'TERRIFYING BUT CAUTIONARY TALE'

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Feb. 26, 2001

By Laura Petrecca

The $6 million embezzlement disaster that took down the Berry Brown agency of Dallas is not unusual, according to authorities.

"It's a terrifying but cautionary tale about what can happen in a small business,"


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'TERRIFYING BUT CAUTIONARY TALE'
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said advertising investment banker Abe Jones. "Setting up a dummy company to siphon the money is one of the oldest embezzlement tricks known to man."

According to research by Richard Hodgetts, a management professor at Florida International University, smaller companies are 35% more likely to be victimized by white-collar crime than larger firms. In an August 2000 memo to members, the American Association of Advertising Agencies warned, "Smaller agencies may be more vulnerable. ... It is probable that each year some company you know experiences an [embezzlement], even if you do not learn of it."

FBI arrests
Across the U.S., 11,208 arrests were made for embezzlement in 1999, according to the FBI.

On its Web site, the U.S. Small Business Administration warns: "People with access to computerized data have the very pulse of your business at their fingertips. Dishonest employees can, and have, diverted funds and goods for their personal gain."

Financial advisers stress the importance of bringing in auditors to check an agency's books annually. But Berry Brown used its outside accounting firm for tax purposes, not for internal audits.

'You can get in trouble'
"We all tend to want to trust and respect our compatriots," said William Nicholson, executive vice president of the American Association of Advertising Agencies. "If [small agencies] don't perceive a problem, they're not going to worry about it. They say, 'I can't afford that or I can't implement that,' but you need to have controls in place or you can get in trouble."

That's a lesson Bob Berry says he learned the hard way. "All of us get so busy with the day to day, working on the business, overseeing accounts, saving accounts, working with personnel. When you feel as though you have someone you can trust, you focus on the advertising end of the business. But even the person you trust most, you can't trust in business. You just can't take anything for granted."

Copyright February 2001, Crain Communications Inc.

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