Will you accept a check? Lax controls help a trusted casino employee use the cage as her personal bank account to embezzle US$128,000.

Author:McConnell, Donald, Jr.
Position:Fraud Findings
 
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After three years of employment with a Las Vegas casino, Bill Whaling was promoted to operations manager. He was happy with the promotion, but had immediate concerns about the internal controls in the casino's cage. The cage manager, Betty Brown, was reluctant to provide access to, and share details about, cage operations.

The cage in a casino is the financial center of all operations. It routinely makes change, cashes checks, and checks slot machine access keys in and out. It also receives funds from drop teams collecting coins and currency from slot machines and gaming tables, verifies jackpots paid, fills slot machines, and makes bank deposits of gaming revenue and ancillary revenue from the bar, cafe, and hotel. An internal auditor always independently verifies payouts.

Several weeks after Whaling's promotion, Dave Neil and Kate Harper, two cage supervisors, approached him and timidly disclosed their awareness that Brown had been "borrowing" cage money by writing personal checks to replace the diverted funds, but she never deposited those checks. They had not come forward earlier because Brown had promised to return the money.

Whaling told Brown not to report to work as scheduled the next day. He also called the auditor to do a reconciliation of the cage. As reported by Neil and Harper, the cage was short US$128,000.

Brown had embezzled by "borrowing" large bills from the vault, and writing seven personal checks over six weeks to cover the shortage and balance out the cage paperwork. She directed Neil and Harper to collude by accepting and reporting the total of the checks in their shift reconciliations, assuring them she would return the cash and shred the checks. Though unconcerned initially, Neil and Harper saw Brown's check amounts growing with no sign that she would return the money as promised. Unable to handle the pressure, they approached Whaling to notify the owners.

Brown had been in charge of reconciling the cage department records with the underlying fund balance of the vault. Both independent semiannual audit findings and required triennial state gaming control board audits had listed this as a material weakness in internal controls. Whaling also had expressed his concerns about the issue. However, the owners were satisfied with filing exception reports with the state gaming control board to maintain compliance with the Minimum Internal Control Standards on the grounds that this was a small operation, nothing serious had...

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