Tale the money and run: white collar crime at DHR construction

Jim! Richard Davis managing partner of DHR shouted in disbelief. “are you trying to tell me that over the past two years my right hand man, Alan Thompson, has embezzled nearly $25,000?”

“figures don’t lie, but liar figure” reported Jamses Carroll the accountant for the firm. I have just finished audting your firms’ financials and found that purchases have been charged to Thompson’s corporate credit card that either have nothing to do with the business or seem far- fetched, like buying gasoline six times in the same day for the same vehicle. Worse, I have noticed that for several procurements, the signatures on the receipts do not even come close to matching the signature on the back of the corporate credit care. I think someone who is not authorized has used his card – that is not only embezzlement, my friend that is credit card fraud and forgery.

The way things were.

Aln and Wilma Thompson were tenants as well as the construction managers of DHR construction and seemed to flourish under Davis’s leadership style. Alan was a soft-spoken individual who had really never been given the opportunity to work the way the wanted to work. Davis gave Alan the autonomy to purchase tools and other building materials as needs, allowed him to use authority to deal directly with subcontractors. Alan was therefore the point man for the building operation and focused on providibg quality workmanship by building a solid network of subcontractors.

Davis’s trust in Alan and Wilma seemed to be reciprocated by their devotion to the business. Alan and Wilma stuck with Davis through the business’ tough times, and they developed what Davis thoufht were strong social bonds. When Alan’s brother Marvin came on board, all social events included Marvin and his family as well. This cemented the family bonds within the business. All seemed to be well from Davis’s standpoint, and the business seemed in solid hands with Alan and family.

Exit Bookkeeper, enter accountant.

Davis employed Wilma’s cousin, Sally as the firm’s bookkeeper after meeting her at one of the business’s summer barbeques. Sally would take all of the monthly receipts, deposits and bills: recorf them in the firm’s journal; and write out any checks for outstanding bills. As the operation grew and became more complex, however sally realized that she was getting in way over her head and that the service of an accountant were needed. With a heavy heart, sally informed Davis that she could no longer properly service the firm and that she would reconcile the books at the end of the fiscal year and then depart.

After chatting with several of the other small local builders, Davis made several phone calls to prospective accountants. They all seemed very competent, but one in particular James Carroll not only understood the business but also owned rental property. Davis met with carroll and hit it off quite well with him and immediately turned over a copy of the books.

A few days later, after digging into the books, Mr Carroll noticed numerous strange credit card charges to the same credit card: a Christmas tree and gifts from Home Depot, over $200 of food purchased at Walmart, and 15 to 20 specialty tools purchased over and over gain in a span of just a few weeks. Carroll would not service any client who mixed personal expenses in with business expenses. He decided that before discussing the ramifications of the behavior with Davis, he has better do so more digging. Perhaps he could discern a pattern that would explain such behavior.

The search and the finding

Carrol plodded through all the receipts, checks, and journal entries and hoped that perhapd these personal charges were at best accidental personal charges that might be considered loan that would be paid back to the businesses. Carroll wuickly noticed that the personal incidentals all seemed to be made on only one person’s credit card, that of Alan Thompson. Carroll tabulated these expenses, along with expenses he thought were perhaps frivolous or questionable, and found about $25,000 of these types of expenditures over a 2-year period. Carroll also cjhecked the signature of Thompson’s card and noticed that on several occasions the signature was different on the signed credit card receipt than on the actuall credit card. He tool hos findings to Richard Davis, who at first was totally incredulous.however, after examining all the evidence, Davis knew that he had a real problem- a problem with really appalling ramificatipns. The questopns is now what should he do sbout it?

1. Given the textbook’s definition of ethics, what are the ethical issues in this case?

2. What human resource management practices of DHR might have led to the alleged unethical behavior?

3. How might having a code of ethics have clarified the ethical values of the firm?

4. Who are the key stakeholders in this case? Why?