EP135: Kelly Paxton - How To Avoid Pink Collar Crimes

Pink Collar Crimes.

If you don't know what they are and how destructive they can be to your bookkeeping business and life, you're listening to the right episode.

The term pink-collar crime was popularized by Dr. Kathleen Daly during the 1980s to describe embezzlement type crimes that typically were committed by females based on limited opportunity.

In this context, women were more likely to have committed low level crimes, such as bookkeeping fraud, from positions of less power compared to men who had engaged in acts of white-collar crime.

Our guest, Kelly Paxton is a Pink Collar Crime expert who specializes in educating the public about this growing problem that has risen by over 40% since 1990.

During this interview, you'll discover...

  • Different ways that bookkeepers and their clients can avoid Pink Collar Crimes from happening

  • The Pink flag signals

  • The importance of knowing the various Pink Collar Crimes in a bookkeeping business

To learn more about Pink Collar Crime, click here.

For Kelly's LinkedIn, visit this link.

For her Twitter, check this out.


Michael Palmer: 01:08 Welcome back to The Successful Bookkeeper podcast. I'm your host, Michael Palmer, and today's show is going to be a fun one. Our guest is a pink color crime expert who specializes in educating the public about embezzlement type crimes such as bookkeeping fraud that are committed by women. Kelly Paxton, welcome to the show.

Kelly Paxton: 01:29 Thank you. Thank you very much. One quick thing, it's not always women, it's position, not gender. I don't want people to think I'm picking on women. It's just women are primarily in these type of positions. So I kind of want to get that out there that a man can be a pink collar criminal too.

MP: 01:46 Okay, great. Well, I think everybody's just on the edge of their seat right now going, what the heck are we talking about? Because this is a, this is interesting that the name pink collar crimes is interesting and I would love for you to share with our audience a little bit about your career and how the heck you ended up being interested in and doing work for pink collar crimes.

KP: 02:09 You know, I would say my career and just sounds weird, is always been about money. First I invested money, I was a stockbroker in a bond trader and then we had a client that was arrested and that led me to become a special agent for us customs. And I arrested kind of typical bad guys, you know, I was armed 24, seven, you know, got to do for surveillance and most of my suspects were men. Um, I did have a female attorney that I got disbarred that was a high point of my career, but then kids came along and life changed. And uh, we ended up moving back home and I started working at a sheriff's office and I was their analysts for their fraud team. And I noticed that all of my suspects was the exception of one male were women. So I started googling women embezzlers nationally. I had women in bachelors.com as a domain name that, uh, directs to pink collar crimes, but there was the term pink color crime. And it got popularized in 1989 by criminologists, Dr Kathleen Daly. And I ended up getting the domain name and I just, my career kind of took a turn. I went from Arestin bad guys to working on cases where it was the nice women that lived in your neighborhood getting arrested for stealing from, you know, a dentist's office. 60% of all dentists get ripped off to like, what was that stat?

MP: 03:37 That's pretty high.

KP: 03:40 Yeah, I know 60% and even some people think that that number is a little low.

MP: 03:45 So 65% of dentists wait 60 yeah. 60 to 60% of dentists get ripped off at some point in their, in their career. Wow.

KP: 03:56 Yeah. And I've had some who've been ripped off more than once. And it's an interesting small business and probably lots of bookkeepers have dentists as clients. So I, I was seeing these families destroyed by the moms. Whatever reason she decided to steal for, you know, there's the fraud triangle, which is opportunity, pressure and rationalization. The only thing a business owner can control for is the opportunity you can pay, you know, your office manager $1 million a year. But if they have a gambling habit or an expensive lifestyle and they need 2 million, they'll steal. It's just if there's the opportunity there, they'll do it. You can't ever, you know, control their pressures or rationalization. It's just, it's not possible. So I've prosecuted pink color criminals and I've defended pink color criminals. And it comes down to money and what people decide to do for money. I was talking to a college professor yesterday and I said, you know, show me someone's book and I can tell you what kind of person they are just by looking at their tech.

MP: 05:06 Interesting. Tell me more about that. That sounds interesting. That's a very interesting, it's like, I'm like blown away by these statistics and you know, I get, I get it with like people have problems and often money, it's believes that money will solve the problem. So if it's a big, big problem, where's that money coming from? So this is where crimes begin. But I'm really interested about this, this checkbook, uh, analogy.

KP: 05:32 Well, when I was a federal agent, you know, I would be able to get people's bank accounts. We would subpoena them and we would get them and it would be like Christmas for me. I'd have boxes, my boss would come in and he's like, Oh God, there she goes to dig in. You schedule out how someone spends their money and you kind of see where their priorities are, whether it's house, whether it's kids, whether it's travel, whether it's casinos. You can kind of tell where people put their money, what they're like.

KP: 06:02 Well I know, I know my bookkeeper who said to me, you like Starbucks. And it was like when he said it, I'm like, how do you know? And it's like, uh, the right. Uh, but very interesting. So this is a question that many people would have had out of the gate is what are pink color crimes? I mean, I've stink, we're starting to get a sense of that. But I'm curious like are there common ones? Is there ones that show up more than others?

KP: 06:31 So the, the definition of pink collar crime is lower-level office type employees stealing from the workplace. And so when you think of lower level, you're thinking accounts receivable, accounts payable, office managers, receptionist, those are primarily female-dominated positions. That's why it's pink collar crime. It comes from pink-collar jobs. So that's why a man can call her criminal. But there's more men in different types of positions. I mean, I think according to like, you know, the census, 97% of those type positions are filled by women, Right?

MP: 07:09 No, it makes it makes total sense. And that that constantly is probably changing or you've probably seen it changing over your career as well as more and more people are changing the work that they do and how work gets done and as well technology. I would imagine technology has also made your job maybe easier or more difficult.

KP: 07:32 Yeah. You know, I'm not a CPA. I don't pretend to be a CPA. I took one accounting course in college and then, you know, I did the finance. So I mean I can put a spreadsheet together, I can put EBITDAR together. But a lot of people are like, well, how come you're not a CPA? And I've worked these cases and you don't have to have to see a CPA to show that the money was in the business owner's account. And then it went to the suspects bank account. It's just, it's not like it goes from the business owner's account down to Panama over to Russia and back. It's pretty straight forward or there's cash skimming. So I love to use hashtags in 'em. I do a lot of posts I tweet and one of my hashtags is it's not rocket science. And I, I say that because I can do these cases, that paper heavy, even though with technology it is changing a little bit, but you know, you're showing money going from one spot to the next and that's, that's what it is.

MP: 08:41 Yeah, absolutely. Absolutely. And when it comes to these types of crimes, I mean bookkeepers are, are, are definitely people that have been made the news of, of being people who've committed those crimes, but they're also more so, fortunately, people who find the, something's fishy going on. How can bookkeepers, our listeners, how can they be more aware of these crimes and what, what should they be looking out for and what's a pathway to do to if they notice something?

KP: 09:15 So, yeah, I mean, it's interesting because this is a bookkeeping podcast and I just tweeted out about, I'm a southern bookkeepers stole $300,000 so when I go and I speak and I do these presentations, a kinda depends on my audience, whether I give tips and tricks or whether I just kind of glossed over it. So bookkeepers, they definitely have access. So anyone who has access to the money, Ken Steel, that's the opportunity. Bookkeepers can look at a lot of different things. I mean, one of the things is if you're an outside bookkeeper and say you're having difficulties getting information from the person who's supposed to provide you the information, if they're really hesitant or they keep blowing you off or they're abrupt and say, no, I sent that to you. If there's pushback, that's where I think, you know, you're a little, I call it the spidey sense, should maybe kick in. Like things just aren't right. And it's like, Huh, why aren't they right? You know, why don't they want to give me this stuff? Or so when there's hesitancy on the person giving the bookkeeper information or say that you want to upgrade your accounting software, go do a new program for whatever reason, and they're just like, no, there's no reason we need to do this. Why is that? Is it because they've been hiding something in the numbers when they're that sort of territorial? That's what I call it is a pink flag.

MP: 10:48 Yeah, I can, I can see that. And I, I have heard lots, lots of our listeners have conversations with lots of our listeners and our clients about where, where are these things have happened? Right? It's a, the, the relative working for the business and it's like the reluctance and it's like, just so it's like something's not adding up or someone not wanting to and being very defensive about letting someone else come in and have a look. It's exactly what you're saying. Uh, and so if there's a spidey sense coming up, what should be the step that a bookkeeper should take?

KP: 11:22 This is one of my number one things. Document everything. Just start documenting, you know, phone calls, emails, anything like that. That makes it, because if you have to go back and look at the stuff you want to, you want it to be documented at the time contemporaneously. So I am a huge fan of documentation, whether it's just a little note or whatever, definite document, depending on the relationship have with the owner or your client. You don't ever want to be the person who falsely accuses someone of this. Because I had a former boss who bought a house and I said, oh, that's a nice house. And he goes, well, you know how I got it? And I'm like, no. And he said, one of my clients also, he accused his office staff of embezzlement and she sued him and the house was the settlement. He had to tell the house in order to do the settlement.

KP: 12:25 So you never want to falsely accuse. That's why documenting, you know, is so incredibly important. But these cases aren't for, I mean, I don't, and it's not to push my services whatsoever. Um, they're not for amateurs because if you mess up, it can go badly. You know? No one wants to hire lawyers. Well, you're going to be hiring a lot of lawyers to defend yourself. They, even if you're right, even if you know you are right, you have to be incredibly careful. Flying Dot your i's and cross your t's before you know, you take that next step.

MP: 13:03 It's touchy. It's a, it's a delicate subject. And one that I remember hearing about was a family member and it was literally, it was quite blatant. Like you say, the, the rocket science pound a Hashtag rocket science, it's not rocket science. They definitely, it was just like literally I'm Duh, you know, debiting money out of the bank account and putting it into a, their own count. It was a, an a niece of the, of the owner and they just weren't paying attention. And so yet that's a delicate conversation to have with the owner. It's their relative, but that had, there has to be a pathway to having those conversations and it's a risky conversation as you say it, it has implications of accusations and, and uh, what if you're wrong.

KP: 13:53 Well, yeah. And so there's also call it the get out of jail free card, which is not to pick on dentists cause I love dentists, but say that the office manager knows that the dentist is doing things, maybe not great like writing off continuing Ed trip to you know, a ski resort for his whole family and he just writes the whole trip. Bob and um, or she knows that the dentist only hires cute young blonde hygienists and so it's a pattern of discrimination or God forbid even that the dentist is maybe has a relationship outside of his marriage and she knows that. So when she gets caught or he gets caught, they're going to do anything to not go to jail and it's going to be, I know you're doing x, Y or z and you'd be at the people who would back off and they'll just say, you know what?

KP: 14:55 Let's just call it good. You can leave. And I'm not going to go to law enforcement. I mean, think about an audit. Knock on wood. I haven't been audited, but my dad was audited numerous times. So I've grown up with the fear about it. When you do these type of cases and law enforcement comes in, they're like, we want to see your books and there's a Gulf, there's a, what can I just provide you with, you know, x, Y, and z? And it's like, nope, we want to see your books. How many people have that little, well, you know, voice in the back of their head saying, yeah, maybe it's not such a good idea. Now the cops, most cops are w two employees. They don't know about k ones. They don't know about depreciation. They don't care. But we all have, you know what a guilty contents when it comes to like, oh, I wrote that trip off. Is that really? Yeah, maybe I just should go away. I Dunno. I've seen it.

MP: 15:54 Yes, absolutely. Absolutely. We're human beings, right? So working, it's not like working with a business, right? A business as a business. It's an entity. There's human beings in that, those entities and they have human problems and those problems can escalate and shift and cause all sorts of havoc. And, and often bookkeepers that bombing, they're right there in the front lines, uh, and can be getting, get involved in these things, which, I mean, no one would want to be involved in any of that, but you could find yourself being involved. And so you've given some good examples of what to do about it. What are the most common crimes?

KP: 16:33 So not to teach anyone how to do this because I don't do that even though I could, um, say we don't want to, you know, educate people on how to criminals there.

KP: 16:44 There's a couple of surveys out there and studies and basically forged in an authorized checks are the number one way to embezzle. And you know what, people will meet me at, you know, say a networking event or a social gathering and they'll find out what I do. And they'll very like almost smugly smile and say, well, I sign all my own checks. And then I met, I'm very true. People tell me I'm very transparent, I'm just, you know, and I smile and then they're like, wait, what? What about that? And I'm like, do you have a visa machine? Well, yeah. Do you know that you can refund on a visa machine? Oh Huh. So you know, or a business owner will say, you know what, my CPA told me to get rid of the signature stamp and I did. But I do have a couple of sign checks in my safe in the office just for when I'm, you know, out of town.

KP: 17:38 Have you looked to see if any are missing? Do you have a log of it? Oh Hm. There's another kind of like, oh, oh, that's an interesting one. I just interviewed a woman. She stole $350,000. She's gone to prison. She's completely reformed. She talks about this. And um, yeah, it was ironic. She could sign the vice president's signature. She could forge it, but she could never get the president's signature down. But the interesting thing was is she goes, I didn't have signing authority, but they did give me wire transfer authority. She said, I never once did a wire. She goes, I could have, but I didn't because I thought that would maybe alert. She goes, but I just burns checks with the VP signature. Not the president's. Wow. Yeah. So I mean there's technology, there are ways around it, you know, I mean there's be some machines, even though those have gotten better, where like you can only refund to an account that has had a charge or, I mean there's ways around it. But cash skimming, I mean a lot of businesses like kids, orthodontist, when she started out, she had no idea how much cash was coming into her office weekly. It was over $5,000 a week because a lot of braces aren't paid for via insurance. And so people come in and they would pay cash and she's like, I have five grand a week sitting in a box and my, you know, office drawer. I'm like, yeah, you might want to reconsider that.

MP: 19:17 Huge risk. Huge risk. And, and w w w d. So we talked about dentists and why, why that happens. Uh, w or the amount that it happens. Why, why dentists?

KP: 19:33 So just on average out in Oregon at Dennis Gross, about 1.3 1.4 a year, he takes home, he or she takes home about two 50 now. That's a dentist that I'm going to say it's just like kind of average. Maybe they're not like cosmetic dentist streets. So that gives you about a million dollars of play. I mean, you've got expenses, you have rent, you have, you know, salaries and things like that, but are you really going to notice $5,000 no, I mean, I call it the fish tank gets expensive. You don't notice that. And these people are smart. They're in the weeds, they know where you won't pay attention to. So maybe you pay really, really close attention to salaries, but you don't pay a lot of attention towards like employee gifts or you know, off sites for our business, you know, conferences or things like that. They'll dump it in those categories that you don't pay attention to. They're smart. They're in the weeds.

MP: 20:33 Right, right. Wow. You know, it makes a lot of sense that because people that need to find a way, find a way and uh, if it's somebody close inside the organization, they're going to have that access to observe and find out where the are.

KP: 20:48 Yeah. I, I had a woman and I interviewed her, I had her come do a presentation with me and she stole a quarter of a million dollars over 18 months from six urologists, which is a, you know, humorous in and of itself. But the first check was an insurance check. But when I had her in an event, they asked her, so how you do it? Like, how did you physically do it? And she said, I wrote a check every week made out to me, but I coded it, you know, to some cost center. And she said every Friday the senior urologist would meet with the CPA and they would pull up the computer generated report. Never once did they pull up a check. She's like, she was there for 18 months. Every Friday. They never once pulled up the check. She quit. She didn't even get fired. She quit because there was other stuff going on in the office that she just didn't want to deal with. And six months later, a detective calls her and he said, do you know why I'm calling she's app? I think so. And, um, but like if they had just looked at one checked and it said, you know, x, Y, Z Printing Company for 2,500 bucks in the system, but the check itself said to Elisa, they would have been up bright while I was that it was that blatant.

MP: 22:14 Yeah. Yeah.

MP: 22:16 Wow. This is, I mean, I'm sitting here blown away and I, and I would imagine that the role of the bookkeeper is, in a way, it's like these are the owners right now. If you're a bookkeeper that has the intent to commit crime, then I don't, I doubt we're listening to who we have any listeners who are, who are those criminals? I hope not. Uh, but we have the, the, the bookkeepers who are out there to serve owners and help them be more successful in and not get into these situations. How can a bookkeeper, you know, bookkeepers, not only, they don't stay in a business, perhaps forever things happen. They move on, you know, businesses get bigger, need full-time staff, these sorts of things. What can a bookkeeper do to help their clients ensure that this never happens to them?

KP: 23:06 Ah, yeah. So removing the opportunity, which, you know, the bank statements should be male. I'm, this is one of the easiest tree previous bank statements mailed home to the business owner. Like, I mean I'm not creative, but give me an Adobe and a bank statement and I can make myself look like a millionaire. So the bank statements need to be mailed home to the business owner. And I mean I have business owners are like, well, if I were to change that, my staff might think I don't trust them. It's okay. Another hashtag trust is not an internal control. It's just, yeah. So that's an, if you don't want to do that, just get duplicate statements and then they'll never know. So you know, that's a free easy thing to do. The surprise audits. Now audits, and I love auditors, Love, love auditors. They are my people.

KP: 24:04 But if you know that every year, say you're going to get audited in the month of June, and there was a woman who stole $800,000 from a local municipality, she knew they only looked at June. So you wrote checks up until May 31st she quit for the month of June and then she started to back up July 1st so mix it up like, you know, don't be so set in your ways. And I had another guy who he reached out and he thought his business partner was stealing from him and they had an arrangement, no accepting of cash. They owned a car repair business and he thought that his business partner was accepting cash. You know, because he wasn't, he was offsite silent partner. And I said, you know, you can hire us but we're expensive. And he didn't have the money to do it. And I said, but why don't you do a mystery shop? Why don't you have a friend go in who doesn't, you know, your partner doesn't know, have them do a lube oil filter, whatever it is, and have them try and pay cash and see what the guy does. He's like, oh my god, that's genius. And you know, if he does pay cash, then it's like, Bingo. It's a problem. So I call it being creative, like you don't mix things up.

MP: 25:26 I, I love that. And I think the thinking around this is good thinking too, to say, hey, just put in some checks and balances that are somewhat random that, that it just, by taking that one little step, it creates another barrier. And so, you know, people, you know, the people, creative people, creative criminals can always find a way, I'm sure. But doing these things can help and can help prevent these crimes from occurring. Um, I'm really curious to hear a little bit about the aftermath of someone who's caught like, you know, they, they get caught like this, this woman who stole 350,000 and they showed up and, and said, hey, you know, you, do you know why we're calling? And so does that money ever come back? Does insurance pay for what, what? I mean, this is, that's a lot of money. I doubt she's gonna to write a check back for $350,000.

KP: 26:22 Yeah. So her story is really interesting. The company had, was very successful. They did have insurance and she was bonded. So they actually were made whole. That's unusual. I have had other cases where insurance cupboard, I had a high six-figure one but the business had very good insurance, also paid for investigative costs, but a lot of times you have like a $25,000 you know, employee dishonesty and like for me to walk into even I say sniff, it's five grand just to snip. And if a business is on the brake, you're throwing good money after bad people don't steal money to save the money is gone. I've seen one case where like a state employee stole a couple of hundred thousand dollars and literally he put it in a bank account and so when he got caught he was able to give the money right back. But that's very unusual to do that. So yeah. Yeah, he should have bought apple stock and then the state would have been even happier. But one of the other big pink flags is if they don't take a vacation, and this kind of goes to the control issues, if you have employees that aren't taking vacations, that's a problem. Why aren't they taking a vacation? Because they're covering something up and a vacation is a two day job. It's a, you know, week or two.

MP: 27:50 That's right. So another, another, another thing to look out for is someone that's not, never leaves the business, doesn't leave, leave the, the gate unlatched so to speak. Right?

KP: 28:00 Absolutely. Absolutely.

MP: 28:02 They've got to keep the, the kind of keep the thing going. That's, it's interesting. Now you, on your website, you mentioned that uh, the FBI say male embezzlers have increased only 4% since 1990. Well, pink collar crime levels have increased over 40% during that period. Why? Why is that?

KP: 28:22 So, you know, there are, I think there's a couple of reasons and I have to preface it with criminal justice. Statistics are really messy, like really, really messy. So that's according to the FBI. But a lot of these embezzlement cases don't even go to the FBI. They go to like state and local law enforcement and the cases are, you know, sometimes if someone in bezels they're charged with aggravated or wire fraud or for forging a check identity theft. So it's not like you have a dead body and you have a dead body. You might have numerous sort of things. So it's kind of messy that way. But think about how the workforce has changed. I mean, women are in the workforce. I mean it's pretty much 50 50 and they're in the positions where they have the access to it. So it is a crime that women really excel at because they have the opportunity and they have the access to it.

KP: 29:17 Whereas men are, and you know, they're in kind of different positions. But I mean one of the things you hear the glass ceiling in the states, it's like, you know, women are in 79 cents on the dollar. Well, women thieves only steal about 45 to 50 cents on the dollar. So I did a presentation one time and I always get a little pushback that I'm picking on women, which I am not in no, no matter whatsoever. And the woman's head. So you're telling me I shouldn't hire a woman? And you know, I've got 250 sets of eyeballs looking at me and I'm Kinda like, got to think quick on my feet here. And I said, no, actually, you know what, if you're going to hire a thief, hire a female because they're going to steal much less than a man and a good laugh for that. Good laugh. But I almost choked there. But yeah, good answer. And in my personal experience, the men have stalled quite a bit more and also much more quickly. Like I had a woman who still $1 million from a dentist over 10 years. The men, they steal it quick. It took one guy to almost set him out only six months and another guy about 1518 months. It takes women much, much longer.

MP: 30:35 Wow. Wow. Yeah.

MP: 30:44 It's, it's amazing that this topic is amazing and I think it's an interesting one. I mean there's, from my, from my listening here, bookkeepers should be, hey, with your owners, make sure you have proper coverage. Are you working with your as advice to their own or clients that, do you have, have you had discussions with your insurance broker about the potential for these kinds of things happening in the business? Which again, it's, I think you can embed that into your, your conversation with all owners and say, look, you know, this is your business. You need to pay more attention to your numbers always and not let that not be something of high importance. And that should, that can be the role of the bookkeeper to educate the client as to what the things that can happen inside of a business. And I think there's this, every bookkeeper will, we'll probably have a story of where the owner just doesn't want to have anything to do with it. It's like they just want to go do the selling or do the work or be the technician. But these things can destroy a business if they happen. So as a role here for bookkeepers to be a part of this conversation and to ensure that these things don't happen.

KP: 31:5 And I would also say, I've done this recently where don't share your passwords and bookkeepers have your own password to get in because you never want to be in the position of defending yourself. Everyone's like, oh well it was just a one time sort of thing. How can you know? You're kind of just proving a negative. So it's a big thing to not share a password and it will protect you because what if you share a password and someone goes in and makes a journal entry in order to, you know, feed and you're like, but I didn't do it. Yeah. Well your password, you were the one who accessed it. Never share passwords. I have a great slide with a toothbrush, you know, and it says never share passwords. You do. This is to protect.

MP: 32:40 Yeah. That's the other side of it is protecting yourself in the work that you do and bank account access, passwords, documentation, making sure that you have a, a plan to educate the owner, but as well make sure that the owner knows that look, this is how it's going to work and I'm not going to have this type of access so that you're protecting yourself because there could be that, it could be the other side, right. You know, someone else in the organization could be potentially setting up a the bookkeeper it to to look bad or to be on the hook for something. So this is where there's lots of opportunity to serve the client and as well protect yourself.

KP: 33:19 Absolutely.

MP: 33:20 Beautiful. Kelly, this has been very interesting. I would love for our listener to know where they can find out more about you if they do come across or want to educate themselves more about this topic.

KP: 33:33 Sure. So I have pink collar, crime.com and Kellypaxton.com I'm on LinkedIn. I love Linkedin, so hit me up on linkedin. I am working. I just sent it to the editor. My My, a book about this, I'm also starting to do some courses specific to different industries and I hope to have those done in the next couple of months where you can buy a course online for x amount where I will, you know, go through different industries and how it's happened with real-life examples. So yeah, my website, I'm also on Twitter. I tweet quite regularly about pink collar crime ethics fraud, and that's PD x, c f e as in certified fraud examiner. So PDX CFE. But yeah, and just give me a call. Hey, I'm all about spreading the word.

MP: 34:25 Beautiful. This has been great and thanks again for being so generous with your time and also your insights and wisdom about this topic.

KP: 34:33 Okay, well thank you. I'm honored that you asked me.

MP: 34:36 Yeah, it's all our pleasure. And with that, we wrap up another episode of The Successful Bookkeeper podcast to learn more about today's guest and to get access to all sorts of valuable free business-building resources. You can go to Thesuccessfulbookkeeper.com. Until next time.

MP: 34:52 Goodbye.