Green Felt-Tip Pens, a Tape Recorder, and Embezzlement

The New Hope/Solebury School District serves students in part of Bucks County, Pennsylvania. The county, just north of Philadelphia, has been a peaceful refuge since its colonial beginnings as a stopover on the road between New York and Philadelphia. But modern telemarketing reaches even the quietest parts of the county and can expose even the most straightforward budget-execution tasks to million-dollar fraud.

The scam involved the business manager of the district, Kathryn Hock, and American Corporate Supplies, an office supplies distributor operated as a telemarketer by Marc and Teresa Suckman. The district serves about 825 students, with an annual budget of $6.6 million. Hock, business manager since 1978, had worked her way up from school secretary. Some school board members had questioned her ability to deal with more sophisticated accounting systems and methods and had expressed ·doubt about her qualifications. She had managed to keep her job, although uneasily. The firm, located in California, made phone calls to prospective purchasers (public, private, nonprofit, it mattered not) around the country offering products at discount. Often the discounts were from artificially inflated prices. Their business was to induce customers to purchase felt-tip pens from them; the scam was that the pens: often had not been ordered or if ordered were never delivered. Their business was good: Along with the district, victims included an Idaho priest ($66,000), a St. Louis businessman ($40,000), and a Pennsylvania man ($155,000). But the $2 million from the district apparently was their best.

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Hock received a long-distance call from American Corporate Supplies in 1983, offering green felt-tipped pens. Because district teachers had requested the color, she placed an order. The shipment arrived as promised, and she paid the bill.

Through the year, the business manager made more pen orders. Eventually her contact, William Chester of American Corporate (possibly Suckman), informed her that her good customer status entitled her to receive a pocket tape recorder, a gift that she accepted. That put Hock in jeopardy, although she did not realize it. After a few weeks, Chester called in regards to filling her back order. There actually was none, but he convinced her that such an order did exist and that she had legal obligation to complete the order. Mr. Chester then proceeded to call one or two times each month to obtain a new order from her.

By April 1984, the district definitely needed no more markers. They had arrived in regular batches, and there was room for little else in the storage closet. Hock tried to stop the flow, but Chester told her that the district had an outstanding balance of $3,547.14 and that she should send a check to close the account. The claim was excessive, and Hock objected. But Chester threatened to tell the school board about the gift she had accepted for placing the orders, which he said would cause her to be fired, so she settled the account and stopped the orders.

Or so she thought. A month later, Chester called again, this time with an outstanding balance of $4,229.53. She again objected, but Chester threatened to inform both the school board and the police, now about the unauthorized payment for goods not received. The stakes for her were higher!

Hock fell in even greater jeopardy, and because of this vulnerability, she was going to be called on to provide even greater sums of money. She was in over her head and didn’t know how to handle it. She paid that bill, and then another the following month, and dozens more- sometimes three in a month. When the amounts Chester demanded escalated as high as $30,000, she started breaking up the payments with several different checks so they would be easier to hide in the books. She had authority to sign checks and stamp them with the signatures of two board officials. When the canceled checks came back from the bank she would white out American Corporate Supplies and type in the name of the local fuel oil company and other regular suppliers, inflating their costs. Then she would alter the computerized accounts accordingly.

 

1. Identify the ethical dilemma or issue and the consequences to the organization’s personnel and policies/program and consequences to the public. 2. Explicitly relate the issue and/or consequences to that module’s reading by citing the readings. Citations should be meaningful and reflect comprehension of reading. 3. Discuss and explain your solution. Be sure to think broadly: personnel, public, policy, and program. 200-400 words.

 

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