Employee Criminal Background Check

The Entrepreneurial Credit Manager

employee criminal background check

An employee criminal background check should always be conducted and should include civil law suits.

As family businesses grow, the problems become more sophisticated and it follows that new key managers, who have specialized skills and experience, will be needed. But it is important that the new managers fit into the policies and practices of the company and not have the new managers setting company policy – certainly not without any organizational oversight.

One family-owned business in Milwaukee decided that, given their rapid growth and expansion, it was time to hire a credit manager. The new employee came on board and almost immediately could not get along with his new boss, the controller. He complained that the controller’s policies hindered good credit management and it was important for his position to have authority to conduct his job.

Since the credit manager had been hired by the owner of the business specifically for his skills and experience as a credit manager, the controller finally agreed that the credit manager could report to the president of the company.

Almost immediately changes were made. A new company was hired to collect past due accounts. Because the president was “too busy”, the contract was not reviewed.

About 6 months after the new credit manager started working for this family business, the owner of the business got a phone call from an old friend and customer. The caller was angry and asked “What in the world is going on? I have been placed on credit hold and had to pay a collection company. I have been a customer since you started your business - I am being treated unfairly”.

A little late perhaps, but danger flags were going up for the business owner.

The trusted controller was called in and asked to do some research for the president. The controller found out that this customer had always paid timely; there was no reason for a credit hold or collection company.

They agreed that something was really wrong – but not sure what it was. They contacted the Family Business Institute in Atlanta and discussed the problems with Harold Copus, Director of Corporate Security. From the initial interview, they decided that an immediate investigation was required.

The investigation revealed those nine months earlier, the credit manager had been released from prison for fraud. He had worked for a company, formed a collection company and sent customers to his company where he “collected” a fee ranging to almost 30% to “collect” past due receivables. But the scheme failed and he was prosecuted and convicted.

The credit manager had learned his lesson while in prison. This time he formed a new collection company but installed his cellmate as the president. He had used a bankruptcy form for another company that he found on-line from the bankruptcy court, scanned in the document and placed customer’s names on the forms as if they were in bankruptcy. He failed to modify the form and all of the “bankruptcy filings” were from the Dallas Texas region.

An employee criminal background check was conducted that disclosed that the credit manger had an extensive criminal record and had been sued numerous times civilly.

The lesson learned from this fraud was that an employee criminal background check should always be conducted and should include civil law suits. The other lesson learned was that organizational structure (checks and balances) should not be modified to prevent a conflict between managers.



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