Hairhouse Warehouse accounting fraud highlights urgency for office security

The bookkeeper of hair and beauty franchise Hairhouse Warehouse has been sentenced to four and a half years jail after embezzling nearly $1 million from the company over two years, emphasising yet again the importance for SMEs to closely monitor their cashflow.

The incident comes two years after troubled consumer electronics chain Clive Peeters eventually collapsed due in part to its accountant taking part in massive fraud, stealing $20 million to fund a luxurious lifestyle.

Gary Gill, KPMG national leader of investigations and integrity risk management, says although there are high profile and highly publicised cases of fraud, many SMEs still become victims.

“You certainly see some new and different things happening, but employee fraud is still there, still happens, and it happens all the time, unfortunately,” he says.

According to AAP, booker Illias Karaliamis worked at the head office from 2004-06 and stole $957,000 in total. Only $726,000 was taken from the office by falsifying cheques, while the rest of the money was taken from two franchisees during 2007-08.

The Victorian County Court reportedly heard the two franchisees suffered financial difficulties as a result of the embezzlement. Judge Gabriele Cannon said Karaliamis said the money was partly spent on his second wife’s business.

“The only person responsible for your offending is you,” Cannon said, ordering Karaliamis pay $726,542 to the business, and $80,000 to each franchisee.

The ruling comes two years after Clive Peeter’s suffered a similar disaster, when its accountant was found to have stolen $20 million from the company and invested in property.

Gill says these types of fraud are usually committed by someone inside the company, middle-aged, and not necessarily who the business owner would suspect.

“One of the issues with businesses, particularly small businesses, is the lack of segregation of duties. So out of necessity one person might be doing a lot of things, as opposed to just one roll.”

“It really is the onus of the business owners to keep a good eye on things and at the end of the day make sure they know what’s going on in the bank account.”

Gill says businesses need to ensure that employees with access to sensitive information aren’t the only workers with access to those records, such as payroll and bookkeeping.

“Make sure they don’t have the authority on their own to process payments without overview. The other person should at least be the managing owner of the business.”