The beautiful island city of Honolulu, Hawaii is home to sand, surf, shopping and scenic views. The nearly 1,000,000 people living in or near Honolulu also have many professional service firms to choose from – one of them being PKF Pacific Hawaii (PKF Pacific), a member firm of PKF International. Patrick Oki, the managing partner of the firm has recently been arrested under charges of embezzlement of firm funds. 13 felony counts surrounding the alleged theft have been made against Mr. Oki.
The embezzlement investigation centers on Mr. Oki reimbursing himself for business expenses he claimed were paid for by him personally. Mr. Oki also is being claimed to have created false records to give legitimacy to these charges. Fake people, entities, contracts and even falsified IRS forms may have been created. Mr. Oki also forged various signatures to allow the expenses to pass inspection by his co-partners at the firm. $500,000 is being claimed as lost by the firm, who said in a statement that they are making plans to move ahead with the future of the firm.
Theft by employees at a company is nothing new. White collar crime makes headlines every year and accounting firms need to know how to address the risks. This type of risk at an accounting firm can be specifically be covered by a crime insurance policy, otherwise known as fidelity insurance. Fidelity insurance covers theft by employee of company funds. It can also cover loss of client funds, or theft by robbers while money is in transit to the bank.
Owners and partners of firms are typically excluded from being covered by this type of insurance, however. The reason for this is simple – an owner of a company can’t steal their own money. So in this particular matter, PKF Pacific may not have coverage for the potential half a million dollar theft. This speaks of the need for good prevention and detection of embezzlement to be highlighted at a firm – not just insurance to handle incidents after they happen.
We find that a number of simple risk management protocols can help firms avoid this type of loss:
- Countersignatures – A firm should require two signatures on all checks above a certain amount.
- Reconciliation of Funds – Firms who have the same person reconcile the bank statements and withdraw/deposit funds are in a precarious situation.
- Oversight – Periodic financial audits or inspections can help uncover fraud. Having an independent party review the firm’s books for suspicious accounts and transactions can also be helpful.
- Personnel Lifestyle – If an employee suddenly begins living above their means with no apparent explanation, it may be because they are defrauding the company.
- Personnel Never Accept Promotions – A talented person who turns down promotions and instead requests to stay in the same position in the finance department may be using their influence to set up an embezzlement scheme.
Protecting your accounting firm from client lawsuits and employee fraud can be daunting. Contact us to learn more about our services and how Calculated Risk Advisors can help protect your firm through insurance and risk management solutions.