Reference no: EM131776645

Case Study: Bank Teller Gets Nabbed for Theft

Laura Grove[1] had worked at Rocky Mountain Bank in Nashville, Tennessee, for five years. As a teller, she thought to herself, she wasn't getting any richer. She and her husband owed about $14,000 in credit card bills, which seemed to get higher and higher each month, especially after they had adopted a five-year-old girl the year before.

When she transferred to a branch bank in Cheetboro, Tennessee, the bank promoted her to head teller. In this new position, Laura had authority to open the night depository vault with another teller. For security reasons, the bank allowed each teller to possess only half the combination to the vault.

Every morning, Laura saw the bank night deposit vault door open and close after the removal of all customer night deposit bags. The bank placed only one camera on the night vault, which was turned on at 8:00 a.m. when the bank opened for business. Laura thought it would be easy to get into the night depository and take the bags. These thoughts were reinforced when a customer reported his bag missing and the bank quickly paid his money without a thorough investigation. So one Friday morning, Laura made up her mind that she could take about $15,000 with little risk of being identified. But before she actually took the money, she made sure to learn the combination to the vault. When she opened the night vault with her coworker Frank Geffen, she saw him dial the first half of the combination and was careful to memorize the numbers. After she entered the second half of the combination, they opened the vault as usual, removed and listed each night deposit bag, and shut the vault behind them. This time, however, Laura did not lock the vault.

It was here that Laura made her first mistake. She thought she could leave the vault door open and return Monday to take the money. But just before the bank closed and employees prepared to leave, teller Melissa Derkstein checked the vault one more time. Seeing that the vault was open, she spun the dial, shaking the handle to ensure the door was locked.

Laura and the other bank employees punched their security codes on the outside door and left for the day. During the weekend, Laura considered her plot. Should she enter the combination by herself this time and place the money into a personal tote bag? Should she stay at work all day with the goods beneath her feet?

Monday morning, she still was not sure how to pull it off but had resolved to go through with the plan anyway. Arriving at 7:15 a.m., Laura was the first person in the bank that morning. After punching in her security code, she placed her tote bag and personal belongings on her chair. Immediately, she went to the night vault and dialed the full combination. Nothing happened. Her mind raced. "Maybe this won't work; this is too risky." Her fingers tried the combination again, and once again, until she heard a click and the vault opened.

Inside, Laura removed the two customer deposit bags, ones that she knew contained large sums of cash. She placed both bags in her tote bag and walked back to her teller window. She stuffed her Weight Watchers book and purse inside the tote bag, on top of the deposit bags. She then hung her bag on the door of the storage room and returned to the teller window, straightening up her work area.

Fifteen minutes later, the branch manager, Harvey Lebrand, entered, looking surprised that Laura was already at her desk. He asked Laura why she had come into work so early this Monday.

"Oh, I just needed to get organized early, because I need to take my Bronco into the shop later today and knew I wouldn't have much time," Laura said.

"You need to get your truck repaired?" Mr. Lebrand asked. "Why don't you go now?"

"Okay, I can get my mother to give me a ride back," Laura said. "See you soon, Mr. Lebrand."

Laura rushed to the storage area, grabbed the tote bag, and left the bank. She drove directly to her home and emptied the contents of the bag, watching the many bills and checks spill onto her bed. She lit up with uneasy excitement. Sorting the checks into a separate pile, she then gathered the money into a large heap and did a quick count. She estimated she had taken about $15,000. After placing the bills into manila envelopes, she hid them in the headboard storage compartment of the bed. She placed the checks in a small plastic bag. She then phoned her mother and asked her to meet her at the Sears Auto Center.

Laura knew there was an apartment complex next to Sears that had a large blue Dumpster. After she had deposited the checks in the Dumpster, Laura drove to Sears. Her mother arrived a little later to take her back to work.

A day later, Rocky Mountain Bank audit investigator Stacy Boone received a call from Laura's manager, informing her that two customers had not gotten credit for the deposits they'd made the night before. Each deposit was for $8,000.

Boone's investigation quickly led her to suspect Grove. The first one in the bank that morning, Grove also came in before the surveillance cameras turned on. As head teller, she had one-half of the combination to the night depository. Other employees said they "didn't trust her." But when the investigators questioned her, Grove strongly denied any knowledge of the theft.

"During our interview with her, she broke out in a red rash" (which suggested stress). "I have seen innocent people break out into a red rash, but she was the only one we interviewed that day who did," Boone said.

Boone also suspected Grove because the branch bank from which she'd transferred "had a lot of unexplained shortages, and she was a suspect there, but we could never pin down that she took the money. She had bought a lot of new jewelry, wore a lot of expensive clothes, but had filed bankruptcy at one point that year."

The investigation came to a swift conclusion, however, when Boone received a call on her answering machine from Grove's husband, a former neighbor. "I was afraid he wanted to know why we were investigating his wife and hesitated to call him right back," Boone said.

Boone decided she "might as well get this over with and tell him I could not talk about it [the investigation]. When I called him, he told me he found the bank's money in his attic and suspected his wife. His wife had told him of the bank's investigation but had not admitted any theft.

"Their daughter had overheard a conversation they had the day of the theft" in which Laura had expressed anxiety to her husband about the bank's investigation, Boone said. "His daughter had told him that she saw [Laura] put something in the attic. So, when she wasn't there, the husband went up in the attic and looked, and found two bags of money."

Boone said the husband was also suspicious because his wife had lied to him before. "He told me that his mother-in-law, her mother, always won all these prizes. She had even won a car through a contest. One night he came home and found a new big-screen LCD HDTV in the living room and asked his wife where it came from. She said 'Oh, Mom won that.' At the time, he really didn't think anything about it. But a couple days later, Kirby's Electronics, where the TV came from, called in regard to her credit application. They told him that she charged that TV."

Faced with this evidence, Laura and her husband delivered the $16,000 in cash as restitution. The bank dismissed Grove, and she was prosecuted for the crime but received probation in lieu of prison time.

A year later, Boone received a call from one of the bank's tellers who had seen Grove working at another bank in a small city outside of Nashville. Boone called one of the personnel employees there and talked with her. "They were a bank that did not do fingerprint checks, so they had no knowledge that she had been convicted. She did get into another bank to work, but not for very long."

1) Lets revisit the Laura Grove case from week 2. Do some research on COSO's Internal Control-Integrated Framework. Focusing on "Effectiveness and Efficiency of operations," discuss how a bank manager could design a system of internal controls to mitigate risk of theft at his/her branch.

2) How do internal controls impact the "perception of detection"?

3) What is the most essential ­element of an adequate employee fraud reporting program? Why?

4) What basic procedures should an organization follow in order to fulfill its due ­diligence