Wednesday, June 3, 2009

Avoid fraud; don't hire a criminal. By Al Lewis, Denver Post columnist

Dear Friends,

Each month I try to talk about an issue that pertains to the Multi-Housing Industry. As I read different articles and publications I thought the following article was really important to any type of company that has employees. As many of you know Rental Services has expanded its services to include pre-employment screening. I think the following article demonstrates the importance of pre-screening employees.

Avoid fraud; don't hire a criminal By Al Lewis Denver Post columnist

Wherever there is a big pot of money, somebody is trying to steal from it.
The folks at Alliance Commercial Partners know this now.

The Lakewood-based commercial real estate firm has money flying everywhere. Since its 1996 founding, the firm has acquired or developed 72 properties across the nation valued around $775 million. Earlier this month, Alliance sold Writer Square in downtown Denver for $30.3 million. In managing all that real estate, the firm is constantly wiring funds to leasing agents, appraisers, attorneys, banks and vendors.

Enter Patricia Jagielski Ragusa, 43, who was Alliance's first employee in April 1997. Alliance made Ragusa its director of portfolio accounting and authorized her to transfer money over the Internet so bills would get paid. Alliance even gave Ragusa, a single mother of two, flexible hours and permission to work from her Littleton home.

Ragusa might have seemed innocuous at 4 feet 11 inches - a slight, white, middle-class accountant with brown eyes and shoulder-length hair.

But here's what Alliance executives didn't know: "Ragusa is a multi-state offender with a criminal history," according to a Lakewood police report. Her rap sheet includes felony theft, unlawfully carrying a weapon, and heroin possession, according to a police report. If Alliance or its employment agency ever ran a criminal background check on Ragusa, they should have found this out.

Last month, Alliance's chief financial officer, Douglas McCormick, noticed that credits to a certain account came up $76,000 short. He soon discovered that money had been wired to a bank account held in the name of Ragusa's son.

Ragusa offered no explanation at first. Later, she indicated "that someone must have gotten her password and her son's information, and made the transfer," according to an affidavit by Lakewood economic crimes detective Dave Voskamp. Why? Maybe someone just wanted to get her fired, Ragusa claimed.

A deeper look at Ragusa's story revealed 72 transactions that police say were fraudulent. Police allege that, since April 2001, Ragusa illegally wired more than $1 million to accounts held by herself, her day-trader boyfriend in California and her two teenage children. Only Ragusa has been charged. Police arrested her Sept. 16. She is free on bond.

Ragusa and her attorney, Robert Grossman, declined to comment, as did McCormick and Alliance president Richard Stone. It will be a long and embarrassing ordeal for both Ragusa and Alliance - a company that boasts a "management and staff with a combined 80 years experience in the real estate industry."

"She's a bad actor, but the company made it very easy for her," said Daniel Predovich, an independent fraud examiner in Highlands Ranch who agreed to review Ragusa's case for this column. Not only did Alliance fail to uncover Ragusa's past, but it didn't have proper internal controls for handling money, Predovich said.

The company simply was too trusting. "There should have been a segregation of duty so that three or four people were involved in a wire transfer rather than just one," Predovich said.

Predovich said embezzlement cases like this keep him in business as a private fraud investigator.
Often, these cases are not reported to police, to avoid embarrassment. They make companies - particularly those that depend on their ability to attract investors - look foolish. But Predovich says companies typically forgo criminal background checks and aren't keen about those pesky internal controls either.

"Most folks who've hired me to do a fraud investigation never expected that anybody would steal from them," Predovich said.

Trust is the basis of all business transactions. But when you give someone the combination to the safe, it's a good idea to know who they are.

"Employees with need, greed and opportunity can and will steal unless management is alert, and good internal controls are in place," Predovich said.

Al Lewis' column appears Sundays, Tuesdays and Fridays. Reach him at 303-820-1967 or mailto:alewis@denverpost.com

I hope this article shows how even your most trusted employees can present a risk. Quality pre-screening could help mitigate this from happening to you and your company. If you don’t currently pre-screen call us. If you currently are using a company call us for a competitive quote. If you have any questions about Pre-Employment screening please contact me at 303-420-1212.

Sincerely,


Jeff Malone
Regional Marketing Director
Rental Services, Inc.