A New Orleans CPA has been charged with embezzling $1.8 million from a client. Federal prosecutors charged Paul Gardner, age 57, with a single count of wire fraud. A CPA for 30 years, Gardner allegedly began his criminal career in 2010 after being hired by a local oil company to do bookkeeping and payroll work.
Between 2007 and July 2010, Gardner apparently had no problems. By August of 2010, however, prosecutors say Gardner had developed a gambling problem and began embezzling money from the oil company’s account.
The FBI says that Gardner had electronic access to the account so he could process the company’s payroll. Beginning on August 31st of 2010 and until being caught in May of 2014, prosecutors say that Gardner accessed his client’s account numerous times and transferred money into his own personal account. The total transfers were $1,798,000.
Gardner waived indictment last month and is expected to plead guilty later this month. He faces twenty years in prison and will likely be ordered to pay restitution. Because the money was apparently used for gambling, collecting any restitution is in doubt. Any accounting malpractice insurance Gardner may have probably won’t cover his client’s losses as most policies exclude embezzlement and theft.
A lengthy prison sentence might make some of his clients happy but it wont make his one client whole. Accounting malpractice cases such as this one are especially tough for clients but usually preventable.
If you use an accountant or payroll company to handle payroll, make sure they are bonded and check the bond yourself to make sure it is issued by a reputable company. A surety bond may pay for losses whereas accounting malpractice probably won’t.
Instead of giving unfettered electronic access to business bank accounts, have the payroll processor tell you the amount in advance and then transfer the necessary funds to the processor. In the alternative, simply give the bookkeeper access to an account containing limited funds.
Of course, periodically read statements or go on-line and make sure the accounts are being handled properly. Also make sure that taxes are being paid by checking with the IRS and state revenue agencies.
Gardner was able to get away with such a massive theft by taking $20,000 at a time. The fraud took place over 4 years before he was caught. Simple due diligence would likely have caught the problem much earlier.