Tuesday, 16 April 2019 14:40

Auto Dealers Get Raw Deal From Thieving Employees

Written by Steven Finlay, Wards Auto



“It has been a different conversation with dealers,” Edwards said. “It’s not something they are necessarily always thinking about. But the second we start having this conversation, it can touch an emotional chord.”


She cites headlines such as:


• “Car dealership accountant indicted for stealing over $200,000”

• “Former exec accused of $745K theft from dealership”

• “Employee admits to embezzling over $1 million from dealership”


Often, the culprits are employees who have been at a dealership for five years or longer, Edwards said, citing published research. Only 4 percent of thieves had a prior fraud conviction.


Reasons vary. Some embezzlers are motivated by the need for money because of pressing debt. Others justify it with reasons such as feeling they aren’t paid enough. Still others just see an opportunity and go for it.


Reynolds noted a 1-2-3 scenario of a front-office employee personally posting expenses to a high volume-account, adding a new vendor and linking it to her band account and posting bogus invoices to the new vendor.


Behavioral red flags include employees who are having financial difficulties, closely associating with a vendor, living beyond their means, not willing to share job duties and refusing to take vacation time off.


Anti-fraud interventions that can reduce the risk of occupational thefts include:


• Using internal controls and processes that deter, not aid, perpetrators. This includes everything from switching up job responsibilities to directly depositing payroll checks.

• Clearly stating rules that all employees know about.

• Making sure staffers know laws and penalties surrounding occupational theft.


With Reynolds’ anti-theft monitoring includes an icon at the bottom of dealership computer screens indicating the system is activated, noted Ed Pontis, the company’s director of product planning.


“It’s like an ADT sign in a front yard,” he said, referring to a burglar-alarm company.


Various reasons make dealerships vulnerable to occupational fraud, said Phil Villegas, a partner in Axiom Advisors, a consultancy that assists dealers with accounting, mergers, acquisitions and litigation support.


Those reasons center on dealerships operating as businesses with high volumes, high cash flows, limited internal controls and distinctly different departments with insular environments, he said.


Moreover, outside auditors and others “have limited-to-no internal knowledge of operations,” Villegas said.


We thank Wards Auto for reprint permission.

« Previous Page Continue reading