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Fraud Friday — Your Borrower Must Never Outsource Financial Responsibility

August 24, 2018

Fraud Friday — Your Borrower Must Never Outsource Financial Responsibility

By Dominic J Bartolone
Contributing Editor

Another story of a small business owner being ripped off financially by a trusted advisor. This time, the CPA pocketed almost $500,000 of company cash.

Joseph Stevens, 54, was sentenced in federal court to 33 months in prison and ordered to pay $512,982 in restitution after pleading guilty to bank fraud and tax evasion.

Stevens was hired by a business owner in 2012 to perform bookkeeping duties for the business. As part of his responsibilities, Stevens paid vendors, handled payroll, and prepared personal and business tax returns.

Due to his accounting position, Stevens had access to his employer’s local business bank account information at Five Star Bank.

In 2016, Stevens began to notify the owner that the business was in financial trouble, having maxed out a $30,000 credit line from Five Star without authorization.

When the business owners questioned Stevens about the credit line, he explained by telling them that the business was not generating enough revenue to cover expenses. Soon after, the owner received a letter from the IRS stating that their 2015 taxes were not paid.

According to prosecutors, in September 2016, the victim noticed that he was no longer receiving Five Star bank statements at his office. When he visited the bank branch on March 24, 2017, to review account activity, he found that two company checks, both made out to “Joseph Stevens,” had been forged with his signature.

On April 4, the business owner received a call from the bank informing him that someone was trying to cash a $5,000 company check. The victim told the bank that the check was unauthorized and instructed them to freeze all of his accounts immediately. While still on the phone with the bank, the victim received a phone call from Stevens informing him that his business account had been frozen.

Prosecutors said that between August 2012 and April 2017, Stevens electronically withdrew approximately $342,700 from the victim’s business and personal accounts without permission. He also forged 39 checks, totaling $87,800, made out to himself.

Stevens also failed to file income tax returns for 2014 and 2015, resulting in losses to the IRS of $29,186 and $53,296, respectively.

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