Welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. In the past we've included some IMA focus bonus episodes where we spoke to Ima, staff members where I am a volunteers and young professionals. Today's bonus episode is very interesting because we are going to share a conversation held with Kelly Paxton, a certified fraud examiner and pink collar crime expert. She spoke with IMS manager of brand content and storytelling, Margaret Michaels Kelly presented on pink collar crime at IMA's 2019 annual conference and expo in San Diego and she was nice enough to sit with Margaret after her presentation to share some additional insights as we approach our 2020 annual conference. We thought it would be a great opportunity to share some valuable perspectives like Kelly's and make sure you look out for this year's speakers and topics. Let's head over to the conversation now.
I'd like to start with your area of expertise. Can you tell us a little bit about how you became interested in pink collar crime and how you learned more about it?
So I became interested in pink collar crime when I was working as the fraud analyst at a local Sheriff's department. Prior to that I was, my original career was in finance and I became a customs special agent. So I was used to arresting bad guys you know, money launderers, drug dealers. But then when I go to a local Sheriff's office and I'm doing primarily embezzlement type cases, all my suspects are women. And I came across the term pink collar crime and I just started researching it and it fascinated me because we were arresting women that look like you and me. They were nice woman. I had a detective one day who, she arrested a woman who stole hundreds of thousands of dollars from her child's school where she worked at. And the detective said it was the hardest day of her career. That was this nice woman. She was crying, she was devastated, she had no criminal history, nothing. She made a bad decision and it just spiraled out of control. So I was fascinated because I was, we think of criminals as bad guys. We don't think of them as the people that live in our neighborhoods. And that's what I was seeing in embezzlement cases.
This is so interesting. Can you explain to us what is the difference between pink collar and white collar crime?
So white collar crime came in in 1939 by Edwin Sutherland. It is a crime committed by a person of high social status in the course of his occupation and it was his occupation. So it took another 50 years for pink collar crime to come out, which is petty amount stolen by lower level workers in the workplace, primarily women because women are in those positions. So what I say a huge part of the difference between pink and white collar crime is it's position, not gender. So white collar crime is generally considered to be fraud, which is Ponzi schemes, financial statement, fraud and corruption. Whereas pink collar crime, I call it garden variety embezzlement. It's the main street crime. It is the dentist who gets ripped off by his trusted office manager. It is the manufacturing company who has an accounts payable, you know, employee who steals. It's relatable. That's, I use a lot of hashtags in my social media and presentations and I call it the relatable crime. I can't tell you how many people come up when they find out what I do and they have their own story of how they are. A family member had been ripped off by someone or a school club that their kid belongs to. So I call it the relatable crumb. We don't relate to Bernie Madoff. It's just we don't, we don't live in his world. We live in the world of mainstream.
Are there patterns in the behavior of pink collar criminals? For example, I'm not sure if you consider Elizabeth Holmes a pink collar criminal or not, but there have been reports that her behavior seemed to raise some red flags. In the cases you've worked on. What have you commonly seen?
So some of the common characteristics of pink collar criminals are the trusted employee. It is your right hand person, you own a business, it is your trusted employee. I will tell you it's positioned not gender. A man can be a pink collar criminal. It's the position, it's just the women are in more of these types of positions. According to census, you know, reports 90 plus percent of administrative positions are filled by women. And that's where the cash is in a business. It's in accounts payable, it's in accounts receivable, bookkeepers, receptionist's office managers. So, but they are trusted employees, absolutely trusted employees. So, um, Elizabeth Holmes, I don't consider it to be a pink collar criminal. I don't know what she actually financially profited from Theranose. But the thing about the women and pink collar criminals or the men and pink collar criminals is they're indispensable in a business. They really are indispensable. One of the, I call them pink flags instead of red flags, I call them pink flags is never taking a vacation. So if you have an employee who never takes a vacation, it is a huge pink flag. Of course, lifestyle I do, I tell businesses to do a parking lot audit, look outside and does their salary match the car? I mean, I've had a dentist who, when you find out you've been embezzled, it's horrifying. You are just gutted. And so what do people do when they're horrified? They try to bring humor in it. And so here I have this dentist, he realizes he's been ripped off and he said, you know, when I realized she drove a newer model, BMW's than me, that would be a clue. And I'm like, yep, that would be a clue. So there are patterns men steal more than women. So if you get a male pink color criminal or embezzler, he's going to steal more than a woman. Women steal 45 to 50 cents on the dollar compared to men. Embezzlers and that's been my practice. The two biggest cases I've had male embezzlers.
Very interesting. Well obviously you don't know someone's behavior before you hire them. Not fully at least. So what are some of the best practices for background checks or industry standards that organizations can follow when looking to hire new employees?
So I did background checks for many, many years and the ACFE has their report to the nation that most company, about 50% of companies do background checks. Now a background check is a rear view looking assessment. We went to look now into the future. So that's what I say, a parking lot audit lifestyle audit. Many States you can no longer run credit reports unless you did. There is a, you know, a need that can be documented. So the problem with the background check is a lot of these people may have done it before and just been fired or terminated and not prosecuted and so it won't show up on their record. But then there's a huge amount of them who have never ever been in trouble with the law before. And so their background check is going to be clean. I had a woman who stole $10 million from a car dealership and I wrote to her in prison. And we had a correspondence back and forth and she told me that she had not so much as ever even had a parking ticket and then she started stealing. So you really have to be paying attention in the now. And that's why I say the parking lot audits, you know, does the salary match the vacation? That woman who stole $10 million, she flew to the Vatican and took her family. She bought tickets to Superbowls and box tickets. So, and she, people did question some of these extravagant trips. She said, well, she had a side hustle, you know, she was very blessed. They had made some good investments. It's hard to ask a coworker like, so how are you affording that? And you know, if they were stealing, they're going to come up with some very clever answers.
So I guess a big thing you need to have is trust. Right? But I know that you use the hashtag trust is not an internal control. What does that mean to you and why do you use that hashtag?
So trust is not an internal control. This is every night I go to bed at nine o'clock, I have a Google alert that comes out on embezzlements and I read the stories of someone who's been arrested for embezzlement or pled guilty to embezzlement. And I can't tell you how many victims have said, I trusted them so much, so, so much. And it's like they were part of my family. You know, I let them into my home. The money is replaceable. That's another hashtag money is replaceable trust. So much harder to regain. So when I go in and there's a victim, I become like the fraud therapist because they feel shame. They say, how did I miss it? It's worse than the worst divorce when they steal money too. So these are likable people. You keep them around because you like them and they do good work. They're doing really good work because they're getting more than one paycheck. So, but I mean, I had one doctor who had a young woman who stole a half a million, almost a half million dollars from him. He's the only one I've talked to who said I really liked her. And I'm like, well, if you never really liked her, why'd you hire? He was busy. And he's like, she seemed competent and actually she only stole $450 he thought she left the business. He got his visa card statement and he saw that she had shopped at like staples and somewhere else. And you thought she stole $450 so we called the local Sheriff's office, they wrote a report and then he started digging and we started digging and it was almost a half a million dollars. So he's the only one who said I never really liked her, but he said I never really liked her, so I didn't let her sign checks. That isn't the only way you can steal. There are plenty of ways that you can steal. So, but generally, you know, these employers are devastated when their trusted employee has stolen from them. It's a huge breach of trust.
That is so fascinating. Now I have to ask, what does the hashtag, it's not rocket science mean. There must be an interesting story behind that too.
So I used the hashtag. It's not rocket science and the reason I use it is I'm not a CPA. I'm not smart enough to pass that test. Um, but the way that this theft embezzlement happens is very basic. Primarily it is, the money is here in the business and it goes here to the suspect's bank account. It doesn't go to Panama, it doesn't go to Lichtenstein. It's very basic. It's paper intensive. You know, there's notebooks. We have lots and lots of notebooks. It's very paper intensive. They steal checks, they steal cash, but they're not doing cyber stuff. It's just, um, it will change with the change of technology and how we bank. But really we're not zipping all over the universe with money. It's just from the business to the suspect. And that's why I say it's not rocket science because I'm not a CPA and most cops don't become cops to play with pivot tables. I mean, I love pivot tables and a pivot table will say a lot, but you're just having to trace the money and the money doesn't go very far, so that's why
IMA's annual conference and expo for 2020 is in Atlanta, Georgia from June 21st through June 24th for more information, please visit www.imaconference.org
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