Co-workers found the 51-year-old Hartley to be sociable and loyal. They knew she would go toe-to-toe with the insurance agencies when they needed help. She was a past president of the Women's Auxiliary of the local Plumbing-Heating-Cooling Contractors, and very involved in the organization. She had a dominating presence that demanded attention.

Hartley's devotion to her job continued through the years and even became stronger, according to Marlin's owners Mark Larson and Mark Giebelhaus. She took few, if any, vacations - opting instead for long weekends, picking and choosing her days off carefully. She was not away from her desk for more than a day or two at the most.

So it was difficult for the company to let her go in April 1999 when she violated a company confidentiality clause by disclosing pay rate information and health records to other employees. She was given a month's salary and asked to leave.

However, it was far more difficult to believe only a month and a half later that this same loyal employee - runner up in 1998 as the NAPHCC's Auxiliary Woman of the Year - had embezzled nearly $1.9 million dollars over the course of eight years.

"She worked for us for so long and did a good job," said Giebelhaus, still shaking his head in disbelief and disgust. "There was no reason to suspect anything."

Employee Dishonesty:

Take a bite out of these facts from the U.S. Small Business Administration:

• Almost two-thirds of theft comes from employees.

• Nearly one-third of all bankruptcies are caused by internal theft.

• Employees steal more than $1 billion a week from their employers nationwide.

One of the main reasons internal theft thrives is that management continues to believe in myths and misconceptions about the nature of dishonest employees. They surround themselves with a false sense of comfort saying, "It could never happen to me, my guys are loyal." But all too often warning signs are ignored, and it's too late to curtail the crime.

The folks at Marlin found out the hard way - there is no stereotypical thief. Like a book, embezzlers can't be judged by their cover. They can be old or young, male or female, new hires or seasoned workers, field technicians or executives - they could even be friends or family members.

Hartley had been in a position to dominate the woman she trained for the sales clerk position, and ultimately subverted the authority of the company. Almost every week for eight years she signed and cashed bogus insurance checks into her own bank account. In the last few months of her employment, she was pilfering more than $40,000 a week. She stole to the degree that the system allowed, and didn't stop until she was caught.

What makes embezzlement different from robbery or larceny is one word - "trust."

By definition, the "fraudulent appropriation of property or funds" by a person you trust can leave you feeling vulnerable from all sides. The best way to avoid being a victim of embezzlement is to have a system of internal controls in place to safeguard your business and profits.

Understanding Why:

• Simple Embezzlement - Cash is received by an employee and he pockets it without recording the transaction. This type of theft is hard to detect if there is no subsequent transaction entry required in accounts payable. By prenumbering your sales invoices or receipts, you can reduce the temptation to steal. Having regular monitoring procedures also ensures your sales are being recorded.

• Lapping - A temporary withholding of receipts for personal use. Let's say an employee receives a check as payment on an open account. He holds out a $100 cash payment made by Customer A on April 1. To avoid getting caught, another $100 is taken from a $200 payment by Customer B on April 5. This is sent on with proper documentation to the accounts of A. The employee pockets the remaining $100, increasing the overall shortage to $200.

  Fraud of this nature can go on for years without detection. It requires detailed recordkeeping on the part of the embezzler, who has to remain one step ahead at all times. Like Hartley, the thief is likely a person given more authority than the position calls for - and s/he will steal until s/he is caught. Something unusual has to happen to bring the crime to light, such as a customer complaint or unexpected time away from the job for the embezzler.

  When Hartley was fired in April, her scheme was uncovered because she could no longer manipulate accounts and records for her own use on a daily basis. The company's sales clerk and controller began to wonder why insurance checks were arriving only once a month instead of every week as before. It didn't take long to follow the paper trail back to Hartley.

  One reason many businesses require regular vacations is to keep indispensable employees from dispensing company funds. An employee who is hesitant to delegate his work to others, or keeps track of business transactions outside his regular accounting books could be stealing your profits.

• Payroll Fraud - A payroll administrator adds bogus names to the company payroll and collects several salary checks each week. This is easy to spot in smaller mom-n-pop shops, but as a business grows, or experiences high turnover, the temptation to pad his own wallet might be too great for an enterprising embezzler.

  To curb this type of theft, make sure no one is placed on the payroll without your permission. It's also a good idea to have the preparation of the payroll handled by a separate person from the one who actually pays the employees - especially when cash is involved.

• Computer Crime - Dishonest employees can divert funds and goods for their personal gain. Small businesses understand the importance and ease of computerized data, but it also makes it easier for embezzlers to attack your profits. Personnel records, inventories, receivables, payables, bank accounts and all other records are contained on small diskettes that can slip unnoticed into pockets.

Have your company select computer software and backup control measures to reduce potential losses - and monitor the results.

What's Next?

With the help of the Phoenix and neighboring police departments, Hartley was apprehended, convicted and sentenced after a plea bargain was settled in December. Her lawyers had hoped to cap her jail time at five years (the minimum for the felony charge she pleaded guilty to), but the judge sentenced her to eight years in a state prison.

Though this was a first-time offense, the judge called Hartley a "serious repeat offender," who betrayed the trust of her employer and co-workers. She could face more jail time and hefty fines from the IRS for failure to pay taxes on the money she stole.

When Hartley was arrested, about $38,000 was recovered from her. Another $30,000 was recovered from her daughter, whom she had given several gifts, loans etc. over the years. Marlin's insurance company handed over a $130,000 check for the company's dishonest employee coverage. But, according to the owners, Hartley spent most of the money she stole by buying friends gifts and gambling a large portion away.

The grand total of her theft may never be known, and will never be fully recovered.

Though no drastic changes were made to the internal checks and balances of Marlin Mechanical, the company hired a human resources director in September to clean up all employee issues, and help perform background and reference checks on new hires. Also, all bank statements and canceled checks are now forwarded to Giebelhaus's home instead of the office.

"Even with the amount she took we've had a good year," Giebelhaus admits. "But the largest impact of the loss was to the other employees. She really stole from them."

Her actions reduced the share price the employees had invested in the company, and had cost them their yearly bonuses for the past few years.

"You hate to see someone you've known and trusted for eight years go to prison, but she's paying for what she's done. She devalued the company and its 130 employees," Giebelhaus said in a statement he made in front of the judge, Hartley and 30 Marlin employees in an Arizona courtroom in December. They all were satisfied as the "clink" of the bailiff's handcuffs echoed in the courtroom when he led her away.