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The female fraud squad: Why women steal from their employers

Men dominate crime statistics, but when it comes to employee fraud, women are catching up. Donna Chisholm examines the trusted and often matronly faces of our “pink collar” criminals.

In the end, it was a dodgy belly that did her in. After embezzling $419,000 over seven years, Lynfield College accounts manager Rhonda Crabb was undone not by accountants or auditors, but by food poisoning.

The day she phoned in sick, that Friday in November 2015, the task of preparing the banking for collection by a security company fell to her offsider, the office administrator. The woman, Crabb’s junior, was the only other staffer in that small office, situated behind a service window that opened to the main reception foyer.

By her reckoning, $2354.50 was missing. Rhonda Crabb didn’t know it then, but she was already on her way to jail.

No one suspected her until that day. Why would they? She’d been running the school’s accounts for 19 years without incident.

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It took three months for forensic accountant John Wylie to trawl the school’s accounts and determine the extent of Crabb’s thieving. In February this year, she was jailed for two years and four months after admitting a single, representative charge of theft. A first offender, she was 64 years old.

It’s only with hindsight that clues to the offending and the motivation for it emerged. Only after she had resigned did other staff describe how she intimidated or belittled them and their pupils if they questioned why her money sums didn’t add up; why fees they’d paid were still listed as outstanding. How she’d distanced herself geographically from several friends on the staff by moving 60km away from the school, to Whangaparaoa, after her marriage ended in 2004. That year, after 30 years as Rhonda Dunn, she became Rhonda Crabb.

Crabb was on a salary of around $50,000 a year, but after her marriage ended, she made several hundred thousand dollars buying and selling five properties between 2005 and 2015 in Auckland’s hot housing market. All that profit – and more – she spent paying back in full the money she’d stolen, plus more than $10,000 the school had paid for the forensic accounting.

She might look like the type of woman you’re more likely to find running a cake stall than a con, but Crabb is in many ways typical of today’s pink-collar criminal: long-serving, unremarkable, implicitly trusted and old enough to know better.

In the month she was jailed, media reported four other cases in which women employees were sentenced on similar crimes, including former Ministry of Transport general manager Joanne Harrison, 50, jailed for three years and seven months for a $726,000 fraud, and another school administrator jailed for a year and 10 months for embezzling $100,000.

Lynfield College accounts manager Rhonda Crabb.

Though national fraud statistics show 65-70 per cent of offenders are men, the figures do not specify the gender ratio for employee frauds in particular.

It’s true that very large frauds seem to be mostly committed by men. Of 128 people prosecuted by the Serious Fraud Office since 2010, only 20 were women.

But experts tell a different story when it comes to much workplace fraud.

Former SIS officer Craig Gubbins runs Auckland company Personal Verification Ltd, which does background checks on employees. He’s tracked worker-fraud sentences reported since July 2004. Of 165 offenders listed, in cases involving more than $50,000, 108 were women.

So what’s going on? Experts blame the “pink ghetto”. They say women are no more likely than men to put their hand in the till but have far more opportunity to do so because they’re the dominant gender in trusted accounting, payroll and office administration roles that give them access to, and at least some control over, a company’s money.

“Literally every second fraud case we do is a female,” says Thompson and Toresen investigator Daniel Toresen. “I think it’s actually more than 50-50 that we’ve been dealing with, and we started looking at why that was. It’s because women are more often in those accounting and book-keeping positions. They’ve got the opportunity, and the same drivers and pressures that men have.”

Toresen, a private eye for nearly 30 years, says of the dozen six-figure-plus cases the firm has investigated in the past five years, the perpetrators were mostly women.

In one case, a woman in her mid-50s who’d been at a small company for 15 years took $330,000 over two to three years after being declined her request for a pay rise. “She wrote the cheques and paid the staff. Basically as soon as they declined the increase, she gave herself one. And for more than two years, no one noticed.”

As in the case of Rhonda Crabb – and many others – the offending didn’t come to light until she went on leave. It’s why fraudsters are often seen as highly diligent: they don’t take leave they’re owed just to prevent anyone else finding out what they’re up to.

“She didn’t even need the money,” says Toresen of the woman he investigated. “She had a $1 million freehold house, but her husband was dying, so she was in this weird place. She bought an Archgola [outdoor awning], a new car for her husband… just dumb stuff.”

The woman paid the money back in full and the company agreed not to prosecute.

Auckland barrister Rachael Reed.

Auckland barrister Rachael Reed, who specialises in fraud and financial crime as both a prosecutor and defence counsel, says in her experience women offenders have been so trusted that employers haven’t checked them efficiently. “They’re often long-term employees, those you wouldn’t suspect. A lot are in the category of middle-aged or older women. They work incredibly hard, they seem incredibly loyal. They don’t take much annual leave – they can’t, because that’s when they could be uncovered.

“They are genuinely horrified at what they’ve done and what it means for everyone. They question how they could possibly have got to that point. They can’t understand [why] they did it. I get to know them pretty well if the process is long. They’re all very likeable, personable, articulate people who you can get on well with.”

Much of the offending is relatively unsophisticated – setting up a bank account for a supposed supplier who doesn’t exist, or changing bank account details on an invoice.

In the 1950s, US criminologist Donald Cressey created the enduring model of the triangle of triggers necessary for a fraud to be committed – opportunity, perceived “unshareable” need, and rationalisation. While the opportunity and, at least initially, the need, are gender neutral, international research has found that each sex has different explanations for their motivation.

In Reed’s experience, the motivation for women clients has been “70 per cent desperation, 30 per cent greed”, and international experts agree with her.

US researcher Paul Klenowski, director of Criminal Justice and assistant professor at Clarion University of Pennsylvania, has interviewed 140 inmates jailed for fraud, half of them women.

“For the males, what I’ve seen consistently over the past eight years, [the motivation] is being number one – success and the American dream. On the female side, it’s the idea of survival, in terms of both their job and for their family, the economic necessity to keep their family afloat. The other thing at the top of the chart for women was the idea of equality. I interviewed managers and executives who were so furious that their male counterparts, some of whom had fewer years of service, were making 25 to 30 per cent more in income.”

Inequality, he believes, motivates female offenders in about 60 per cent of cases. Fewer than 20 per cent had alcohol or drug addiction problems.

He says with up to 97 per cent of all white-collar offenders in the United States taking a plea deal, the courts never get to hear why they did it. “I go in to ask them that question. You’d be surprised how many break down and start crying. Their faces flush with embarrassment. Many said they had never come to terms with the fact they knew what they were about to do was wrong, but given their situation – what Cressey called their unshareable problem – they felt their back was against the wall.”

American “pink collar” crime expert, Oregon fraud examiner Kelly Paxton.

The fraudsters spoke of their guilt and paranoia about being caught. “About 90 per cent of the 140 I talked to said that when the Feds or state police showed up, they felt, ‘Thank God, it’s over.’ Unlike the street criminal, who couldn’t care less.”

Another American “pink collar” crime expert, Oregon fraud examiner Kelly Paxton, founder of pinkcollarcrime.com, told North & South that in the cases she’s investigated since 2008, only about 10 per cent have involved men.

“Men steal for the three Ws – wine, women and wagers. For women, it starts as Joan of Arc – usually a family need. Then she finds out she likes the money and it makes life easier. It becomes greed, not need.”

Men, she says, are less likely to identify “need” as a cause of their offending. “Men just don’t really say, ‘Gee, I’m not making enough money right now, therefore I’m going to go steal.’ Women share the fact they’re in financial strife. If you talk to their co-workers, all of them knew the woman had financial problems, or a sick child, or their husband had left them. They’re very open about why.”

The “tone at the top” sets the culture for organisations, and a kernel of resentment or grievance about some of the boss’s activities can provide the necessary rationalisation for offending.

“You’ll get, say, a dentist who’ll take his whole family to a convention in Aspen. He comes back and hands the $20,000 bill to his office manager, and she asks how he wants to break it out, so that he pays the personal costs for his family. The dentist will say, ‘Just pay it,’ and at that point she realises he’s stealing. Maybe, when her kids can’t go on a school trip because she can’t afford it, that little moment might be all it takes.”

Investigator Daniel Toresen. Photo/ Ken Downie

FBI figures show male embezzlement crimes have increased by just four per cent since 1990, but female offending has risen 40 per cent.

Auckland KPMG fraud investigator Jason Lunjevich, a former detective who did fraud inquiries for the police, says that trusted employees “know the systems, they know the processes, they know the gaps”.

Lunjevich, who also helps companies improve their fraud risk management, says boards are increasingly taking the issue seriously. “We’re starting to see pressure down, with boards saying to CEOs and CFOs, you need to sort this out; what are you doing to prevent fraud in the workplace? It’s about messaging from the top. If the troops aren’t seeing it, they’re going to think, ‘Who cares?’”

Companies are always advised to report fraud offending to police, “otherwise you’re just packaging the problem for someone else”, says Lunjevich. But a 2016 PwC survey on economic crime  found law enforcement agencies were informed in only 60 per cent of cases involving an employee.

Gubbins believes police are more likely to be involved when the offender is female. “You could argue men are treated differently. Quite often they’re in senior positions and when the company finds out about it they get rid of them rather than prosecute, because they don’t want the bad publicity. They don’t want it known that the head of IT has stolen millions of dollars – it’s bad for their reputation, so they just say ‘Go away, leave, and we won’t involve the police.’”

He disagrees with Klenowski and others that “need” rather than “greed” is more often a driver for women. “All these women who’ve come up for sentencing – you look at what they spent the money on and it’s all luxuries: overseas holidays, remodelling the kitchen. It’s not about going to Countdown and buying meat for the family to put food on the table. It’s about extravagances.”

The key driver is “human weakness”, rather than need or feeling undervalued, he says. “When stuff goes missing in the office, it’s always ‘the cleaners must have taken it’, because they’re getting poorly paid. It’s very unfair. Our grandparents went through the Depression without stealing.”

Daniel Toresen says although fraud is one of the easiest crimes to investigate because it leaves a paper trail, police seem reluctant to take cases on. His firm handed a file to police in 2015 which provided evidence of a $500,000 fraud, and circumstantial evidence of offending involving $12 million, but no officer was assigned to the case for 18 months.

“They just don’t like fraud. They don’t want to do it, it’s paper, it’s difficult and they don’t have the staff to figure it out. So the fraud just stacks up and stacks up and these are massive cases; it’s just crazy. There must be hundreds of them. I don’t understand why they hate it because it’s so simple to investigate.”

Assistant Commissioner of Police Richard Chambers.

Police figures released to North & South under the Official Information Act show that it takes an average of six weeks before fraud cases are assigned to an investigator. Nationally, fewer than 500 of the 3000 fraud cases with police are unassigned, but in Auckland, more than half of the 210 current files haven’t yet had an officer put on the case.

Assistant Commissioner of Police Richard Chambers says he’s spoken to victims and private investigators who’ve been dissatisfied with police action on some fraud files. He says while that’s regrettable, cases always need to be prioritised against other demands from offences involving violence, sexual and family violence, and crimes against children. Auckland City, Counties Manukau, Waikato and Canterbury have specialist fraud investigation teams, but officers can be deployed onto different types of cases at any time.

As a detective sergeant more than a decade ago, Chambers was officer in charge of Auckland’s company fraud squad, and he’s seen no lack of appetite for fraud cases. He acknowledges the private investigators and banks who do much of the groundwork before cases are referred to police. “But the reality is they still involve a lot of work – we can’t just take it on face value and wander down the road and arrest someone.”

A number of forensic accountants already work for police, and he says he’s hoping to employ more to assist not only with fraud investigations but in tracing proceeds of organised and significant crime.

So what mistakes do companies make that allow fraud to flourish undetected?

In Lynfield College’s case, says accountant John Wylie, it was a “fundamental” error. The school was running two systems: one for receipting fees, and another for recording them in the financial accounts. “Those systems didn’t talk to each other and it had been like that for a number of years.”

Wylie says Crabb’s deputy had raised the issue two years before with her, but “Rhonda was a dominating and intimidating person. She’d said, ‘Don’t worry about that,’ or words to the effect that she takes care of that.”

He says Crabb sometimes didn’t issue receipts for cash received from pupils, telling them to come back later. “The kids wouldn’t go back. They were shit-scared of Rhonda.”

Though Wylie says the lack of reconciliation between the two account systems was “a very obvious cross check that should have been done and wasn’t”, Lynfield principal during Crabb’s offending, Steve Bovaird, says it was at the time fairly typical of how schools operated. Systems were tightened progressively over the past 12 years. Ironically, the school had tried to improve things by centralising cash payments for various school activities into the accounts office, instead of being collected in classrooms by teachers.

Fraud victim: Steve Bovaird, principal of Lynfield College when Rhonda Crabb stole nearly $420,000.

Although it wasn’t an issue in Lynfield’s case, many companies, particularly small ones, run into problems because the same person handles both accounts payable and accounts receivable, says fraud examiner Kelly Paxton. “A lot of small businesses say they can’t afford to pay for two people so they can segregate the duties. But they can’t afford not to.”

Audits, she says, generally don’t catch fraud.

That’s been a lesson learned the hard way for Bovaird, who reads from an audit report on the school, from the year before Crabb’s offending was detected, saying it had identified no weaknesses in internal controls relating to the prevention and detection of fraud. “You read something like that and think it’s fine. You might have thought the auditors would pick that up [the reconciliation issue] as a process that was missing in our system, but they never saw it.”

Bovaird says Crabb apologised in a restorative justice meeting before her sentencing. “I knew I wasn’t going to get an answer to ‘why’. I don’t even know if she really knows. But she was very ashamed.”

So ashamed that, according to Judge Kevin Glubb’s remarks at sentencing, she tried twice to take her own life. One attempt came immediately after the school detected the missing money, when Crabb was hospitalised for six weeks with serious injuries after a fall in north Auckland.

However, Wylie, a former SFO investigating accountant and the only person to speak at length with Crabb about her offending, says she expressed “no remorse whatsoever” during his 90 minutes with her at her lawyer’s office. “She didn’t want to be reminded of the grubby details, so I didn’t have to go through it item by item. She was talking about how the system allowed it to happen. She was surprised at the amount, which is not uncommon.”

Bovaird says trust among school staff took a big hit after Crabb’s arrest. “It’s quite raw for some, especially those who were close to her. In some ways, it’s taught me not to trust people, but that’s unfair. I always worked on the premise that until someone proved you wrong, you always trusted people. I’m probably a little more cautious now.”

Though the judge suggested Crabb’s marriage break-up might have been a trigger for her offending, Bovaird says it wasn’t a red flag. “In an organisation like this, you’d have lots of people going through things like that. If I’d suddenly said, ‘Oh, now you’re divorced I better watch you more closely’ – is that really what you expect me to do?” He says Crabb never allowed pictures to be taken of her, or her phone number or address to be listed in school records after her divorce, but that didn’t raise any concerns either.

Failing to take leave – a red flag in other companies – didn’t apply in schools because office staff could always take time off in term holidays, when no one else would need to cover for them.

He says the school has been open about what happened because it wants others to learn from it. “In some situations, organisations will say, ‘You pay us back and we’ll keep it all quiet.’ We never for one minute considered that.”

This was published in the July 2017 issue of North & South.