HOW TO AVOID BEING AN EMBEZZLEMENT VICTIM

“The irony is inescapable. The same thing that can underlie success can also make you all the more vulnerable to the grifter’s wares. We are predisposed to trust. Those who trust more do better. And those who trust more become the ideal, albeit unwitting, player of the confidence game: the perfect mark.”

Maria Konnikova, The Confidence Game: Why We Fall for It . . . Every Time

Trust should be a four letter word. It is the embezzler’s currency. A famous President once said, “trust, but verify.” I would add: “and do so promptly and regularly.”

Most all of us know someone who has been conned or the victim of embezzlement. But you or me, that would never happen to us — right? Wrong. It may be happening to you right now.

Embezzler’s need opportunity. If your business or family does not present an inviting target, most embezzlers will not invest the effort needed to relieve you of your wealth. And if a thief mistakenly believes that you are a possible mark, your quality control — your “trust, but verify promptly and regularly” — will red flag any theft.

Sounds easy, right? It’s not. We are irrational creatures who often engage in “confirmation bias.” This is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses. People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. Confirmation bias leads to “belief perseverance” — a belief that persists even after the evidence for the belief is shown to be false.

Most of us engage in belief perseverance at one time or another. Indeed, right now, half the country is convinced that the other half is delusional. But when is the last time a Facebook rant or cocktail party conversation changed your mind about politics? Never. Belief perseverance is strong.

Knowing that we may be smart, but are also prone to confirming our beliefs rather than challenging them, here are ten strategies to protect your business and family wealth from embezzlers:

• Do not have a bookkeeper, accountant, or family member operating your business or personal wealth without oversight by others; too many of my embezzlement cases have involved the “trusted” bookkeeper or CPA.
• Be observant of any unusual, defensive, or territorial behavior among your “trusted” employees, partners, and associates.
• Your first reaction to new information should be healthy skepticism, not blind enthusiasm or rationalizing bad news. In The Confidence Game, the author notes that “Sherlock Holmes’s trick is to treat every thought, every experience, and every perception the way he would a pink elephant. In other words, begin with a healthy dose of skepticism instead of the credulity that is your mind’s natural state of being.”
• Do not wait until after you are a victim to sit down and carefully think about what is happening to you in any given situation. “A helpful exercise is to describe the situation from the beginning, either out loud or in writing, as if to a stranger who isn’t aware of any of the specifics—much like Holmes talks his theories through out loud to Watson. When Holmes states his observations in this way, gaps and inconsistencies that weren’t apparent before come to the surface.” The Confidence Game.
• If you are an organizational or family leader, make sure that your employees or family members are free to bring concerns to your attention; then listen intently and evaluate what they are telling you before reaching a conclusion. This is extremely difficult if the news challenges your beliefs about a trusted person.
• Put organizational safeguards in place, update them regularly, and follow them like your fortune depended on it.
• Perform periodic audits — formally and/or informally — that expose your books and records to scrutiny.
• Retain a professional(s) if you believe you have a problem on your hands, or a situation that requires closer scrutiny.
• Do not engage in illegal or immoral conduct; other than the fact that it is wrong, the embezzler or con-man will use it as a means to expose you should you expose him.
• Read The Confidence Game and The Sociopath Next Door — informative and entertaining — to know who you are dealing with.

Are you predisposed to trusting people? Worry not: the world is full of trustworthy, wonderful people. A certain percentage of people, however, cannot be trusted, and many have acting skills that are academy award worthy. Do not be an unwilling participant in their game. Play Sherlock Holmes to their Professor Moriarty.

Art Bourque is an AV rated commercial and employment lawyer who has been practicing law in Phoenix, Arizona for 27 years. Art provides training in order to help businesses operate safely, efficiently and avoid financial and other mistakes; he is also an experienced litigator. Art can be found at www.bourquelaw.com, art@bourquelaw.com, 602.559.9550, linkedin, or trail running with his dog, Eli.

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