Former Renner Supply Co. employee confesses to suspected embezzlement

In hindsight, Mike George talks openly about lapses that set the stage for a confessed in-house swindler who allegedly stole more than $31,000 from Renner Supply Co.

George said he had initial reservations two years ago when hiring administrative assistant Jennifer Gallo. And when the 28-year-old who has been accused of embezzlement started wearing authentic sports jerseys, buying big-screen TVs and extensively remodeling her home with "inheritance money," his suspicions that she was stealing from the company reached a new plane.

"If she saw something she wanted, she bought it," said George, who has managed the local office of Kansas City-based garage-door supply manufacturer Delden for eight years. Renner Supply, 3252 N. Glenstone Ave, Ste. B-100, is one of Delden's four Missouri locations, selling and servicing garage doors and gate openers.

When Gallo was on a summer vacation last year, accounting irregularities involving two cash transactions surfaced, but tickets for the transactions could only be found after she returned, George said.

For weeks following, George said he and another administrative assistant, Mary Tallman, gathered evidence of the alleged embezzlement, which Gallo apparently committed by deleting every second or third cash ticket and pocketing the proceeds.

"She buffaloed all of us, even our corporate office," George said. "She had a pretty good system down. Our biggest concern is that she doesn't do that to someone else. ... What we want is for her to do some jail time, and we also want restitution."

Gallo was fired in September after confessing to the theft, George said. She was arrested in January and charged with one count of felony stealing in March, court records show. Gallo admitted to a Springfield police detective that she embezzled at least $31,673 from Renner Supply between February 2007 and September 2008, according to a probable cause statement filed in December. She pleaded not guilty at her March 27 arraignment before Greene County Circuit Judge Calvin Holden. Gallo's attorney, Kenneth Shunk, did not return calls to Springfield Business Journal.

Widespread problem

After Gallo's departure, George said he implemented new policies to better track Renner's cash flow. In addition to playing a more active role in bookkeeping, George and Tallman now strive to daily reconcile check deposits, invoices and a general ledger. Cash and corresponding tickets are bundled and stored in a secure location at the end of each business day, he added.

Certified fraud examiner Angela Morelock, partner at Springfield accounting firm BKD LLP, said instances of embezzlement at small businesses are a widespread problem in southwest Missouri and nationwide. She said more companies are paying closer attention to their budgets these days, and many are finding evidence of employee misdeeds.

"When the economy compresses, the weird stuff sticks out a little more," Morelock said. "We see so many businesses that are performing poorly, and business owners who are struggling. Come to find out, they're not making a profit because their money's being embezzled."

On average, companies victimized by their own employees lose an estimated 7 percent of annual revenues, according to the 2008 Report to the Nation on Occupational Fraud & Abuse compiled by the Association of Certified Fraud Examiners. The report was based on 959 cases of occupational fraud between June 2006 and February 2008 that resulted in a median loss of $175,000. More than a quarter of the crimes involved losses of at least $1 million.

The typical fraud lasted two years before it was detected, and the most common schemes centered on corruption, followed closely by those that involved fraudulent billing, according to the report.

Occupational fraud victims

Renner Supply and other businesses with fewer than 100 employees are especially vulnerable to occupational fraud. Companies in that category suffered a median loss of $200,000, according to the report, and employees in accounting departments were to blame for roughly three in 10 of the financial crimes.

Small-business owners and office managers can take a number of steps short of a full-fledged audit to safeguard their companies from in-house theft, Morelock said. She warned against relinquishing check-signing authority and strongly encouraged owners and managers to keep a close eye on bank and credit card statements as well as processed checks, cash receipts and deposit slips.

"Just by doing that much, you've covered quite a few of the small-business-type risks," Morelock said. "Unfortunately, the beefing up of the procedures often doesn't happen until after they get hit."

Morelock's point is reflected in the ACFE report, which states that 78 percent of victim organizations modified their anti-fraud controls after uncovering the crimes. A managerial review of internal controls and surprise audits were the most common responses, according to the report.

"It makes you less trusting of your employees when that happens," said George at Renner Supply. "There were probably literally days that she had two-grand in her pocket, standing there talking to me. ... That's an expensive learning curve."

George did note that Tallman had concerns about Gallo's handling of cash receipts, but at the time, she was a new employee who didn't want to rock the boat. Morelock said businesses should set up reporting hotlines, if possible, and urge employees to step forward with any evidence of unusual or criminal activity.

"In almost every embezzlement case that we see, there's another employee that knows what's going on, and oftentimes, they're just not sure what to do," she said. "Employees are the best watchdogs we have."[[In-content Ad]]