(Photo via iStock)
A longtime Vedder Price office manager was charged with embezzling about $7 million from the firm in a decades-long false billing scheme involving her sister and two other accomplices, Illinois prosecutors say.
A yearlong investigation by the financial crimes unit of the state attorney’s office in Cook County resulted in the Friday arrest of Patricia Lapinski, 66, who worked as an office manager at Vedder Price for more than 30 years, according to firm. Also arrested were Lapinski’s sister, Deborah Acuna, 61, as well as James Bauer, 62, and David Leisen, 57.
All four defendants were charged with felony counts of theft of more than $1 million and are currently free on bond. Vedder Price said in an emailed statement that the scheme didn’t affect its clients or other employees and it has recovered some of the stolen funds.
Prosecutors say that as office manager, Lapinski was responsible for both choosing supplies and equipment vendors for the firm, and for processing the invoices. Lapinski and her sister, who was not employed by Vedder Price, allegedly created a company called DAS Designs in the late 1980s whose sole purpose was to obtain furniture contracts using Lapinski’s position. Acuna claimed to be president and controlled the furniture company’s bank account while Lapinski used a fictitious name to act as signatory.
Throughout the 1990s, Vedder Price placed millions of dollars worth of orders for furniture and other goods from DAS for which it was allegedly overcharged. In 2002, the firm switched to a different office furniture provider, but DAS continued to bill for items it didn’t provide.
All told, DAS Designs billed Vedder Price more than $6.4 million from 2002 to 2013, which Lapinski and her sister allegedly used to finance fancy homes and vacations, among other luxuries, authorities say.
Then, in 2011, Lapinski contacted flooring contractor James Bauer and furniture repairman David Leisen, also longtime vendors of Vedder Price, and allegedly let them in on the scheme. Their companies issued invoices for more than $950,000 for services never provided to the firm, and kicked back a portion of the proceeds to Lapinski, prosecutors say.
Things unraveled in 2012, when Vedder Price got wind of the scheme, turned the matter over to the state attorney’s office for investigation and fired Lapinski. The firm would not comment on how it came to discover the fraud, but it did issue a statement on Tuesday, which read in part: “It is unfortunate that Vedder Price was the victim of this breach of trust by a former employee of over 30 years. The firm already recovered a substantial portion of the funds, and expects to recover more.“
Jason Flemmons, a certified public accountant who formerly served as deputy chief accountant of the enforcement division at the U.S. Securities and Exchange Commission, said the scheme as described by Illinois prosecutors is not uncommon and that “law firms are not immune from that kind of fraud.”
In fact, Vedder Price is one of a string of Am Law firms that have seen crimes committed against them in recent years, including a January 2013 case in which a Fried, Frank, Harris, Shriver & Jacobson employee was charged with stealing $376,000 worth of copy machine toner. Another case involved Mayer Brown’s chief information officer in Chicago, who was federally charged with 10 counts of mail fraud in 2012 for allegedly cheating the company out of $4.2 million by using phony invoices.
Flemmons, who is now senior managing director in FTI Consulting’s forensic accounting practice, was not involved in the Vedder Price investigation. But he provides expert testimony, advises legal and corporate clients and performs internal investigations involving auditing and accounting issues.
“In partnerships and smaller companies that are not subject to a lot of the same regulatory requirements as a public company, you do find many times that the internal control structures are not as robust as they could be, [which gives] them more exposure to something like this,” he says.
To guard against fraud, Flemmons says vendors should come from a list that’s been approved by someone outside of the purchasing department. Another standard control is to have a high-level executive sign off on purchases over a certain dollar amount.