I recently wrote about corruption by government officials. As an extension of that commentary, I  became aware of frequent cases of corruption involvingan organization’s leader, or trusted employee, stealing the firm’s assets.

In many of these cases, the theft resulted from lack of oversight by the organization’s Board of Directors who sat by while the employee was pilfering the firm’s assets without their knowledge. The situations that I recall involved very large sums of money that would be difficult to sweep under the carpet if the governing board was paying attention to their fiduciary responsibilities.

The most recent report involved the dismissal of the Poway School Board superintendent, John Collins. According to the media coverage, Collins is the highest paid school superintendent in San Diego County and the second highest paid in California. He was able to draw down $345,000 more than his authorized salary and other perks.

His attorney responded to the charge by saying the audit by the Poway Unified School District was “replete with errors and took a one-sided view of the facts.” That is a lot of money in a small school district to suddenly vanish without proper authorization. Where were the members of the school board when financial statements were distributed?

This is a good example of what I believe is endemic with too many civic organizations that are governed by volunteer boards of directors, often ill-informed of what a director’s fiduciary responsibility should be when they accept the appointment. As a CPA for over 30 years, I had several occasions to be an auditor called in after the fact to determine how much of the firm’s assets had been stolen by a trusted employee. Most of these cases were small non-profit associations or charities that had limited oversight procedures due to size of staff to provide necessary checks and balances.

That’s why the board of directors has an added responsibility to review the financial statements and perhaps require certain financial information to be mailed directly to the treasurer of the company. It is a simple procedure for the board member to have direct access to the firm’s banking interests to compare to the reports presented by the so-called trusted employee.

I recall one of my audits revealed that the bookkeeper had instructed the bank to call her when there was a bank overdraft, due to her consistent pilfering of cash, while she was reporting to the Board of Directors a substantial bank balance. If the bank statements had been mailed directly to the treasurer, this theft would have been detected immediately.

In the Supervisor Collins’ case, someone in the accounting department should have been alert to the extra paychecks for unauthorized salary. If there was collusion between the superintendent and his staff, a review of the financial statements could still expose the improper salary payments.

Apparently the county Board of Education also needs to revise its oversight procedures. Just a few days after the Collins’ case hit the headlines, another superintendent, Randy Ward, was placed on administrative leave. The county school board announced a forensic audit to examine concerns related to expenditures and compensation for Chief Executive Ward who draws a salary of $331,700.

A later media release reported that the Board was set to approve a contract with an interim chief executive to take over Randy Ward’s position. That didn’t happen as the contract was missing “for reasons that were not explained.” Meanwhile Ward continues on administrative leave with pay.

A lawsuit was filed by Cory Briggs alleging financial fraud relating to Ward’s salary. Another legal action is threatened amid mounting accusations of fraud and mismanagement, according to a report in the San Diego Union-Tribune. It is unclear how the alleged fraud was committed as the Board of Education conducts closed sessions concerning supervisor Ward’s censure.

Looking beyond San Diego County for major embezzlements, the U.S. Justice Department is investigating the financial activities of a Malaysian financial fund known as the1MDB. This organization was created by the Malaysian government under the supervision of Prime Minister Najib Razak to promote economic development for the benefit of the Malaysian citizens.

Instead an estimated $3.5 billion was siphoned off to invest in valuable California real estate, movie production rights, fine art, a $35 million jet and other assets acquired by a series of off-shore shell corporations that conceal the ownership. Most of these embezzled funds were laundered through Switzerland and Singapore. The individuals being investigated by the Justice Department include relatives of the Prime Minister, several American businessman and many investors from the Middle East and Asia.

Corruption by industrial and financial companies has increased substantially as a result of the digital age making it possible to switch funds from one shell company to another to avoid detection. Financial institutions are the most vulnerable. A recent indictment of the British global banking institution HSBC is just the latest one. The bank’s head of foreign exchange used his cash trading desk to manipulate financial markets on behalf of oil and gas companies. He was arrested at Kennedy International Airport and will be brought to trial in a New York federal court.

The list could go on, but the message here is that responsible business leaders are victims of their own greed and create tremendous financial losses to investors and the companies that they serve. I consider this to be even more despicable than the fraud uncovered in the public sector where government officials and employees are taking bribes and concealing political contributions.

My last commentary addressed the situation of our local congressman, Duncan Hunter. The investigation of misuse of his campaign funds by the Federal Election Commission and a group in Washington called Citizens for Responsibility and Ethics continues to plague the politician while he is running for reelection. Hunter has hired a law firm specializing in political law for defense and is conducting his own internal audit of his campaign spending.

Indicative of the purpose of campaign funding by major corporations and individuals is the fact that Hunter represents a district in the Alpine area. However, his latest report shows he raised $110,000 through 67 contributions. None of these donors had addresses in the 50th Congressional District.

All but six of the contributors of addresses are outside of California and represent companies with interest in military spending and infrastructure of transportation. Hunter serves on Congressional committees for these two commissions, according to the San Diego-Union Tribune. Watchdog reporting.

Where do you draw a line between legitimate political contributions and bribes?