Community forum: State needs embezzlement safeguards

This week’s writer is Mike Palmer, president of Ethics By Design, which is a Middlebury company that helps nonprofit organizations, commercial enterprises and government agencies set up effective ethics programs.
I was shocked and dismayed but not surprised to read in Thursday’s Addison Independent that the Weybridge Town Clerk had admitted having embezzled between $100,000 and $150,000 over the past several years. Several embezzlement cases have come to light in the past two years, leading not only to newspaper stories but also to a one-hour program on VPR’s “Vermont Edition” with Jane Lindholm. (A search of VPR’s website turned up 10 pages of stories involving embezzlement.)
Why am I not surprised? Because, according to organizations such as the Center for Public Integrity and the State Integrity Investigation, Vermont has very few laws or agencies designed to protect against fraud and theft in public office. (See The Center for Public Integrity and the State Integrity Investigation www.publicintegrity.org/accountability/waste-fraud-and-abuse/states-disc… www.stateintegrity.org/vermont.)
Comparative studies on ethics in government routinely rank Vermont toward the bottom of the 50 states for this reason.
Our low ranking is not because our state is notorious for fraud, theft, and corruption. It is not. Rather, we score so poorly because we lack the institutional framework for public integrity.
Here are just a few examples of the deficiencies watchdog organizations have identified: We have no laws that promote and protect a professional ethics enforcement agency. The governor, members of the governor’s cabinet, and members of the Legislature are not required to file asset disclosure forms. There is no audit of asset disclosures, including those of judges. We don’t have an ethics training program. There is no means for confidentially reporting fraud or misconduct.
To be sure, ours is a small state. Our public officials are highly accessible. We generally feel we know and can trust them. And no doubt we can — most of the time. But our public officials are also human beings just like the rest of us, subject to the same weaknesses all humans have known since Adam and Eve were cast out of the Garden. Indeed, those who engage in fraud and theft are sometimes those we would least suspect because we know them so well.
A few years ago one of my clients, a small professional firm, was the victim of a bookkeeper who stole more than $700,000 over a 6-year period, despite being a personal friend of the owners of the firm. The two families even went on vacations together. Another client’s fledgling business was destroyed and the owner also lost his home when an employee stole all the working capital. Another client raised over $25,000 in cash every year through an auction of donated goods but let one person handle all the money alone, creating conditions under which she could easily take some of the cash for her own needs.
And, as we have learned over the past couple of years, several Vermont town clerks and treasurers, beloved and trusted members of their towns, have victimized their communities by stealing tens of thousands of dollars. The Weybridge town clerk is the most recent; but I am confident hers will not be the last case.
To build trustworthy organizations, leaders must pay attention to both the integrity and decision making of individuals and the structures (institutions) of the organization itself. Relying solely on the moral character of individuals is insufficient.
The Association of Certified Fraud Examiners, of which I am a member, estimates that the average unprotected organization loses 5-7 percent of its gross revenues to various forms of fraud and theft every year. This is not because organizations are filled with bad people. Rather, it’s because, under the right conditions, good people will sometimes do bad things.
There is a reason Jesus taught his followers to pray: “Lead us not into temptation.”
As Benjamin Franklin put it more recently: “There is no kind of dishonesty into which otherwise good people more easily and frequently fall than that of defrauding the government.”
The series of embezzlement cases over the past couple of years should wake us up to the need to establish the need for an effective ethics program at the state and municipal levels. It would be naïve to think that the known cases are the only incidents of fraud and theft actually going on. I hope that Douglas Hoffer, our incoming state auditor, will make the establishment of such a program one of his top priorities.

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