In late 2001, I ended up losing everything when I found the employee who oversaw the accounting of my company embezzled nearly $700k. Unfortunately, most of that amount came from client escrow accounts associated with a number of the properties the real estate company I owned was managing at the time. He did this by cooking the monthly financials, so everything always looked copacetic to both me and the affected clients; so copacetic, in fact, nobody even thought to look at the bank statements to reconcile what they saw in those statements with what was going on. However, the key issue ended up not being the embezzling itself. Rather, it was that the insurance company, Allstate. behind the employee dishonesty policy, my company had routinely paid premiums for nearly 18 years to protect against such an event just walking away from that policy required payment responsibility. Why? Because its attorneys assessed, because of the embezzlement and all its implications, I likely would end up being financially incapable of taking it to court to enforce the payments required to cover those losses.
In fact, I was told by my attorney and others, based on their knowledge of insurance industry and, more specifically, Allstate, its attorneys would likely assess that: (a) when the news of the theft became public, my company would likely lose most if not all its clients forcing me to shut it down; and then, (b) there likely would be a huge legal nightmare needed to be funded by me—now, with no source of income—while facing a multitude of legal actions from all the impacted client organizations suing me to get their money back; and (c) there also would likely be a further six-figure financial burden related to funding the necessary forensic accounting work needed on all impacted bank accounts over the previous 24 months to specifically identify those losses ensuring the embezzler had no choice but to plead guilty and end up in jail and finally, (d) per US banking law, the involved banks could not be held responsible for overlooking the very obvious forgeries of my signature that the embezzler used on the checks he wrote to get funds from those client accounts, first, into my company account to make it appear as if I was the thief and, second, on into his own accounts, for his own use.
Then, consistent with what I was told by my attorney and others, what happened was, when news related to the embezzlement hit a couple of Sunday front page news articles in the local newspaper, because Allstate refused to cover those losses, almost immediately my company effectively lost all its clients. So, my only option was to quickly lay off all employees and shut the entire operation down. Then, of course, again thanks to Allstate, for the next 3 years with no source of income, I was left with nearly a full-time job dealing with all the above issues funded by emptying personal savings and retirement accounts, selling off assets, plus even having to stop paying the mortgage on a new golf course home that, in the end, I lost to foreclosure. It was a complete nightmare that I could only stop with a Chapter 7 bankruptcy filing, which was granted in late 2004, leaving me broke, homeless, and barely able to even buy food to eat.
I also turned 60 that year, and, again thanks to Allstate, with that above-described awful history following the embezzlement plus my approaching retirement age, it became impossible to find any kind of decent job reflecting my nearly 30 years of very successful experience in business, which allowed me after the first 18 years, i.e., in 1983, to fund setting up a quite successful, until the embezzlement, real estate management organization in a world-class ski area, that had employed as many as 40 over the years. It also allowed me to average a nearly six-figure income in the late 1990s, i.e., before the embezzlement started impacting and was discovered by me. I even had two corporate executives, who interviewed me for jobs related to my business experiences, as a corporate financial planning and analysis executive and property manager, to which I applied post-Chapter 7, tell me they thought I was the best candidate both personality and resume wise that they interviewed for the job. However, given the embezzlement, details of which they got from me plus from mostly inaccurate but easily accessible old newspaper articles they found on the internet, plus my age, neither thought their bosses would look favorably on hiring me. So, they just couldn’t do it! I’m sure the Chapter 7 didn’t help either. This whole nightmare took my very excellent credit rating up until the embezzlement and the actions of Allstate down to very poor almost overnight. Moreover, that very poor rating would only disappear when the bankruptcy filing was finally removed from my credit report ten years later, i.e., when I was 70.
More perspectives: At age 52 (1997), I had a CPA-certified net worth of $1.6 mil, which reflected approximately where I was when the embezzlement hit. Further, I planned on working till age 70. So, by likely earning 6 figures or, say, averaging conservatively inflation adjusted $100k/year from 2001 through to 2014, I’m sure I would have been able to put aside at least $20k/year compounded annually with interest that could have added another $400k to my net worth, making it easily $2.0 mil by 2014, when I did turn 70. Then, when adding such savings to supplement my planned much higher monthly Social Security stipend plus income from my retirement savings accounts, this likely would have left me with a pretty comfortable retirement. Also, these numbers do not fully reflect what my companies could have sold for when I retired nor what I could have sold my house for if I still lived in that ski area today.
Fortunately, I have had some great friends and family who, knowing my situation, since 2005, have given me places to live with very low rental rates, i.e., ranging from $0 to $450/mo., which has been effectively all I have been able to afford in the nearly 18 years since ending up homeless after the Chapter 7. It did help that I could get into Social Security early, but that, and the embezzlement plus Allstate’s completely walking away from covering those paid-up policy losses left me with a very much lower monthly stipend than I had even remotely planned.
Dear readers, at 78, I am still relatively healthy, e.g., still play tennis 5-6 times a week at a high level for my age. Plus, I donate considerable time as a coach for a local high school girls’ tennis team, where the three girls I’ve been given to work with the past two years all qualified for the “state level” singles playoffs. However, with my much-reduced monthly SSA stipend not keeping up with inflation, I have lately been facing costs I have been unable to meet, including $100k for an “optional”—mostly because I cannot afford it—medical surgery not currently covered by Medicare. Plus, I need a different car (used of course) to get me around, which I also have no way to afford. But, most importantly, the elderly couple who have rented me the nice apartment in their house for the past seven years in that above-mentioned way below-market rate range have asked me, due to some health issues themselves, to move out by the end of this year, while hoping for November end-of-month. They have a daughter who wants to move into their apartment currently rented to me to help them out. So, now, I am looking at facing monthly rental costs that likely will be $1,500 a month more than what I have been currently paying. Just to be clear, I have nothing but extreme gratitude and thanks to that wonderful couple, who have helped me these last 7 years.
One more thing: After getting out eight years after going to jail for what he did, for a few months, the outlaw did make restitution payments to all those his embezzling impacted, obviously including me. Unfortunately, suddenly without notice, those payments stopped with the involved DA’s office saying, “The outlaw changed his name and had moved, for it had not heard from nor been able to find him since.” Interestingly, it also said, “This isn’t surprising. This is what often happens in cases where the embezzler finally gets out after spending a significant amount of time in jail (8 years)!”
What’s amazing is that none of this above-described post-embezzlement nightmare would have happened if Allstate had just immediately come to the plate and covered those paid-up policy losses. So, I ask. What was the bigger evil, (a) the outlaws for embezzling nearly $700k and spending 8 years in jail for doing it or (b) Allstate and its attorneys’ whose refusal to cover those paid-up policy losses that ended up effectively costing more than 150 clients of my company and their organizations $700K plus one more person—the one writing this “MY STORY”—probably more than $3mil, when adding up everything that impacted the last 22 years of his life, as ever so briefly summarized in the foregoing?
While some might say both were equally so, I cannot. I put the bigger evil directly on Allstate and its attorneys at law, who, in ignoring the law because they knew their policyholder would not be able to afford to go after them for their doing so, allowed their company to walk away scot-free in their choice to exchange earning profit over using integrity and acting responsibly to do what the law would have required it to do based on that paid-up employee dishonesty policy. If Allstate had just done what its paid-up policy required it to do, even the outlaw would not have been facing those extremely severe restitution requirements that forced him to disappear.
Thanks for your kind attention to this matter everyone!