THEFT/

EMBEZZLEMENT

Professional Ethics

STUDENT’S NAME
Saleh Ehsan BSEF17A045
M. Bilal BSEFF17A046
Shahzad Ali BSEF17A035
Abdul Haseeb BSEF17A019
 DEFINITION

Embezzlement is the act of withholding assets for the purpose of

conversion (theft) of such assets, by one or more persons to whom
the assets were entrusted, either to be held or to be used for specific
purposes. Embezzlement is a type of financial fraud.
For example, a lawyer might embezzle funds from the trust
accounts of their clients; a financial advisor might embezzle the
funds of investors; and a husband or a wife might embezzle funds
from a bank account jointly held with the spouse.

Embezzlement usually is a
premeditated crime, performed
methodically, with precautions that
conceal the criminal conversion of the
property, which occurs without the
knowledge or consent of the affected
person.

Embezzlements may continue for

many years without detection. The
victims often realize that the funds,
savings, assets, or other resources, are
missing and that they have been
duped by the embezzler, only when a
relatively large proportion of the
funds are needed at one time; or the
funds are called upon for another use.

Also, when a major institutional

reorganization (the closing or moving
of a plant or business office, or a
merger/acquisition of a firm) requires
the complete and independent
accounting of all real and liquid
assets, prior to or concurrent with the
reorganization.
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 Some employees are known for

Theft / diverting company funds into

their bank accounts—padding
project quotations, invoices, etc. to

Embezzlem
deceive the company on how much
was spent on particular projects.

This act is detrimental to the

ent in company because employees who

steal sometimes replace quality
products with counterfeits which are

business
cheaper but causes damage in the
future.

and
Often it involves the trusted
individual embezzling only a small
proportion of the total of the funds or
resources they receive or control, in

Companies an attempt to minimize the risk of the

detection of the misallocation of the
funds or resources.

MOST COMMON TYPES OF EMBEZZLEMENT

When most people think of common types of embezzlement, they think of
CEO’s and pyramid schemes. That’s because these are the types of cases that
make the nightly news. However, in the real world, most embezzlement
schemes are on a much smaller scale. And, they’re committed by all types of
employees – from CEOs to cashiers and waiters.
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 There are all different kinds of embezzlement. Most do involve people who
work in larger companies or banks. However, embezzlement can happen in
just about any type of business. It doesn’t matter whether they deal in cash
or not. People who are determined to steal will find a way to do it no matter
what.
CASH SKIMMING
The most common form of embezzlement is cash skimming. This is the kind of thing that
cashiers and bartenders do. Instead of putting cash in the register, they put it in their
pockets. A good example of this is a bartender who doesn’t ring up a sale and, instead, puts
the cash in their pockets. As long as they don’t ring the drink, they figure the manager will
never know the drink was sold.

WIRE-TRANSFER EMBEZZLEMENT
People who commit wire transfer embezzlement are a bit more sophisticated than those
who engage in cash skimming. People who do this type of embezzlement find a way to
intercept, manipulate and alter accounts so that they can send partial amounts or full
amounts of wire transfers to their personal account. For example, if a client is paying their
bill via bank wire, the defendant gives them their own personal bank account information
instead of their company’s information.

EMBEZZLEMENT INVOLVING NEGOTIABLES

One of the hardest forms of embezzlement to pull off is that kind that involves negotiables.
This is when an employee steals, alters, forges or manipulates a negotiated instrument in
order to divert the money to their own account. Some of the ways they do this involve the
following:

 Refund authorizations
 Credit and debit memos
 Computerized checks
 Customer money orders
By changing the information on the instrument, the defendant is able to somehow divert
the money into their own accounts.

COMPUTER-BASED EMBEZZLEMENT
People who are very good with computers and programming usually attempt to embezzle
using computers. Since so many transactions are done electronically, it’s a lot easier to
intercept these transactions using computer functions. There are a few common examples
of how this happens, including:

 Electronically take a portion of your company’s sales and transfer them to your
personal account
 Use computer code and programming to automatically transfer money to your own
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 account
 Create a trojan horse that can issue unauthorized transactions without detection

CREDIT CARD EMBEZZLEMENT

Regardless of what type of industry you work in, you probably use credit cards.
Whether this is to run sales or credits, it doesn’t matter. Once an employee has
a client, customer’s or employer’s credit card information, they can commit
credit card fraud. For example, a cashier can take a customer’s credit card
information and buy items online. They can then return those items for store
credit or sell them to people for cash.

CASE STUDY
A Thief Within
When Lloyd and Jim Graff discovered an embezzler in their company, they
had to decide how emotional -- and how practical -- their response would be.

By  John Grossmann

Case Study
If Patty Preston hadn't taken a vacation in March 2000, it might have taken
her bosses some time to realize that she'd been stealing from them.
Preston was a bookkeeper at Graff-Pinkert Inc., a family-run business in
Oak Forest, Ill. Owned by brothers Lloyd and Jim Graff, the company buys
and sells machines that make metal components. It was Jim, the company's
vice president and treasurer, who discovered that something was amiss.
Preston (not her real name) had neglected to deposit Jim's last few salary
checks in his personal bank account. When he complained about the
apparent oversight, a co-worker voiced a more troubling allegation: She
believed Preston -- an 11-year employee and mother of three -- had recently
charged several Rugrats videotapes to the Graff-Pinkert account at Office
Depot. "And a backyard storage shed at Home Depot," chimed in someone
else.
Graff investigated these claims, and finding them to be true, called his
brother Lloyd, Graff-Pinkert's president, who was himself on vacation. The
crime was clear -- Preston had used company money for personal items. "I
fired her for being a petty crook," says Lloyd Graff, who did so by leaving a
message on Preston's home answering machine before either she or he
returned from vacation.
In the months to come, however, it became clear that Preston's crime was
anything but petty. She had funded riverboat gambling and an extravagant
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 lifestyle out of the Graff-Pinkert account for at least four years. The bad
paper ran to dozens of checks and exceeded $200,000, a big hit for a
company doing between $8 million and $10 million in sales.

Embezzlement is sadly commonplace, and arrests for the crime are rising.
The FBI estimates there were 20,157 embezzlement arrests nationwide in
2001 (the latest year for which there are statistics), up from 15,700 in 1996.
The most notorious claim last year involved a secretary in the London office
of Goldman Sachs who allegedly stole $7 million, wiring the money to
Cyprus. At presstime, she had pleaded not guilty.

A CASE OF THEFT: Lloyd Graff, president, fired an employee on her home

answering machine when he learned she was stealing.

Graff-Pinkert took Preston's theft particularly hard. The company, started in

1941 by the Graffs' father, often does business on a handshake. The same
spirit of trust extended to the company's employees, who numbered 18 at the
time. The Graffs were known to provide workers with interest-free loans to
make deposits on homes or in times of family crises. "Jim and I walked
around punch-drunk as the enormity of the crime mounted up. It was a real
blow to our confidence. We felt dumb," says Lloyd. "And the people who
worked with her were horrified, even angrier than Jim and I. This was a co-
worker they trusted, someone they went out to dinner with and to the
gambling boats. They felt violated."
As the brothers pored over their books, the banal mechanics of Preston's
fraud became evident. She'd write a check, say to United Parcel Service, and
have a Graff brother sign it. Then she'd head back to her IBM typewriter
and, using an erasable tape, Preston would alter the check, making it
payable to her credit card company. Since she filed bank statements, no one
saw the discrepancies. Forgery after forgery, the embezzlement grew,
unnoticed by the Graffs in a busy time of growing sales. Their accountants, a
small firm brought on decades before by their father, also missed the theft
during annual audits.

The tendency for many business owners is not to prosecute," says Graff; his
losses topped $200,000.

The company wanted Preston brought to justice and, lacking fidelity

insurance protecting them against employee theft, the Graffs wanted their
money back, somehow. But how to go about it? Local police seemed ill-
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 prepared to handle white-collar crime, so the Graffs thought about suing
Preston. And because many of the forged checks, they discovered, were
sloppily altered, they contemplated naming their bank and accountants in
civil suits citing negligence. But mounting a strong case could take years.

Then, both their bank and their lawyer suggested the Graffs try the FBI.
Since Preston had mailed fraudulent checks across state lines, hers was a
federal crime. The bureau was willing to pursue the case, but only if the
Graffs agreed to go the distance. "The tendency for many business owners is
not to prosecute," Lloyd explains. "They don't want their dirty laundry in
public and don't want to look stupid for allowing someone to so easily take
advantage of them."
The Decision
Working with the FBI and pursuing the case in federal court, where they
were told convicted offenders face strict sentencing guidelines, the Graffs
were able to recoup a big chunk of the embezzled money. Under the terms of
her plea bargain, Preston relinquished $90,000 (all company provided)
from her profit-sharing plan. Though her premature "withdrawal" directed
$18,000 of that to the government, the $72,000 Graff-Pinkert received
helped soften its losses. So did tax refunds the company received after
amending past earnings.

The ruling of theft in Islam

Theft is Haraam (forbidden) according to the Quran, Sunnah [sayings of
Prophet Muhammad sallallaahu `alayhi wa sallam ( may Allah exalt his
mention ) (may Allah exalt his mention)] and Ijmaa’ (scholarly consensus).
Allah, the Most Exalted, has condemned this action and decreed an
appropriate punishment for it. The Hadd [i.e. the legal punishment
prescribed by the Sharee'ah (Islamic law)] for a thief is to cut off the thief's
hand. Allah Almighty Says in the Noble Quran (what means):

“[As for] the thief, the male and the female, amputate their hands in
recompense for what they earned [i.e. committed] as a deterrent
[punishment] from Allah. And Allah is Exalted in Might and Wise.”
[Quran 5:38]

The Prophet sallallaahu `alayhi wa sallam ( may Allah exalt his mention )
said:
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 “The hand (of the thief) should be cut off for (the theft of) a quarter of a Dinar
or more.” [Al-Bukhari]

The Prophet sallallaahu `alayhi wa sallam ( may Allah exalt his mention )
cursed the thief because he is a corrupt element in society, and if he is left
unpunished, his corruption will spread and infect the body of the Ummah
(Muslim community). He sallallaahu `alayhi wa sallam ( may Allah exalt
his mention ) said:

“May Allah curse the thief who steals an egg and has his hand cut off, or
steals a rope and has his hand cut off.” [Al-Bukhari]

What indicates that this ruling is definitive is the fact that a Makhzoomi
noblewoman (from the tribe of Makhzoom) stole at the time of the Prophet
sallallaahu `alayhi wa sallam ( may Allah exalt his mention ) and
Usaamah Ibn Zayd, may Allah be pleased with him, wanted to intercede for
her. The Prophet sallallaahu `alayhi wa sallam ( may Allah exalt his
mention ) became angry and said:

“Do you intercede concerning one of the Hadd set by Allah? Those who came
before you were destroyed because if a rich man among them stole, they
would let him off, but if a lowly person stole, they would carry out the
punishment on him. By Allah, if Faatimah Bint (daughter of) Muhammad
were to steal, I would cut off her hand.” [Al-Bukhari]

This is the ruling of Allah concerning theft; that the hand should be cut off
from the wrist joint.

Al-Nawawi may Allah have mercy upon him said in his commentary on
Saheeh Muslim (Hadeeth collection): Al-Shaafa'i, Abu Haneefah, Maalik and
the majority (of scholars) may Allah have mercy upon them said: "The
hand should be cut off from the wrist, where the hand meets the forearm."
Al-Qurtubi may Allah have mercy upon him said: "All the scholars said:
The hand should be cut off from the wrist, not as some of the innovators do
when they cut off the fingers and leave the thumb."

Because cutting off the hand is a serious matter, it should not be done for just
any case of theft. A combination of conditions must be fulfilled before the
hand of a thief is cut off. These conditions are as follows:

1- The thing should have been taken by stealth; if it was not taken by stealth,
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 then the hand should not be cut off, such as when property has been seized by
force in front of other people, because in this case the owner of the property
could have asked for help to stop the thief.

2- The stolen property should be something of worth, because that which is of

no worth has no sanctity, such as musical instruments, wine and pigs.

2- The value of the stolen property should be above a certain limit, which is
three Islamic Dirhams or a quarter of an Islamic Dinar, or their equivalent
in other currencies.

3- The stolen property should have been taken from a place where it had
been put away, i.e., a place where people usually put their property, such as
a cupboard, for example.

4- The theft itself has to be proven, either by the testimony of two qualified
witnesses or by the confession of the thief twice.

5- The person from whom the property was stolen has to ask for it back; if he
does not, then (the thief’s) hand does not have to be cut off.

If these conditions are fulfilled, then the hand must be cut off. If this ruling
was applied in the societies which are content with man-made laws and
which have cast aside the Sharee’ah of Allah and replaced it with human
laws, this would be the most beneficial treatment for this phenomenon. But
the matter is as Allah Says (what means):

“Then is it the judgement of [the time of] ignorance they desire? But who is
better than Allah in judgement for a people who are certain [in faith],”
[Quran 5:50]

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 Fin.

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