255 lines
12 KiB
Plaintext
255 lines
12 KiB
Plaintext
April 1991
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BANK EMPLOYEE EMBEZZLEMENT
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By
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Denise M. Dube
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Supervisory Investigator
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Los Angeles County, California,
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District Attorney's Office
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In August 1988, representatives of a large regional bank
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contacted the Los Angeles County District Attorney to request
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assistance in prosecuting employee embezzlement cases.
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Apparently, employee embezzlement resulted in million-dollar
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losses each year, and the bank experienced only minor success in
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investigating and prosecuting these cases. After reviewing the
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bank's request, the district attorney realized the magnitude of
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the problem warranted immediate attention. In September 1988,
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he directed the Major Fraud Section of the Los Angeles County
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District Attorney's Office to develop and implement a program
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that would facilitate processing bank employee embezzlement
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cases.
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This article focuses on the extent of bank employee
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embezzlement, how a program to curtail this crime was developed,
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its implementation, and the problems encountered. It then
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details the benefits that were realized once the program was put
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into effect.
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THE PROBLEM
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The bank estimated that it experienced approximately 30
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employee embezzlement cases a month, with a resultant loss of
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$2.5 million a year. No figure was projected for losses
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incurred due to undetected cases.
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Of the embezzlement cases uncovered in 1989 by the bank's
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investigative auditors, a statistical summary of the
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perpetrators shows that:
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* 62% were female employees; 38% were male employees
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* 66% had a high school education; 31% had some college;
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3% other education
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* 41% were between the ages of 20 and 25
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* 25% were between the ages of 26 and 35
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* 82% were working as tellers
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* 47% took cash
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* 71% had less than 1 year of service with the bank
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The last statistic was by far the most important and the
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primary reason the bank pressed for a pilot program to
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investigate and prosecute employee embezzlements. The program
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not only would serve as a deterrent to current employees but
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also would prevent offenders from finding employment in another
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bank before the embezzlement was discovered.
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It is the transient nature of bank employees that compounds
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the embezzlement problem faced by banking establishments. Due
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to a proliferation of civil suits, banks usually do not warn
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other financial institutions of any problems encountered with an
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employee unless criminal charges have been filed. Therefore, it
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is important to uncover the crime and charge the person
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responsible before the embezzler moves on to work at another
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bank.
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DEVELOPING THE PROGRAM
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The 200 investigators in the Los Angeles District
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Attorney's Office have full-time peace officer status under
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section 830.1 of the California Penal Code and are assigned to
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the Bureau of Investigation within the district attorney's
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office. (1) The duties of these investigators range from
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providing trial support to handling original jurisdiction cases,
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such as major fraud, consumer fraud, and environmental cases.
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To begin, investigators met with bank representatives to
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evaluate the extent of employee embezzlement and to learn how
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county and city law enforcement agencies handled such crimes.
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They also wanted to determine what action the district
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attorney's office could take to improve the current situation.
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From these meetings, investigators learned that the bank's
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main complaint was local law enforcement's inconsistency in
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handling embezzlement cases. Oftentimes, charges were not filed
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for many months after the initial complaint or an agency failed
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to keep the bank informed of the status of each case. The bank
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also found that in some instances, the law enforcement agency
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failed to file cases before the statute of limitations expired.
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The investigators soon learned the reasons why banks
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encountered problems in getting their cases processed through
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the criminal justice system. In some instances, it became clear
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that officers in local agencies were too unfamiliar with the
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workings of embezzlement cases to complete a thorough
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investigation and the necessary followup for a successful
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prosecution. More often, an agency simply lacked the personnel
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needed to work the growing number of cases. Also, a prevailing
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belief among officers was that embezzlement incidents were just
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"paper cases," and they placed these cases at the bottom of the
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priority scale. In fact, a U.S. Department of Justice report on
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the investigation of white-collar crime supported these
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findings. (2)
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IMPLEMENTING THE PROGRAM
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After meeting with bank representatives and identifying the
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problems that banks encountered with the criminal justice
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system, the district attorney's office then evaluated its
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resources to determine how it could effectively develop a
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program dedicated to employee embezzlement cases. For example,
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the Major Fraud Unit set specific criteria for the types of
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cases it works. Cases are accepted for investigation if they
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involve multiple victims and/or suspects, are
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multijurisdictional and complex in nature, and involve a
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considerable dollar loss. The types of cases for which the bank
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was requesting assistance could result in losses ranging from
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$2,000 to $100,000. Cases involving losses exceeding $100,000
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would be referred by the bank to the FBI for investigation.
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It was impractical to think of dividing 30 cases a month
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among the Major Fraud Unit's 8 investigators. This would have a
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detrimental effect on the cases already under investigation.
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Therefore, another approach had to be taken.
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Since one of the main complaints of the bank in dealing
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with local law enforcement agencies was inconsistency, the
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district attorney's office decided to relieve one investigator
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of his caseload and make him the liaison investigator for the
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pilot program. This liaison investigator would serve as the
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contact person in the district attorney's office for the bank.
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In turn, the bank designated its own contact person to work with
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the liaison investigator.
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The next step was to determine how the district attorney's
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office could best use the bank's resources to process these
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cases expeditiously. Obviously, for the district attorney's
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office to handle the number of cases projected, it became
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imperative that the bank prepare its cases as thoroughly as
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possible before submitting them to the liaison investigator.
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To address this issue, the district attorney's office offered to
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instruct the bank's investigative auditors on how to prepare
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cases involving employee embezzlement.
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The liaison investigator and a designated deputy district
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attorney began by conducting a class for the bank's
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investigative auditors on how to write reports of witness and
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suspect interviews and prosecutive summary reports. Then, each
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investigative auditor received a folder that contained samples
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of each type of report required in embezzlement cases.
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The deputy district attorney explained section 3361 of the
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California Financial Code, misapplication of bank assets, under
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which most of the cases would be filed. (3) Discussion also
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centered around the exhibits needed to file a case successfully,
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such as checks and bank documents.
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Both instructors of the class stressed that cooperation
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between the bank and the district attorney's office was crucial
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for this pilot program to work. The liaison investigator
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encouraged the auditors to call him anytime if they had
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questions or needed assistance in completing a case package
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before filing with the district attorney's office.
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The instructors also took time to explain the filing
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process fully. The investigative auditors needed to understand
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why the district attorney's office was requesting they do such
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thorough work before taking action on an employee embezzlement
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case. The bottom line was if this pilot program was to work,
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the bank's investigative auditors had to be responsible for
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completing as much of the paper work as possible prior to
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submitting it to the liaison investigator.
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REVIEWING CASES
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Upon receiving the bank's report, the liaison investigator
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reviewed the package to ensure it was completed properly. The
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investigator returned to the investigative auditor incomplete
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reports, those that lacked documentation, or if the elements of
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the crime were not established. The liaison investigator would
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return the incomplete package to the bank with a letter
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explaining why it was not being accepted for processing at this
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time.
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If the bank's package was complete, the liaison
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investigator forwarded the report to a preselected deputy
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district attorney for filing. From this point on, any
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additional investigative work would be the responsibility of the
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liaison investigator, to include tracking all filed cases
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through the court system and maintaining of the monthly case
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status file.
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SUCCESS OF THE PROGRAM
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From September 1988 through July 31, 1990, 51 bank employee
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embezzlement cases have been filed through the use of this
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program. Of these cases, 10 suspects have outstanding arrest
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warrants, 24 suspects have been convicted and sentenced, and 17
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cases are pending in court. From these statistics, it is
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obvious that a substantial improvement has been realized in
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prosecuting bank embezzler cases.
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This pilot program resulted in a faster turnaround time for
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cases reported which, in turn, led to charges being filed more
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expeditiously. Better followup and a uniformity in the handling
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of the cases were also realized. Now, the liaison investigator
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could check on the status of a case more readily because of the
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tracking system and statistical file that were implemented and
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maintained.
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Another significant benefit is the realization by the
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district attorney's office that cooperation between the public
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and private sectors is crucial to combat this crime effectively.
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The law enforcement community must recognize the need to work
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in conjunction with the private sector to prosecute bank
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embezzlement cases. On the other side, banks, title companies,
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and other financial establishments must assist the law
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enforcement community in investigating these complex cases.
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For example, the bank involved in this pilot program offers
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classes in computer technology, bank terminology and procedures,
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and trends in bank fraud cases to Federal, State and local
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agencies in Southern California. This keeps the law enforcement
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agencies up to date on valuable information that leads to
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successful investigations, apprehensions, and convictions.
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CONCLUSION
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The development of a successful program to process bank
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employee embezzlement cases illustrates that law enforcement and
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private business establishments can work together toward a
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common goal. Only through these and other types of joint
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ventures will the public and private sectors be able to control
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and prosecute the growing number of fraud cases effectively.
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FOOTNOTES
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(1) California Penal Code, Section 830.1, p. 247.
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(2) U.S. Department of Justice, The Investigation of
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White-Collar Crime (Washington, D.C.: U.S. Department of
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Justice, Law Enforcement Assistance Administration, Enforcement
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Program Division, Office of Regional Operations, 1977), p.2.
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(3) California Financial Code, Section 3361, p. 457.
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