did not perform any services and clients lost over $4M.

Instead, April Thompson, who worked in an administrative position, was able to use her position to submit phony invoices to the TIMO claiming that her husband, James Thompson, had performed work on properties owned by the TIMO’s clients, according to the lawsuit. April allegedly shielded her and her husband’s scheme from detection by making sure the amounts billed to the TIMO never surpassed the amounts budgeted annually for a particular client.

The complaint alleges the fraud began in 2011.

The TIMO’s clients paid the $4M through an electronic invoice processing system based on the fraudulent representations. The TIMO has agreed to make the affected clients whole for their losses suffered as a result of this scheme.

The TIMO is asking for an injunction and temporary restraining order meant to prevent the Thompsons from hiding money or other assets. The Thompsons have been asked to deposit any funds which resulted from the alleged fraud into the court’s registry for safekeeping while the suit is pending.

The TIMO has asked the federal court where the claim was filed to freeze the Thompson’s assets, pending resolution of the case. The hearing was set for Thursday, May 23 and agreement was reached to for a temporary restraining order and to conduct expedited discovery, the exchange of evidence. The restraining order will remain in effect for 30 days, but can be extended should the parties request it. Furthermore, the Thompsons have agreed to provide information to the TIMO about all of their accounts and assets. Both sides agreed to trade information.

My employees won’t steal from be because …… (and other dreams we have)

Below is a summary of the five myths proposed by D. B. Libhart in his article “Why My Employees Won’t Steal from Me: 5 Myths,” published in September 2012.

1. They Like Me. Although it seems that good relationships with the boss may deter a small percentage of employees from stealing, research has shown that dishonest employees are driven by a number of factors including motive, opportunity and low risk of detection. Even employees who genuinely like the manager or owner will often succumb to temptation to steal in spite of that friendship.

2. They are my Best Employees. Many managers equate self-motivation and hard work with integrity. Therefore, high performers are often above reproach and are not even scrutinized for compliance to the rules, nor suspected of counterproductive behavior or theft. Without that accountability, even the best employees can steal, given the circumstances.

3. They have a Clean Background. Pre-employment background checks are an important part of any loss prevention program. Oftentimes, prior behavior is a predictor of future behavior. Circumstances can change though. If there is a compelling motive and the employee has opportunity with a perception they will not get caught, integrity can suffer. Employees rationalize their actions in many ways.

4. I Show that I Trust Them. Trust is important, but that does not mean there is no need for accountability. Without checking up on employees through a check and balance process or audit system, employee perceive rightly that there is a low risk of getting caught and that is a trigger to test the system. Once an employee tries theft and ultimately gets away with it, they will more than likely keep it up.

5. I Pay Them a Higher Wage. Many employers believe that by paying a higher wage employees will be happy and happy employees won’t steal. Only about 10% of employees are morally incorruptible. They don’t bend or break the rules. Another 10% are prone to steal. The other 80% are influenced by culture and attitude. When poor practices go undetected and/or unresolved, that creates an atmosphere of tolerance and other employees are influenced.

Ultimately, employees must know and believe that compliance is not only valued and expected, but checked. They must believe that opportunities to steal are low and the probability of getting caught is high. It can be very easy for all of us to trust those around us, which is one reason to maintain good business controls and test those controls on a consistent basis.