Last week, we discussed dealing with dishonesty from theft or improper behavior. However, the dishonesty that can really hurt your company can come from some of your most trusted employees. Stories of the bookkeeper stealing thousands of dollars from small companies and not-for-profit organizations are rampant. In these times of layoffs and salary cutbacks, we can expect even more of these incidents.

But there are more insidious white-collar crimes that can be far more damaging to all companies both large and small. If you are a small company with an outstanding loan from your bankers, you may have all your receivables routed through a locked box controlled by your bank. Under these arrangements, your bank will usually release funds to your account as you post new receivables from ongoing sales. One deception that will destroy your credit is to book “likely” orders in your account receivables to release cash from your lock box. How many times do “likely” orders turn into vapor? What do you suppose will happen to your relationship with your bank after this deception is discovered?

This deception, however, is not limited to lock-box accounts. Some years ago, Bausch and Lomb, was posting sales to its distributors without any orders from them for glasses. This gave a false projection of their sales for a given quarter, and the un-needed glasses were returned to the company the next quarter. Of course, this deception can only go on so long unless there is a significant increase in real sales in a future quarter. Bausch and Lomb eventually had to restate a number of financial returns to the distress of their stockholders and eventually the CEO.

We all know the story of the accounting scandals at Enron. Here we have officers of the company setting up satellite entities in which to hide gigantic losses from their stockholders. Many companies have made some “slight” accounting changes in their quarterly reports to hide bad news from stockholders. All these abuses usually start with the idea that we will make it up in the next quarter when we will reverse these entries. Many times the situation only gets worse. In a public company it can mean jail time for you if you are an officer.

In the recent news is the story of GE being fined $50 million for “accounting irregularities.” Is GE – that icon of American business – guilty of cooking the books to state better earnings to enhance their stock value? Sounds like it.

Then there are the padded expense reports taking advantage of loose control over expense-report auditing. How many times have you been billed for an expensive dinner with a customer that was actually a private affair with no customers involved? Trade shows are wonderful places to use this to get around a daily per diem for meals.