2009 Office of Risk Management Annual Conference Property Coverage Ray Louviere State Risk Claims Adjuster IV 2009

2009Office of Risk Management Annual Conference

Property Coverage

Ray LouviereState Risk Claims Adjuster IV

2009


Agenda 2008 Review Lessons Learned Coverage Discussion Case Studies Warnings and Schemes Safeguarding Measures Questions and Comments


What a Year!

GUSTAV – 1700 and counting

Throughout the state


What a Year!

Multiple Contracts Issued to Independent Adjusters to inspect and assess the damages

Additional staff hired to manage the many claims

Weekly meetings with FEMA, GOHSEP, FP&C and State Agencies to coordinate efforts


Lessons Learned

Establish a disaster plan prior to the disaster.

Appoint an Emergency Response Group to implement disaster plan.

Establish an off site location to assimilate in the event your building is not accessible.

Emergency Phone Tree to communicate with all personnel.

Store paper files in water proof cabinets above the flood elevation (not in the basement).


Lessons Learned Maintain electronic copy of all critical data

at an off site location.

Identify contracts that your agency will need and communicate with State Purchasing.

Obtain digital photographs of contents.

Take a regular inventory of contents.

Know where your agency vehicles are located and move them to higher ground (garage).


ORM Property Coverage

Scheduled Property Policy Equipment Breakdown Policy Employee Bond Policy Crime Policy Marine Policy


Steps to take after a property loss or accident

Contact ORM Claims Department-report all losses exceeding $1000 Deductible.

Prevent additional damages. Preserve evidence. Photograph damages. Notify police or other authorities

when appropriate.


Scheduled Property Properties identified in the Schedule of

Property Values with the State of Louisiana, Office of Risk Management

All properties owned by the State of Louisiana

All properties for which the State of Louisiana has assumed liability


1st Party Vs. 3rd Party Claims

First party claims involve State Agencies and State Employees

ORM is contractually obligated to cover 1st Party insured losses

Third party claims involve individuals who are making a claim against a State Agency or a State Employee

ORM is obligated to defend and indemnify claims against State Agency


Focus of Discussion

Employee Bond Policy

Crime Policy


Date of Loss Vs. Discovery Date

Most claims are based upon the date of loss.

Most claims expire or prescribe 12 months after the date of loss.

Most losses can be reported anytime during this 12 month prescriptive period, but should be reported as soon as possible.

Employee bond claims are based upon the date of discovery.

The employee bond policy requires that the claim be reported within 90 days of the discovery date.

The suspect employee must be identified when the loss is reported.


Policy Definition

Employee Bond PolicyProvides coverage up to $500,000 with a $1,000 deductible in the event of an employee mishandling of funds (i.e. embezzlement)

Crime PolicyProvides coverage up to $2 million with a $1,000 deductible for theft against a State Agency by a non-state employee (i.e. burglary)


What is Embezzlement?

Fraudulent appropriation by an employee in the use of State property or money entrusted to that person’s care.

The embezzler is usually a trusted confidant who has been given more authority than the position requires.


Case Study 1 Labor Leader Took Millions,

U.S. Charges October 18, 2006, Wednesday By ANEMONA HARTOCOLLIS AND STEVEN GREENHOUSE;

MICHAEL COOPER CONTRIBUTED REPORTING. (NYT); Metropolitan Desk

DISPLAYING ABSTRACT - President of New York City Central Labor Council arrested on federal racketeering charges involving embezzlement, bribery, fraud and money laundering; head of nation's biggest municipal labor council has personified New York's politically powerful labor movement; is charged with obtaining $2.2 million from taxpayers, unions and contractors over decade; accusations include theft of $95,000 from Little League teams, creating no-show jobs, using subordinates as servants and taking campaign funds to pay for wedding party, home renovations, country club membership and plasma television for female friend.


Case Study 2

Bookkeeper Admits Embezzling $2.3 Million for Lottery Habit

August 24, 2006, Thursday By BRUCE LAMBERT AND VALERIE COTSALAS

(NYT); Metropolitan Desk DISPLAYING ABSTRACT - For months, Annie J.

Donnelly drove her blue Dodge Durango every day to MK Cards and Gifts near her home on Long Island and bet thousands of dollars on New York State Lottery games, sometimes buying tickets by the hundreds.


Case Study 3 Probation for Embezzler's Son In Theft From Roslyn Schools

June 22, 2006, Thursday By PAUL VITELLO (NYT); Metropolitan Desk Late Edition - Final, Section B, Page 9, Column 1,

656 words DISPLAYING ABSTRACT - The son of an

admitted embezzler at the center of the Roslyn schools scandal was sentenced yesterday to five years' probation for buying $83,000 worth of merchandise for his personal use with a school district credit card given to him by his mother.


Case Study 4 A Guilty Plea in Wal-Mart Case February 1, 2006, Wednesday

(AP); Business/Financial Desk

Late Edition - Final, Section C, Page 5, Column 5, 322 words

DISPLAYING ABSTRACT - Former Wal-mart Stores vice chairman Tom Coughlin pleads guilty to fraud and tax charges, admitting he stole money, gift cards and merchandise; faces maximum of 28 years in prison and could be fined $1.35 million on losses estimated at up to $500 million


Warning Signs Inventory Shortages could indicate

fictitious purchases, unrecorded sales or employee theft

Decline in Profits could be a sign that cash is being misappropriated

Unusual small increases in cash or credit card sales could mean that some sales are not being recorded

Any unanticipated change in accounting records should warrant further review


Common Schemes Cash Scheme – employee receives cash which

goes unrecorded

Lapping Scheme – employee temporarily holds payments on accounts receivable and cycles the payments through the system to avoid suspicion. Money is received from Customer A for $100 on January 1st. Money is received from Customer B for $200 on January 7th. Employee credits Customer A’s account for $100 and pockets the $200 from Customer B. Customer C comes in with $500 on January 8th. Employee credits Customer B’s account for $200 and pockets the $500. The cycle continues. The employee has to be a detailed record keeper to keep up with this scheme.


Schemes Cont…

Check-Kiting Scheme – employee has authority to write checks out of more than one account.

On January 2nd, a check for $4,000 is drawn on Bank A and deposited into Bank B.

On January 3rd, the employee cashes a $4,000 check payable to Cash and drawn on Bank B.

The employee then deposits sufficient funds into Bank A and drawn on Bank B.

The process of using the money float continues.


Schemes Cont…

Vendor Scheme – employee establishes dummy vendors and creates dummy invoices.

Padded Expense Scheme – employee creates fictitious invoices and submits them for reimbursement.


Practical Exercise

Everyone, please take out a few coins, count them, place them in the plastic bag provided to the person on the far left and pass it onto the next person.

Person on the far right, safeguard the gift that has been provided to you.

Mr. or Ms. Far Right, raise your hand when you have received your gift of money.


Mistakes Made First you allowed a third party, me, to direct

you on what to do with your money.

Secondly, you entrusted your money to Mr. or Ms. Far Right whom you likely did not know, did not run a background check on and did not get a receipt for your monies.

Thirdly, Mr. or Ms. Far Right gleefully took your money without making an entry into a financial record and without giving you a receipt.


Lessons Learned

Embezzlement can be easy if you let your guard down.

Safeguards are needed to prevent misappropriation of monies.

Now Mr. or Ms. Far Right, please pass the bag to your left so that each person can remove their misappropriated funds.


Safeguarding Measures

Instill a climate of accountability in all areas, particularly in the area of finances.

Examine current procedures and implement internal controls.

Separate assigned job tasks, such that the employee receiving payments is not the same employee making entries into the accounts receivable record.



Conduct periodic audits and address entries that are questionable.

Review your internal controls on a regular basis.

Conduct background checks on prospective employees.

Know your employees such that any change in behavior may warrant further examination.


Crime Policy

Covers forgery of checks, drafts or promissory notes by a non-employee third party

Covers theft, disappearance and destruction of money and securities which are stored in a locked safe, vault, cash register, cash box located on the premises

Covers robbery and safe burglary of property, other than money and securities



Educate your employees on safety. Never open or close your office alone. Use a radio or television so that a potential

intruder will assume others are in the office. Avoid signs on the windows which obscure

visibility. Keep valuables locked.


Safeguarding Measures (cont.) Avoid routine bank transactions and

banking days.

Always us more than one employee for banking errands.

Use surveillance wherever possible. Maintain only minimal dollars in the safe.

Never disclose internal financial practices to third parties.


Your Property Team is Ready to Assist


Contact Information

Ray Louviere

Office of Risk Management

P. O. Box 91106

Baton Rouge, Louisiana 70821-9106

225-342-8438


Questions

And

Comments


Thank You

Documents

2009 Office of Risk Management Annual Conference Property Coverage Ray Louviere State Risk Claims Adjuster IV 2009