Embezzlement cripples and scars. Lessons can be learned.

The Enterprise — Elizabeth Floyd Mair 
Jamie Bonkoski, at left, listens to Judge William Carter while pleading guilty to second-degree grand larceny in Albany County Court on Oct. 11. Beside her is her lawyer, Joseph Ahearn of Troy. Looking on is Assistant District Attorney Shadi Masri, who prosecuted the case. Bonkoski will be sentenced on Dec. 5. 

GUILDERLAND — Embezzlement can have far-reaching effects.

Recent cases in Guilderland illustrate this and can also serve as cautionary tales on how organizations might better protect themselves.

The New York State Weatherization Directors Association, which had $800,000 embezzled from its Guilderland office, closed that office, where its fiscal operations had been centered, on Tuesday. Long-term staffers have been laid off and its director worries about the effects nationally for programs that help the poor.

The teachers’ union for the Guilderland schools has changed its financial practices, after its treasurer embezzled union funds several years ago.

The management company for Deer Valley Apartments in Guilderland did not know that for years Jamie Bonkoski — who will be sentenced on Dec. 5 — was stealing tens of thousands of dollars from the complex.

In all of these cases, the employer took the case through to criminal charges and prosecution, but that happens rarely, says local forensic-accounting expert Pamela Wickes. Wickes is a certified public accountant and certified fraud examiner who provides services including fraud prevention and investigation.

In the overwhelming majority of cases, perpetrators are not punished, but only fired, Wickes says. Most of the time, she says, companies just want to move on and don’t want their names in the limelight. They contact a forensic accountant to find out if an employee is stealing, and then resolve the problem by terminating employment.

Naturally, this means an employee still has no criminal record and is free to move on to another organization and commit workplace fraud there. Wickes described “red flags” that organizations can look for and also described methods that help deter embezzlement in the first place.

Several of the circumstances that can lead to embezzlement, like a long-time, trusted employee having sole control of the books, can be seen in Bonkoski’s case.

Bonkoski, the long-time manager of Deer Valley Apartments, “kept making excuses” about why she hadn’t yet started having an audit done, even though the property was on the market, said her former supervisor, Frankie Gray of InterSouth Management.

Gray said this week she didn’t understand why Bonkoski was avoiding an audit, and thought it was strange but theft didn’t come to mind.

Gray brought in someone from the outside to conduct the audit, a process that showed Bonkoski had been stealing. “We discovered it was a minimum of $80,000,” Gray said, describing her own reaction as “total shock.”

“It was pretty devastating,” she said.

Bonkoski, 42, of Cohoes, had worked at the Guilderland apartment complex for 20 years, with Gray as her supervisor for most of that time.

Bonkoski pleaded guilty in Albany County Court on Oct. 11 and admitted to embezzling about $80,000 from January 2013 to February 2018.

“We only went back to 2013, and we have no idea how long she’s been doing this,” Gray said, calling that five-year period “a good starting-point.”

Bonkoski was charging more rent than was due, and keeping the overage, Gray said. “We never accept cash,” Gray said, referring to InterSouth, the company that managed Deer Valley Apartments, but she said that Bonkoski did accept cash, for rental payments, security deposits, and pet fees at the complex off Johnston Road, and pocketed it.

Many improprieties were hard to document, Gray said. Bonkoski also works as a real-estate agent and was, Gray said, furnishing homes and apartments with items she bought using the company’s credit card. Proving exactly where an item, such as a lamp that Bonkoski bought, had ended up was difficult. But some items could be proven to be thefts, she said, such as the purchase of a gas stove, since Deer Valley does not use any gas.

One Deer Valley resident is a personal trainer, Gray said, and he had worked as Bonkoski’s trainer instead of paying rent, Gray said, adding that he gave a statement to police.  

According to the Albany County District Attorney’s Office, Bonkoski also forged tenant signatures, opened bank accounts without authorization, and falsified business records.

InterSouth is a management company located in Charleston, South Carolina that specializes in apartment complexes. Gray would visit Guilderland once every three months.

Gray doesn’t think distance was a factor in Bonkoski’s decision to steal. “A thief will be a thief regardless,” she said.

InterSouth will, in the future, do audits more often, at random times, Gray said, with the properties it manages. InterSouth remains solvent and has not needed to fire anyone as a result of Bonkoski’s actions. Deer Valley is now under new ownership and new management.

Bonkoski faces no more than one to three years in state prison when she is sentenced on Dec. 5.

At the time of her Oct. 11 guilty plea to second-degree grand larceny, her attorney, Joseph Ahearn, told Albany County Court Judge William Carter that he expected Bonkoski to make full restitution “as early as next week.” But on Nov. 27, more than a month later, Gray told The Enterprise that InterSouth has not yet received any money in restitution.

The plea deal requires Bonkoski to make full restitution prior to sentencing and to write a letter of apology to the victim.

Gray said she wasn’t sure if there was anything Bonkoski could say that would seem like a heartfelt apology. “I doubt it, but we’ll see,” she said.

Gray hopes that Bonkoski will have to spend time in jail — “a year or two,” she said — and believes she should lose her real-estate license.

Bonkoski and her lawyer both declined to answer any questions.

Patterns in embezzlement

According to the 2017 “Hiscox Embezzlement Study: A report on white-collar crime in America,” produced by Hiscox, a specialty insurance company that works with clients to manage and mitigate risks including employee theft, the average loss in cases of embezzlement is $1.13 million. Fifty-five percent of cases occur at companies with fewer than 100 employees. Fifty-one percent are committed by women, “but men are close behind.”

The median age of perpetrators is 48. Most long-running schemes involve one perpetrator acting alone, and 29 percent of employee theft schemes went on for more than five years. The longest-running scheme Hiscox found went on for 41 years.

The model of the “Fraud Triangle” has been around for years and years, said Wickes. This model describes three factors that have to be present to make someone embezzle:

— Perceived pressure: Pressures might be work-related or personal, Wickes said. They can include a gambling addiction or extramarital affair; financial pressures, from greed to personal debt; or the death of the main breadwinner in the embezzler’s family;

— Perceived opportunity: This is a feeling that no one is watching, Wickes said, or a sense that it would be possible to conceal fraud. In some cases, people may have observed that, when others in the organization have engaged in unethical behavior, it has gone unpunished; and

— Rationalization: The third element in the triangle is rationalization, in which a controller might think, “I’m just borrowing the money for now, and I’ll pay it back,” Wickes said. Alternatively, she said, an employee might think, “The company owes me, because I work so hard and I don’t get paid enough.” Once someone starts dabbling and they see that little things go unnoticed, it usually starts to snowball, Wickes said.

Red flags

One thing employers can do is learn to better recognize warning signs, Wickes said, adding that these can include sudden changes in circumstance, like divorce or financial difficulties.

One of the most common red flags, Wickes said, is living beyond one’s means — for instance, driving an extravagant vehicle while on a $30,000 salary. Another red flag, she said, is a controller who is unwilling to share duties with others in the office or who never wants to take a vacation.

People involved in embezzling, she said, don’t want to give up control of the books and records, for fear that colleagues will discover evidence of their fraud.

When she begins investing at an organization after it has experienced fraud, Wickes said, she often listens to co-workers describe the person involved and thinks, “Those are red flags that could have sparked an investigation earlier.”

Fraud doesn’t always start right away, Wickes said. In some cases, it’s done by an employee who has been with the organization for years and has earned trust.

“But things change in people’s lives,” Wickes said. “What if that trusted employee who does everything perfectly for 10 or 12 years all of a sudden is going through a divorce?” she asked rhetorically, adding that it’s sometimes hard for employers to realize that they have to put in place systems of oversight, even over trusted employees who have proven themselves for years.

Protecting the company

In her experience, Wickes said, embezzlement often occurs in situations where accounting duties are not separated among different staff members, and where owners take a hands-off approach and there is not much oversight or many checks and balances.

When possible, separating accounting duties among different staff members is helpful in preventing fraud, Wickes said. It’s better if one person is in charge of sending out invoices, for instance, and someone else collects monies, she said. “The more people you can have within an accounting process to have different checks and balances, the better it is for protecting the company from having someone within the company … be able to modify things,” she said.

She cited an example of a government-agency client she had had — a power authority — where one person was responsible for sending out invoices, collecting money, and making adjustments to the accounts. When customers would send in payments, she would apply them to her own power bills, or to her son’s or her friends’ bills. She would then go into the system and reduce the paying customer’s balance, so it looked as if the customer didn’t owe any more money, Wickes said, adding that, because of the lack of oversight, this employee was able to hide the scheme for a long time.

When one person is working alone, doing everything, it’s easier to falsify books and records and “make adjustments within the accounting records, to hide the fraud that they’re doing,” Wickes said.

Small organizations do not always have enough people to divide responsibilities among different employees, Wickes said, but, even if one employee is responsible for doing all the accounting, owners can still help protect themselves. “They can review the online bank records,” she said. Owners can go online and look at the backs of checks, she said,  noting it can be a deterrent to crime “to just have the controller know that the owner is looking at the bank records.”

A business owner can have a payroll company send a change report each time a payroll is run, Wickes said, to reflect whatever changes are made during that period — including any raises that a controller happened to receive.

In more than half of cases, occupational fraud is uncovered through tips, Wickes said. So, she said, one important step that owners can take is to let employees know that tips related to suspicion of potential fraud are welcome and will be investigated; the method can be as formal as a hotline, or as simple as an anonymous tip box somewhere inside or outside of the building. If outside vendors could also have information, she said, a request for tips could be included at the bottom of invoices.

Business owners who are not comfortable with accounting may want to have an outside accountant such as their tax preparer look over a printout periodically of all the adjusted journal entries that are prepared and recorded by the controller. A tax preparer or Certified Public Accountant, she said, would be able to look at journal entries and flag items that don’t make sense or that seem questionable.

Wickes suggested that this could be done once a year, when the outside accountant is preparing the taxes. She has worked with company owners who want to know what is going on every quarter, or even every month. “It really depends on the size of the company, the amount of transactions they’re doing, and how much pressure, or oversight, the owners want to have, on what’s going on,” she said.

Steps taken by local organizations

Helderberg Reformed Church in Guilderland Center divides accounting duties among a number of people, said Lindsey DeKruif, who became the church’s pastor in 2016.

The church’s treasurer keeps the books and does payroll, DeKruif said. But a financial secretary counts the offering when it comes in, and the board of deacons also helps oversee those monies. “Usually it’s not someone counting money alone,” she said.

Among the churches she knows, DeKruif said, it’s common to have an audit of all the books done every seven years, whether by an outside firm or a team of people within the church who have accounting backgrounds. Churches will also sometimes choose different people to handle various financial tasks each year, she said.

When she was studying to become a minister, DeKruif said, there wasn’t much training on how to handle a church’s finances. The seminary she attended — Western Theological Seminary in Holland, Michigan — has become “really more intentional about teaching clergy about finances,” she said, but only beginning the year after she graduated. She thinks one of her teachers led students in a discussion about it once.

DeKruif learned along the way, from congregants whose work had required them to become familiar with financial best practices, from the senior pastor under whom she served as associate pastor at Christ Community Reformed Church in Clifton Park, and from practices already in place at Helderberg Reformed Church, she said.

Tara Molloy-Grocki, who has been president of the Guilderland Teachers’ Association since 2017 said that the union has changed the way it collects its dues, in response to an an incident in which a former treasurer pleaded guilty and went to jail for stealing more than $100,000 in dues.

This incident occurred before Molloy-Grocki became president. The union president at the time was Maceo Dubose.

Brenda McClaine stole over $100,000 from the Guilderland Teachers’ Association during a period of about a year, from 2012 to 2013, while she was the union’s treasurer. McClaine was a math teacher at Farnsworth Middle School at the time.

According to her guilty plea in September 2014, McClaine forged the signature of the GTA president on association checks and then cashed them and also collected dues and deposited them into her personal checking account. Judge Stephen Herrick noted, at the time of sentencing, that, before criminal charges were brought, McClaine she had made “full restitution plus more” to the association. He said that her cooperation, balanced by the seriousness of the offense, was taken into account in determining her sentence, which was six months, served on weekends.

McClaine now works at Mildred Elley as the director of academic support and advising. In exchange for her resignation in 2014, the Guilderland School Board agreed to withdraw the disciplinary charges the superintendent had filed against McClaine, pay the district portion of her health insurance through June 30, 2015, and allow her two fifth-grade children to finish out their school year free of charge.

Molloy-Grocki said that, in the past, the district would take union dues out of teachers’ paychecks and then hand the union a check; the embezzlement started, she said, because McClaine would deposit less than the total amount of the check.

“So what we do now is that money is put electronically into the union’s checking account, and then we have to write a check to NYSUT,” Molloy-Grocki said, referring to New York State United Teachers. “We keep our dues, of course, and then the rest we send to NYSUT.”

As president, she also checks the organization’s financial records. There are always “like two pairs of eyes on everything now, just to make sure everything’s clean,” she said.

The GTA has an audit committee that meets once a year and that is able to look into and clear up any discrepancies, Molloy-Grocki said. She also runs things by the union’s labor-relations specialist, Michael Rowan.

A devastating betrayal

For the New York State Weatherization Directors Association, which provides energy-efficiency improvements to homes of low-income families across the state, the embezzlement of $800,000 over seven years by chief financial officer Randi Smith, 53 — and of another $300,000 by her son, Dakota Smith, 23 — has been devastating.

Andrew Stone, the organization’s executive director, told The Enterprise this week that the association has begun the process of rebuilding its reputation, which he expects to take time, more than anything else.

“I think the sensationalism of this thing just needs to calm down,” he said. “Now that the criminal case is settled, that helps a lot,” he continued. “There’s no concern any more about whether there was any conspiracy. The state police did a very thorough investigation, and that helps a lot.”

Regaining the association’s good name will be “about time, more than anything,” he said. At the same time, “We still have to deal with the economic impact,” he added.

There was never any doubt that the association was going to see this through to prosecution, Stone told The Enterprise, “due to the size,” referring to the more than $1 million that the Smiths stole. “If it had been a small amount, she would have been fired and we would have privately sought restitution,” he said.

Stone read a statement at Randi Smith’s sentencing in Albany County Court on Nov. 19, saying that the not-for-profit organization will need to spend as much time digging out from the effects of Smith’s actions as she spends in prison. Randi Smith was sentenced that day to two to six years in state prison; her son was sentenced the next day to the same amount of time. Both were ordered to make restitution.  

According to Stone, Smith drained the organization’s bank account, forcing it to fire other long-time employees or to slash their hours to zero as Stone works to try to keep NYSWDA afloat and make payroll.

Beyond the effect on the staff, her actions have harmed the association and its ability to support the network of members in their efforts to assist the poor, Stone wrote. “Development of new training, advocacy, and meeting facilitation are all at a standstill. We have had no choice but to raise training rates in order to stay afloat and this had had a direct negative impact on every weatherization program in the state,” he said in his statement.

Stone explained that, as a program funded by the Catalog of Federal Domestic Assistance, the Weatherization Directors Association has a responsibility to ensure that federal tax dollars are protected from fraud. When fraud is discovered, “Its implications are huge,” he wrote. Internal investigations are launched to determine if the crime is “the work of a lone actor or the group as a whole,” he said, and whether federal tax dollars were stolen.

Since May, NYSWDA has had three forensic audits completed, including one from the state. Federal funds were found to have been affected by the crime. The state is now seeking restitution from NYSWDA of the federal dollars stolen. The organization will make that restitution, Stone said,”but it puts us further in a hole that we are struggling to get out of.”

Knowledge of the crime, and fear of its impact, have reached the federal level in Washington, Stone told the court. Other not-for-profit organizations that have similar missions have spent time strategizing whether damage control is needed, since incidents like this one can be used by elected officials who oppose funding the program, Stone wrote. If the incident is raised during federal budgeting, it could have an enormous negative impact on the national program, he said.

Smith’s actions have “permanently tarnished” the association’s “impeccable reputation,” Stone wrote in his statement. Several members have backed out of events and training because they were unsure if NYSWDA as a whole was “dirty and involved in a conspiracy to defraud our members.” He continued, “Let me be clear, we were not.”

 

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