A former employee of wireless data company TeleCommunication Systems Inc. (No. 37 on the BE INDUSTRIAL/ SERVICE 100 list with $92.1 million in sales) pleaded guilty to one count of bank fraud June 4 in a federal court in Baltimore after stealing more than $1 million from the company over a three-year period.
Joanna L. Cook, 31, worked in the accounts payable department of the Annapolis, Maryland-based company. According to court documents, Cook cut unauthorized checks to herself and people to whom she owed debts. She also made changes to the company’s ledgers and invoices, according to prosecutors with the U.S. Attorney’s Office for the District of Maryland, which first filed charges against Cook in April.
Cook stole money from the company between September 2000 and October 2003, according to court documents. She made false entries in TCS’ ledger and then cut checks to herself for those entries. She also entered false invoices for TCS vendors and then changed the names of those vendors before cutting the checks made out to either herself or companies that she owed money to.
Her scheme was discovered in October 2003 when an assistant controller and accounting supervisor found that Cook had changed three checks for a total of $129,000 to make them payable to “J. Cook.” She had also endorsed the checks, according to court documents.
At the time, Cook admitted to altering those three checks, but denied she had stolen anything more. However, an investigation turned up a larger scheme that resulted in the theft of $1,112,000 in TCS funds.
TCS and other companies can learn from the Cook incident and protect themselves by setting up an internal system where no employee has so much control over company finances that he or she can manipulate the system, says Rachel G. Hall, an Alexandria, Virginia-based CPA and consultant who helps companies implement such systems.
“Some things are unavoidable. But [with] some things, you can minimize the risk by having the proper internal controls,” Hall says. “You have someone that may initiate the transaction, someone that records it, and someone that reviews it and approves it. [That way,] you have the proper checks and balances in place so that you don’t have one person that can run a transaction all the way through and make adjustments to the ledger to cover up what they did.”
Cook is scheduled to be sentenced Aug. 26. She could face a maximum 30 years in prison followed by five years of probation and a $1 million fine. Cook’s attorney, Timothy D. Murnane, would not return repeated calls for a comment. TCS also declined to comment about the case at this time, according to a company spokesperson.