Wichita State University
A community college says a longtime employee embezzled at least $5.4 million over a decade. How can this happen? The adage "trust is not an internal control" certainly applies here.
Trust is Not a Control
The events at St. Louis Community College are classic occupational fraud; a longtime trusted employee violates that trust to commit fraud. In this case, he even registered a fictitious company to receive stolen funds.
The Association of Certified Fraud Examiners conducts a biennial study on occupational fraud and abuse, issuing its most recent Report to the Nations for 2018. The St. Louis fraud was much larger than most.
The statistics in the graphic show that longtime employees are better positioned to cause significantly larger losses. That fits the situation in St. Louis, where the employee had been with the college since 1992.
Also, note that "tip" is by far the most prominent means for outing a fraud. That, too, was the situation in St. Louis. A college spokesman said the scam unraveled when another employee came forward and told supervisors about "the financial irregularities."
St. Louis Public Radio also covered the story, quoting the college's chancellor:
It's frustrating and discouraging to believe that anybody would take advantage of a situation like this.
Jeff Pittman, Chancellor of St. Louis Community College
Unfortunately, the opportunity to take advantage of a situation like this presented itself to the wrong person.
Update - August 14, 2019
The identified loss grew to $7.5 million from $5.4 million when it was first reported. This case was unusual because most of the proceeds were invested rather than spent.
In his plea agreement, the fraudster agreed to forfeit $11 million and pleaded guilty to five counts of wire fraud, five counts of mail fraud, and five counts of money laundering. All 15 counts are felonies.
From the United States Attorney's Office, Eastern District of Missouri:
From the St. Louis Post-Dispatch:
He stole $7.5 million from St. Louis Community College, then made millions investing it