February 18, 2016

Insurance Coverage for Employee Theft – The Making of a Thief

Employee theft or crime policies come into play with any kind of corporate embezzlement, Ponzi scheme, or fraud. Known by many names, including crime policies, employee theft policies, and bankers bonds, these policies are behind the scenes covering some of most significant and horrific corporate frauds in history.

Although the path to becoming a thief varies greatly from person to person, when a thief mixes with unsuspecting employees, corporate losses can be significant. In today’s video, Mark Miller tells a story of a recent insurance recovery case where the thief was the CFO of the company. This incredible story of how a CFO turned bad also tells a story of how insurance coverage can be implicated when a high level corporate employee is involved in the embezzlement of funds.

While watching television recently, I noted the prevalence of corporate theft. I was watching one crime show about a billion dollar Ponzi scheme. I immediately recognized that we handled the insurance for that fraud. Then, I tuned into an automobile auction on television, and noticed that the cars, which included Ferraris, Bentleys, and Lamborghinis, were the fruits of an employee theft scheme. When they identified the thief, I realized that we handled the insurance for that fraud as well.

Our experience with employee theft is perhaps the broadest of any insurance recovery law firm. If your company has been the victim of fraud or employee theft, please feel free to give us a call.

Below is a transcript of the video:

We have extensive expertise with employee theft coverage, including Ponzi scheme cases.

Insurance recovery for employee theft is another area where we have a great deal of experience in. We’ve been doing the insurance work for some of the largest Ponzi scheme’s in the nation. Names that you be aware of and companies that you’d be aware of that were dragged into these ponzi schemes.

Let me just give you one example, so this is a client that is an international engineering firm. They basically do projects all over the world. Unfortunately one of their employees, high-level, trusted employee was taking money. The employee had all the right kind of toys. He had boats. He had Ferrari’s. He had watches. We’ve seen it time and time again, the thieves have all kinds of stuff.

So this fella had all of the stuff and he worked for a nice regular good company. And people would come over to his house for parties and they would say how do you have all of this money, you’re just x person in this company? And he would say, oh my wife is independently wealthy. So he had this story going on, but over a period of 10 years he stole over  $1 million a year. Somehow he was taking it off the books and he was hiding it because he was the CEO. He was not a crook from day one.

What happened was, he caught his assistant stealing. She had some small time scheme, where she would steal $500 here and there. And he caught her one friday and he said what are you doing? And she broke down crying saying, I’m sorry. I never should’ve done it. I’ve been stealing money. I probably took about $3000. And he said fine. We’ll talk about it on Monday. So he gets back on Monday and what does he do on Monday? He says you’re doing it all wrong. If you want to do it, here’s how you do it.

So she became involved and she had a new Lexus and she had all of the stuff. She didn’t have a $2 million watch collection, but she had all of the stuff. The company recovered a lot of the money that had gone out the door but there was still a massive delta that we needed to recover from insurance. So that was our job and we did quite well at it.

One of the issues that keeps coming up is with these fiduciary policies is this is a high-level person in the company that stole the money. And I just gave an example of a high-level person. And you might say well what level does it stop?  What level do we not get coverage? What if the CEO is taking the money? What is the chairman of the board and the CEO are all together taking the money? Our position is generally, it shouldn’t matter. It’s covered. But the insurance companies usually see it another way. At some level it’s too high up in the company to be covered. So we fight that fight. Our fight is it’s a theft policy and it was brought to cover theft. It is not the individuals who are benefiting. It’s the company that’s losing and that’s how you have to view it. And if you view it from our perspective it makes complete sense. The company lost money. The company is entitled to the reimbursement. We’re not saying it goes to the individuals, it goes to the company.

Subscribe for Updates