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Stealing from charity – N.Y. foundation loses $650,000

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Mailroom clerk Clifton Richards was a respected employee at the Social Science Research Council in Manhattan, until he was charged with bank fraud for stealing $650,000 in grant payments from the nonprofit’s mail, the New York Times reported July 12.

The managers of the foundation are now setting up security protocols they never thought they needed.

“It’s analogous to what one would do when someone burglarizes your home,” president Craig Calhoun told the Times. “You change the locks, you put in a burglary system. But that doesn’t mean you’re invulnerable or can stop this from happening again.”

In organizations of all sizes and shapes, employees are stealing more than ever. In a 1998 survey of 5,000 business, government agencies and nonprofits, the average loss from check fraud by employees was $624,000.

The survey, by accounting firm KPMG, also found that employee theft from company bank accounts using ATM cards had more than doubled, to an average of $300,000. Theft and abuse of company credit cards tripled between 1994 and 1998, to an average of more than $1.1 million.

Small staffs and an atmosphere of trust make nonprofits susceptible to theft, but investigators say most fraud still happens in the corporate sector.

Cost cutting can increase the problem. Many organizations have reduced expenses by cutting back on departments like accounting and security that help detect theft.

The Social Science Research Council had good safeguards, however. Richards came from an employee agency that promised background checks. The foundation itself has 5 accountants out of 50 employees, an unusually high ratio.

Still, the foundation said it did not know of the thefts until students who had been awarded research grants started calling to ask when the money would arrive. It took weeks to track down the source of the thefts.

Richards has not yet stood trial on the federal charges. According to the complaint, Richard confessed to taking the checks and said that a teller at Chase Manhattan Bank approved cashing them. Investigators suspect the teller deposited the checks in false accounts.

For full story, go to the New York Times.

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