The Impact of Embezzlement in Small Business
According to the Oxford Dictionary, “embezzlement is the act of dishonestly appropriating or secreting assets by one or more individuals to whom such assets have been entrusted”. It is this act of dishonesty that is costing American businesses billions of dollars each year. According to the Federal Bureau of Investigation (FBI), “Embezzlement is considered a white-collar crime, a term coined in 1939. It is not a victimless crime. A single scam can destroy a company, devastate families by wiping out their life savings, or cost investors billions of dollars.”
In today’s economic decline, the number of embezzlement cases in small businesses has risen drastically. Bressler (2009) states that “Embezzlement may perhaps be the most serious crime impacting business, in that many times the crime goes undetected for years. As so many instances of embezzlement go unreported to police, experts can only estimate the extent of embezzling. Embezzlement may cost companies as much as $90 billion each year.”
The current trend of economic decline has shown an increase in the number of arrests made for embezzlement. The following data shows that increase.
Estimated arrests of all persons in the United States: 1994 - 2008
1994 1995 1996 1997 1998 1999 2000
Embezzlement 14,300 15,200 15,700 17,400 17,100 17,100 19,000
2001 2002 2003 2004 2005 2006 2007 2008
Embezzlement 20,200 18,600 16,800 17,300 19,000 20,000 22,400 21,400
These statistics are estimates that account for missing data and may differ from other published sources. The county-level files which are the source of this information are not official FBI releases and are being provided for research purposes.
While embezzling most directly affects the businesses from which the money was stolen and the person involved in the act, the effects of the crime can be felt throughout entire communities. If losses are significant, a small business may be forced to close its doors. If other businesses depend on the affected company, they too may suffer. The decline of a community often opens doors for other crimes such as robbery, theft, and vandalism.
What makes a person embezzle money from their employer? Ruoco (2007) provides the following as motivation factors that cause one to steal are:
“Family drug, alcohol or gambling problems
Deteriorating health of a family member
Assumption of too much debt
Embarrassment because of lack of material possessions
Outward desire to be accepted by an affluent group”
Embezzlement is unlike other crimes such as robbery or vandalism. It is not a crime that law enforcement agencies are able to prevent by patrolling the streets and neighborhoods. It is up to employers to patrol their employees and operating practices in order to reduce and/or prevent instances of embezzlement. The majority of funds lost due to embezzlement comes from small business as there are fewer...