When Trust Turns Toxic: Investigating Employee Embezzlement in New York

Running a business in New York takes grit. You're juggling clients, payroll, compliance, and everything in between. But when someone inside your circle—the employee you trusted—starts stealing from you? That kind of betrayal hits hard. Financial losses are one thing, but the emotional fallout? It cuts deeper.

If you suspect internal theft, don’t push it to the back burner. Working with commercial litigation attorneys can help you protect your company, your peace of mind, and your future. The team at Horn Wright, LLP has been recognized as one of the best law firms in America, and we’re ready to help you confront the fallout of workplace embezzlement.

The Red Flags You Can’t Ignore: Spotting Theft Inside Your NY Business

Embezzlement doesn’t always happen in dramatic fashion. Sometimes, it's slow and methodical. A little here. A little there. Then suddenly, you're staring at a gaping hole in your finances.

Behavioral Shifts That Should Worry You

When an employee starts acting...off, pay attention. They might be hiding something they don't want you to see. These behavioral shifts are often the first signs that something's gone sideways:

• Reluctance to take time off: If an employee refuses to go on vacation or won't delegate tasks, they could be worried someone will uncover their scheme.
• Unusual spending habits: Flashy purchases that don’t match their salary? Think designer bags, luxury cars, or big nights out in Midtown Manhattan.
• Overprotective of their work: When someone gets cagey about letting others review their financial reports or access certain files, that’s a problem.
• Sudden defensiveness: Do they snap when asked basic questions about invoices or budgets? Defensive behavior can be a mask for guilt.

Fudged Numbers and Phantom Transactions

Beyond behavior, numbers often tell their own story. If something seems off in your books, trust that instinct. Don’t just assume it’s a math error.

Watch for these accounting red flags:

• Duplicate payments to the same vendor, especially if the vendor isn’t well-known.
• Missing receipts or expense reports that don’t align with actual spending.
• Petty cash shortages or "round" numbers that repeat over and over.
• Unexplained balance sheet adjustments at quarter-end or year-end.

In New York, internal financial crimes like this can fall under N.Y. Penal Law §180.05 if false entries are made in business records. And yes, that can lead to criminal charges.

Quiet But Thorough: How to Investigate Embezzlement Without Causing a Stir

You don’t want to shout "thief!" before you’re sure. Accusations without evidence can lead to defamation claims. But doing nothing allows the theft to continue. So how do you walk that tightrope?

Securing Key Documents Without Tipping Them Off

Start by gathering quietly. Focus on records you can access legally without alerting the employee.

Here are some strategies that keep things discreet:

• Audit bank statements and payroll logs: Look for anomalies in accounts they had access to.
• Pull access logs from internal systems: Who logged in and when? Odd hours or irregular patterns stand out.
• Review vendor invoices: Cross-check names, addresses, and EINs. Fake vendors often hide in plain sight.
• Call your accountant: A forensic review can spot cooked books and walk you through next steps.

New York employers are legally allowed to monitor employee activity on workplace systems as long as the employee has been notified. As of 2022, N.Y. Gen. Bus. Law §52-d requires that businesses give prior notice if they monitor phone or internet usage. Keep this in mind when reviewing digital communications.

Hitting Back: Legal Weapons New York Employers Can Use

You’ve done the digging. You’ve got the proof. Now what? In New York, you have a few different routes to hold a dishonest employee accountable and recover what you lost.

Civil Court vs. Criminal Court—What’s Right for You?

Both paths are valid, but they serve different purposes.

• Criminal charges: You can report embezzlement to your local police department or the New York State Attorney General’s office. Charges could fall under N.Y. Penal Law §155.30 (grand larceny) if the amount exceeds $1,000. The state prosecutes, but you might not see any money come back.
• Civil lawsuit: You can sue the employee directly to recover stolen funds, legal costs, and sometimes punitive damages. This is where commercial litigation attorneys step in. They’ll help you build a strong civil case.

Which route should you take? That depends on your priorities. If your goal is justice and public accountability, go criminal. If you're focused on getting your money back, civil court may be the better option.

Locking the Doors After the Snake Slips In: Preventing It From Happening Again

After dealing with embezzlement once, you never want to go through it again. You can’t predict every bad apple, but you can tighten your systems.

Here’s how to make your New York business a harder target:

• Separate financial duties: No single employee should handle billing, payments, and record-keeping alone. Divide tasks among different people.
• Use multi-factor authentication for sensitive financial platforms and internal systems.
• Set up automatic alerts for large withdrawals or payments made outside business hours.
• Require dual approvals for payments above a certain amount, especially when dealing with vendors.
• Conduct surprise audits a few times a year. Keep employees on their toes.

You should also establish a written internal theft policy that lays out disciplinary actions and reporting steps. This not only protects your company—it shows prosecutors and judges that you took preventive steps if you end up in court.

Fraud can strike anywhere, from small family-run shops in Albany to growing tech firms in Buffalo. Prevention is your first line of defense.

Get Help from Commercial Litigation Attorneys in New York

Embezzlement cases can be messy and emotionally draining. You're not just chasing numbers, you're dealing with betrayal from someone you trusted. That’s where we come in. At Horn Wright, LLP, our commercial litigation attorneys understand how to protect your business, pursue accountability, and help you move forward. We’ve been proudly recognized as one of the best law firms in America because we fight for our clients with precision, urgency, and heart. Let us help you take back control.