A 38-year-old paralegal pleaded guilty to conspiring to embezzle funds from the trust account of a Richmond law firm where she was previously employed.
According to court documents, from September 2015 to December 2017, the 38-year-old was a paralegal at a firm in Richmond, Virginia that specialized in real estate law. That firm held loan proceeds in an escrow account for a private lender to the paralegal’s co-defendant, who was involved with the purchase, rehabilitation, and sale of homes around the Richmond area. The funds could only be used with the lender’s express approval.
The former paralegal disbursed a total of more than $1.2 million of the lender’s funds held in escrow for the co-defendant without receiving the lender’s approval or by misleading the lender about how the funds were to be used. The co-defendant allegedly used the lender’s money for purposes outside the scope of the agreements with the lender.
The former paralegal is scheduled to be sentenced on August 18th and is facing a maximum penalty of 20 years in prison.
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Prevent This From Happening To You!
It is impossible to eliminate the potential for fraud, but you can manage reducing the exposure. Therefore it is important, not only for law firms but for all companies, to manage their internal controls to help reduce the risk of fraud. Having a good system of internal controls not only protects employers and clients but it also helps protect the employees. Below are a few examples of internal controls to help reduce your company’s risk of fraud:
- Screen employees. When you hire anyone perform credit and criminal background checks and verify resume items related to past employment, education, military service and professional certification.
- Separate duties. No single employee should be in charge of purchasing and approving vendors or receive payments and deposit them.
- Reconcile regularly. Periodically reconcile overlapping financial records.
- Conduct surprise audits. Audits don’t have to be top to bottom reviews of your firm’s finances – they can focus more narrowly on areas of concern such as accounts payable. To discourage fraud, let employees know that unannounced audits are possible at any time, but don’t let them know what data or records the auditors will review.
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