Closing the Books – Really?

In the July 1 column of “The Ethicist” in The New York Times, I came across this concern posed by an unnamed CFO of a financial services company:

“… I found our bookkeeper using the corporate charge card for her personal use. The misappropriation was approximately $47,000 over a six-month period. She forged a partner’s signature to acquire a card in her name. We fired her, and she paid back the funds in exchange for our not pressing charges. But I cannot get closure if she is not punished for this egregious betrayal. I recommended that we call her husband, as I think family humiliation would be punishment enough. Would this be ethical?”

What I find interesting here is that the question posed by the CFO was not about whether or not the agreement was ethical, but whether or not revenge was ethical. And it seems like the columnist was on the same page. In response to this query, the columnist first reminded the CFO that the financial services company had agreed to sweep the issue under the rug as long as the perpetrator repaid the money, and the CFO’s revenge-seeking was not only against the ‘agreement’ but also inappropriate. Then the columnist writes, “I have to wonder, meanwhile, about a financial-services company that allows someone to steal and then to just stroll off to the next company to do it again.”

Now, this point raises some serious questions. Did the financial institution report this theft by an employee as required under the Bank Secrecy Act? Did they complete a Suspicious Activity Report (SAR)? Did they consider reporting this employee to an industry database so she is not free to go on her merry way stealing from another financial institution? There seem to be ethical issues galore associated with the question submitted to this column.

The fact is, it is not up to a financial services firm’s discretion whether or not to file a SAR when an employee steals from the institution. That can’t be used as a negotiating tool to convince the employee to repay the stolen funds. Not only can the filing of a SAR not be used as a negotiating tool, but disclosure of a SAR to the suspect of the SAR is a violation of Federal Law and is punishable by a fine and/or jail time. Firms are required by Federal Law to report any theft by an employee, regardless of how small the amount. Another legal issue may arise if some employees who commit fraud have SAR’s filed against them and others do not, which can turn into civil litigation for discrimination. All employees who commit fraud need to be treated the same. SAR’s must be filed on each and every one of them. Surely a CFO at any financial services firm knows this…right?

Once an employee crosses the line and begins to steal from his employer or its customers, it is highly unlikely for him to stop. Just like a bank robber, he would tend to continue until he was caught. So, I ask, where are the ethics in not reporting those employees who steal to ensure that they don’t move from bank to bank, stealing at every one of them?

As stated previously, this article raises many ethical and legal issues, the least of which is the writer’s desire for petty revenge.

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