Business Ethics and Embezzlement – Heather Lott Pleads Guilty – What Went Wrong?

Monday…Monday. While the song from the Mama’s and the Papa’s was good – it wasn’t so good for Heather Lott, the former bookkeeper for Local 19 of the International Brotherhood of Teamsters. Lott plead guilty to embezzling more than $140,000 in union funds.

As the bookkeeper of Local 19 from January 2003 through January 2006, Lott’s duties including paying bills and maintaining the financial records. According to the US Attorney’s news release, the treasurer of Local 19 first discovered improprieties in the union’s accounting during his 2005 year-end audit. He noticed more than 12 database entries during 2005 were designated as rent payments for the union hall even though the union only paid rent on a monthly basis. The lessor of the union hall stated he had received only 12 payments from the union that year. The treasurer was unable to find all the cancelled checks for the supposed rent payments in the union’s financial records and subsequently obtained the cancelled checks from the bank supposedly for rent that were missing from the union’s files. All these missing checks listed Lott as the payee and endorser.

Now how dumb is that? Lott steals money from her employer and then gives the auditor – as proof of here excuse for the missing money – checks made out to her?

After this discovery, the Teamster’s International

Union sent two auditors to examine the Local’s records who discovered 91 cancelled checks missing from the Local’s records. According to the database entries, all of these 91 checks were paid to vendors the Local used. However, after the cancelled checks were obtained from the bank, all 91 checks, totaling $135,974.53, listed Lott as the payee and endorser. The subsequent Department of Labor investigation found five additional checks made out to Lott for $4,977.72, bringing the total amount embezzled to $140,952.25. Bank records show the vast majority of the 96 checks were deposited to Lott’s personal account and that she spent the money on personal items.

When there is a lapse of business ethics and integrity – often potential white collar crime follows. In this case Heather Lott was a dumb criminal. Not only did she steal money, but she was lame in the crime as she only disguised the defalcation through accounting entries. All the checks that were written and cashed created the perfect paper trail for the auditors to follow.

Every choice has a consequence. Lott‘s choices will likely result in a prison sentence, restitution and potentially an IRS claim for tax fraud as I doubt that she paid tax on the embezzled funds. Yes! Tax is due on money from all sources except those that are exempt and stolen money is taxable. I should know – I spent time in federal prison for not paying tax on stolen money. By the way, I am not proud of that fact, but today, I speak nationwide on (1) fraud in business, (2) how to avoid fraud in your company and (3) how business ethics can improve your financial performance.

One thing is for sure – You do reap what you sow! Heather Lott will come to learn that soon as she is scheduled to be sentenced on July 7, 2008.

If you know Heather Lott and have any comments on her and/or the crime committed here – feel free to comment!

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