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: University of Louisville Law Faculty

Jennifer Martin's Blog: Quality Woodworks' Embezzlement

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Annette Yeomans, chief financial officer for California-based Quality Woodworks, Inc. was recently arrested in a classic case of embezzlement of $9.9 million of company funds, causing the company to lay-off workers and restructure operations. The scheme apparently lasted more than seven years and Yeomans used more than $6 million for gambling and other funds for clothing, shoes, home improvements and the like. Yeomans would charge up to $25,000 on her company credit card each week and then issue a company check the next week to pay off the balance.

Yeomans' case is one that makes a great law school classic. Under 1-201(43) an "unauthorized signature" includes a "signature made without actual, implied, or apparent authority." Yeomans' signatures on company checks over the course of seven years would be unauthorized under the code. Section 4-406(d)(2)'s "same wrongdoer" rule precludes the customer (QWI) from claiming the loss from the bank for the acts of those like Yeoman where the customer did not notify the bank of the forgery within thirty days. With a longstanding scheme like Yeoman's, QWI will shoulder the load. It looks like about $2 million is recoverable from Yeoman, but apparently she lost the rest gambling. This becomes another case of faulty internal procedures resulting in a huge corporate loss. That Yeomans will likely spend some time in jail is small comfort for company employees at a time when jobs are already hard to come by.

? JSM

Full post as published by University of Louisville Law Faculty on March 08, 2009 (boomark / email).