What NOT to Do When Discovering an Employee Is Stealing

Certainly you want your money back, but if you go about getting it the wrong way, you could be facing felony charges of your own.

(Image credit: Chris Fertnig)

You’ve just discovered that an employee has been stealing cash and you want every cent back. To recover that money, several options are available, but one could get you in big trouble. We’ll tell you what it is in a moment, but first meet “Jill,” who runs her own résumé-writing service in a Northern California university town.

“Most of our clients are about to graduate and need a reasonably priced, attention-getting résumé. Our $75 ‘Builder’ package lets them complete a questionnaire, select a style, and walk out with a CD Rom or flash drive containing a one-page résumé , cover and thank you letters, all that is needed for entry-level job applications,” she explained.

“We are cash only. Seeing hundreds of dollars pass through her hands was too great a temptation for ‘Taylor,’ who worked for us about two years and comes from a prominent family that can trace its roots to the founding of the university.

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“CCTV security video shows Taylor repeatedly stuffing customers’ cash into her purse, and our data reveals no accounting entry for dozens of résumés which were created during a one-month time frame when she was the only person working. The loss comes to $3,500.

“She lives with her parents and I want to send her and them a letter, along with a CD rom video clip, giving an opportunity to repay the loss or I will go to the police. My boyfriend reads your column and felt it best to ask you before doing anything.”

Where common sense collides with the law

We ran our reader’s question by Jane and Riley Parker, both California licensed private investigators. “If Jill sends that letter,” Jane warns, “she opens herself up to being charged with blackmail, or extortion as it is sometimes called, which is a felony.”

“Blackmail?” you are probably thinking, “Isn’t blackmail like threatening to expose someone’s affair unless they pay up? Jill is just giving the girl or her family a chance to make it right before going to the police. That’s fair, it’s the right thing to do, and it’s just plain common sense, so how could it be blackmail?”

“Yes,” Riley agrees, “You would think that it is common sense, but in this instance, common sense and the law collide. It is the first thing private investigators warn clients not to do when employee theft is discovered,” adding, “They are usually frustrated and find this to be counter-intuitive, until we read them the legal definition of blackmail.”

All states define blackmail and extortion just about the same way. In California, Penal Code section 518 makes it illegal to use force or threats to compel someone to give you money or other property. This includes threats to accuse the targeted person of a crime, to reveal a secret or to expose the person to embarrassment.

Go to the police - Just don’t threaten to unless paid

So, Jill can go to the police and request that criminal charges are filed against Taylor, but she cannot use that as leverage to get the embezzler to cough up the $3,500. Think of this another way; you have the legal right to do something, but can’t threaten to do it unless your money or property is returned.

Let’s say that Jill wants to give Taylor a chance to make things right. What could she — or better yet, her lawyer — state in such a letter to Taylor and not get in trouble?

“In our experience, we’ve found that an embezzling employee isn’t going to be motivated by a phone call or letter from the employer. Instead, an attorney’s letter advising of legal consequences should the money not be repaid bring this to a higher level in the crook’s mind and is always worth the small expense,” the Parkers strongly maintain.

Be careful whom you tell

A moment ago you just read the words, “in a letter to Taylor.” We did not say, “To Taylor and her family.” Why?

“Dennis, you do not want to be the victim of embezzlement and then sued by the former employee for defamation, but we have seen this happen far too often. What if the employer is wrong? What if there is a reasonable explanation for what looked like theft?

“Do not contact family, friends and neighbors. Unless instructed by your attorney, you should not discuss your investigation with other employees as you might not know their relationship. And whatever you do, don’t offer special favors to co-workers if they will snitch on the suspected embezzler.

“We have seen employers who sought to crush a former employee instead be forced to pay fortunes to defend themselves. Some battles are not worth fighting,” Jane and Riley Parker concluded.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

H. Dennis Beaver, Esq.
Attorney at Law, Author of "You and the Law"

After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, "You and the Law (opens in new tab)." Through his column he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."