Pathological gamblers often guilty of cooking books

Pathological gamblers often guilty of cooking books

Trust busters: Embezzlers betray unsuspecting employers
CLAIR JOHNSON Of The Gazette Staff‌
The Billings Gazette

Bill Underriner was stunned when he learned that his bookkeeper of 20 years had embezzled more than $200,000 from his dealership, Underriner Motors.

“That’s got to be wrong,” Underriner said he remembered thinking. “It can’t be her.”

But Ronda Marie Walter admitted federal wire fraud charges for skimming $205,000 from the company over about three years. She did it by fixing the books to hide cash she was stealing.

A federal judge sentenced Walter to two days in jail, house arrest and community service. The sentence was designed so Walter could continue caring for son, who had a heart transplant. She also paid $205,865 in restitution by selling her house and borrowing money from relatives.

The company, which Underriner described as “one big family” of 65 employees, had been generous with Walter because of her son. Underriner had leased a van to Walter at a reduced rate and let her work shorter hours to care for her son.

The restitution didn’t cover all of Underriner’s investigative expenses, and he doesn’t know where all of the money went. Walter had a lot of toys, like motorcycles, for her children, he said.

“Since the sentencing, I’m over it,” Underriner said. “I have advised my employees I have moved on and they should too. I trust every one of my employees until they prove me wrong.”

Beyond the financial havoc, employee embezzlements break a bond inherent in any business or organization — trust. The betrayal can be devastating for the victims.

“It’s a crisis. The trust is just completely broken,” said Margaret Gallagher, a deputy Yellowstone County attorney who prosecutes embezzlements.

Employee thefts have been growing in recent years and may be a reflection of a tough economy and gambling addictions, law enforcement officials said. Gallagher said she’s seen an increase in cases in the last six years. About 20 percent of her caseload, roughly 25 cases a year, are employee thefts, with about 75 percent of them involving embezzlements, she said.

Assistant U.S. Attorney Ryan Archer, who prosecutes financial crimes, said a flush economy tends to mask embezzlements. But when times are tough, businesses pay closer attention to the bottom line and catch anomalies.

For Jim Markel, it was a gut feeling that something was wrong at his company, Red Oxx Manufacturing, a Billings firm that makes high-end luggage. When another employee filled in for vacationing bookkeeper, Crystal Deloris Bryant, the company learned that Bryant had been embezzling to pay her credit card bills.

“It was a serious blow,” Markel said. Bryant was “a criminal mastermind,” he said.

As is common in most small businesses, Markel was focused on growth and trusted his employees.

“I empower people. I give them a lot of responsibilities. At some point you have to trust somebody,” he said. Bryant’s thefts, he said, were “a total betrayal of the relationship.”

An 18-month investigation by Red Oxx and the Billings Police Department found that Bryant had stolen about $81,000 by making 92 payments from the company’s bank account to her credit card accounts.

Deputy Yellowstone County Attorney David Carter said Bryant had no addiction or expenses like medical bills.

“She just wanted a personal bank account. She was someone who liked to buy stuff — the knickknacks of life,” he said.

Embezzlements, Carter said, seem to hit the opposite ends of the spectrum — very big businesses and the small operators and organizations. Small operations get taken because they have limited resources and perhaps can’t afford an audit, he said. Big businesses get taken because an employee can maintain a low profile, he said.

Greed and gambling combined with opportunity are the most common motives for embezzlers, investigators said.

“People seem to want the brass ring. They want the new car. They want the better house. They want a better life. They want travel, vacations,” Archer said. “They can’t restrain themselves.”

Embezzlers also have a sense of entitlement about their jobs and rationalize stealing by thinking, “I should be getting more,” or “I’m so smart. I can beat the system,” Gallagher said.

Gambling and greed were behind one of Montana’s biggest embezzlements in recent years. Hardin resident Vickie Diane Becker, a 30-year employee of First Interstate Bank in Hardin, admitted stealing $1.6 million in a five-year loan scheme she devised while serving as the bank’s vice president.

At Becker’s sentencing, Lyle Knight, First Interstate’s president and chief executive, called Becker’s thefts “diabolical.” The bank’s top auditor worked a full year to sort out the scheme.

“We saw new jewelry often. We saw her drive a brand-new truck. Our money was used in Deadwood,” a South Dakota town where Becker and her husband gambled, Knight said.

Becker, 51, apologized at sentencing, saying her husband’s gambling problem and family debt put them in a bind. She stole to help her family, not to be greedy, she claimed.

Embezzlement is “a very common behavior with pathological gamblers,” said Mona Sumner, chief operations officer and clinical director at Rimrock Foundation, which offers addiction treatment programs. A significant number of gambling addicts resort to crimes, like embezzlement, when they get desperate and run out of family and friends to bail them out, she said.

Bigger businesses may be able to weather the financial hits, and insurance can cover losses and expenses, but embezzlements can be devastating, especially for small firms or nonprofits that may not have the resources to find and investigate problems.

Former Bearcreek resident Carl Peterson, a self-employed contractor, and his girlfriend, Kristi Wagner, had to rely on relatives for loans to pay their bills after Peterson’s bookkeeper embezzled from him through a credit card scheme.

The bookkeeper, Vicki Lynn Heater of Red Lodge, spent the money on prescription drugs through an online supplier, paid bills and bought other items.

Peterson had hired Heater to manage his business and personal accounts.

“We thought this was a way to free up our time and stay on top of things,” Wagner said. “You want to trust people, because honestly, people hate to do their books.”

At sentencing, Peterson said he lost his hair and had sleepless nights from the stress of trying to restore his finances and remove fraudulent credit charges.

Heater, who opened credit cards in Peterson’s name and used his current accounts, had ruined his credit and burned through his home equity loan, Peterson said.

“Now I’ve got to work another 20 to 30 years,” he said.

Six months after sentencing, Peterson, 51, suffered a stroke that left him unable to work, Wagner said. The couple has since moved to Whitefish to be closer to Wagner’s parents. Peterson is having to learn again how to walk and has difficulty speaking.

“We can’t get that money back. We never will,” Wagner said.

Embezzlements hurt not only the business or organization but also can affect vendors and customers, said Gallagher. “Every embezzlement is a minor explosion in the business world,” she said.

Plus, it’s embarrassing.

Markel knew the Red Oxx embezzlement would become public and said it was humbling to face employees and customers.

“I had to explain to my employees why they didn’t get Christmas bonuses,” he said. “I let this happen on my watch.”

Red Oxx had to delay an expansion, use its line of credit, which it has since repaid, and work twice as hard to recover, Markel said. He worried about customers’ reaction, but customers rallied behind the business, he said. The company is growing again and just posted its best year ever, he said.

The Northern Plains Resource Council also recovered from embezzlement by a bookkeeper who stole $375,000 to support a gambling addiction, and the subject is still sensitive almost eight years later.

“I have a stomachache just thinking about it,” said Teresa Erickson, staff director of the Billings-based nonprofit environmental organization. “It was such an emotional thing because you’ve been betrayed. It’s embarrassing. It’s humiliating. I don’t think people realize what a horrible experience it is for people.”

The loss amounted to about half of NPRC’s annual budget. “It was all of our reserve fund,” Erickson said.

NPRC had financial reviews but not full-blown audits, because they are expensive, Erickson said. She thought she was being frugal.

“We do an audit every single year now,” Erickson said. “We were way too trusting.”

NPRC’s leadership and staff were supportive in helping to develop a recovery plan, implement internal controls and rebuild confidence, she said. Without that support, NPRC might not have survived, she said. Only one foundation withdrew support because of the embezzlement.

NPRC also received calls from other nonprofits from around the country asking about its experience. Erickson wrote an article about how NPRC survived embezzlement for the spring 2005 issue of the Grassroots Fundraising Journal and continues to field inquiries about the article.

Investigations often begin when victims contact law enforcement with suspicions or evidence. Depending on the circumstances, the case can be investigated by federal agencies, like the FBI, Secret Service and IRS, by local law enforcement or by a partnership of both.

The Secret Service, for example, worked with local agencies on two Carbon County cases, including the Peterson embezzlement. Bryan O’Neil, the Secret Service’s resident agent in Billings, said the agency’s goal is to have an impact in the community. While the Peterson’s case did not involve a large amount of money by agency standards, “it’s everything” to the victims, he said.

Building cases can take months as investigators analyze financial records, interview witnesses and review internal probes.

“I’m just following the money,” said Billings Police Detective Brett Lapham, who works financial crimes. Most of his investigations are straightforward but time-consuming, he said.

Some schemes are more complex and are limited only by a person’s creativity, investigators said.

FBI Special Agent John Teeling, who investigated Becker’s Hardin bank embezzlement, said Becker, having worked there for so long, “knew everything about the bank from soup to nuts.” Becker changed balances and hid money in accounts to avoid detection by auditors, he said.

When Teeling confronts a suspect, he lays out the evidence.

“I graciously ask them to give me their side of the story, and they often do,” he said. “They are often a mess trying to maintain a stable cover. Most of these people are very nice people.

“They’re able to do it because people like them.”

Embezzlers tend to be women working in accounting or bookkeeping jobs, investigators and prosecutors say, at least in part because those occupations have been dominated by women. Bookkeepers who handle the money, Lapham said, “can cook the books any way they want to.”

More often than not, prosecutions result in guilty pleas.

“I’ve yet to go to trial on anybody,” Lapham said. “Once we find them, the numbers don’t lie. It’s hard to argue against that.”

Restitution to victims is rare because the money usually is gone, having been spent on trips, entertainment or gambling, officials said.

“It’s amazing how quickly the money goes in these cases,” Archer said. Leftover assets, like a boat, depreciate so fast it doesn’t make sense to seize them, he said.

Markel laughed when asked whether he’d get restitution.

“I don’t think so. We’ll see,” he said. “I’m not going to sit there and lose sleep over it. Not anymore. I tend to always look forward. This will be a chapter in the history of this company, and thankfully, it wasn’t a death blow.”