Property Coverage

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• Property Coverage
• Ray Louviere
• State Risk Claims Adjuster IV
• 2009

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Agenda

• 2008 Review
• Lessons Learned
• Coverage Discussion
• Case Studies
• Warnings and Schemes
• Safeguarding Measures
• Questions and Comments

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What a Year!

• GUSTAV 1700 and counting
• Throughout the state

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What a Year!

• Multiple Contracts Issued to Independent
  Adjusters to inspect and assess the damages
• Additional staff hired to manage the many claims
• Weekly meetings with FEMA, GOHSEP, FPC and State
  Agencies to coordinate efforts

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Lessons Learned

• Establish a disaster plan prior to the disaster.
• Appoint an Emergency Response Group to implement
  disaster plan.
• Establish an off site location to assimilate in
  the event your building is not accessible.
• Emergency Phone Tree to communicate with all
  personnel.
• Store paper files in water proof cabinets above
  the flood elevation (not in the basement).

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Lessons Learned

• Maintain electronic copy of all critical data at
  an off site location.
• Identify contracts that your agency will need and
  communicate with State Purchasing.
• Obtain digital photographs of contents.
• Take a regular inventory of contents.
• Know where your agency vehicles are located and
  move them to higher ground (garage).

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ORM Property Coverage

• Scheduled Property Policy
• Equipment Breakdown Policy
• Employee Bond Policy
• Crime Policy
• Marine Policy

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Steps to take after a property loss or accident

• Contact ORM Claims Department-report all losses
  exceeding 1000 Deductible.
• Prevent additional damages.
• Preserve evidence.
• Photograph damages.
• Notify police or other authorities when
  appropriate.

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Scheduled Property

• Properties identified in the Schedule of Property
  Values with the State of Louisiana, Office of
  Risk Management
• All properties owned by the State of Louisiana
• All properties for which the State of Louisiana
  has assumed liability

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1st Party Vs. 3rd Party Claims

• First party claims involve State Agencies and
  State Employees
• ORM is contractually obligated to cover 1st Party
  insured losses

• Third party claims involve individuals who are
  making a claim against a State Agency or a State
  Employee
• ORM is obligated to defend and indemnify claims
  against State Agency

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Focus of Discussion

• Employee Bond Policy
• Crime Policy

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Date of Loss Vs. Discovery Date

• Employee bond claims are based upon the date of
  discovery.
• The employee bond policy requires that the claim
  be reported within 90 days of the discovery date.
• The suspect employee must be identified when the
  loss is reported.

• Most claims are based upon the date of loss.
• Most claims expire or prescribe 12 months after
  the date of loss.
• Most losses can be reported anytime during this
  12 month prescriptive period, but should be
  reported as soon as possible.

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Policy Definition

• Employee Bond Policy
• Provides coverage up to 500,000 with a 1,000
  deductible in the event of an employee
  mishandling of funds (i.e. embezzlement)
• Crime Policy
• Provides coverage up to 2 million with a
  1,000 deductible for theft against a State
  Agency by a non-state employee (i.e. burglary)

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What is Embezzlement?

• Fraudulent appropriation by an employee in the
  use of State property or money entrusted to that
  persons care.
• The embezzler is usually a trusted confidant who
  has been given more authority than the position
  requires.

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Case Study 1

• Labor Leader Took Millions, U.S. Charges
• October 18, 2006, Wednesday
• By ANEMONA HARTOCOLLIS AND STEVEN GREENHOUSE
  MICHAEL COOPER CONTRIBUTED REPORTING. (NYT)
  Metropolitan Desk
• DISPLAYING ABSTRACT - President of New York City
  Central Labor Council arrested on federal
  racketeering charges involving embezzlement,
  bribery, fraud and money laundering head of
  nation's biggest municipal labor council has
  personified New York's politically powerful labor
  movement is charged with obtaining 2.2 million
  from taxpayers, unions and contractors over
  decade accusations include theft of 95,000 from
  Little League teams, creating no-show jobs, using
  subordinates as servants and taking campaign
  funds to pay for wedding party, home renovations,
  country club membership and plasma television for
  female friend.

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Case Study 2

• Bookkeeper Admits Embezzling 2.3 Million for
  Lottery Habit
• August 24, 2006, Thursday
• By BRUCE LAMBERT AND VALERIE COTSALAS (NYT)
  Metropolitan Desk
• DISPLAYING ABSTRACT - For months, Annie J.
  Donnelly drove her blue Dodge Durango every day
  to MK Cards and Gifts near her home on Long
  Island and bet thousands of dollars on New York
  State Lottery games, sometimes buying tickets by
  the hundreds.

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Case Study 3

• Probation for Embezzler's Son In Theft From
  Roslyn Schools
• June 22, 2006, Thursday
• By PAUL VITELLO (NYT) Metropolitan Desk
• Late Edition - Final, Section B, Page 9, Column
  1, 656 words
• DISPLAYING ABSTRACT - The son of an admitted
  embezzler at the center of the Roslyn schools
  scandal was sentenced yesterday to five years'
  probation for buying 83,000 worth of merchandise
  for his personal use with a school district
  credit card given to him by his mother.

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Case Study 4

• A Guilty Plea in Wal-Mart Case
• February 1, 2006, Wednesday
• (AP) Business/Financial Desk
• Late Edition - Final, Section C, Page 5, Column
  5, 322 words
• DISPLAYING ABSTRACT - Former Wal-mart Stores vice
  chairman Tom Coughlin pleads guilty to fraud and
  tax charges, admitting he stole money, gift cards
  and merchandise faces maximum of 28 years in
  prison and could be fined 1.35 million on losses
  estimated at up to 500 million

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Warning Signs

• Inventory Shortages could indicate fictitious
  purchases, unrecorded sales or employee theft
• Decline in Profits could be a sign that cash is
  being misappropriated
• Unusual small increases in cash or credit card
  sales could mean that some sales are not being
  recorded
• Any unanticipated change in accounting records
  should warrant further review

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Common Schemes

• Cash Scheme employee receives cash which goes
  unrecorded
• Lapping Scheme employee temporarily holds
  payments on accounts receivable and cycles the
  payments through the system to avoid suspicion.
  Money is received from Customer A for 100 on
  January 1st. Money is received from Customer B
  for 200 on January 7th. Employee credits
  Customer As account for 100 and pockets the
  200 from Customer B. Customer C comes in with
  500 on January 8th. Employee credits Customer
  Bs account for 200 and pockets the 500. The
  cycle continues. The employee has to be a
  detailed record keeper to keep up with this
  scheme.

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Schemes Cont

• Check-Kiting Scheme employee has authority to
  write checks out of more than one account.
• On January 2nd, a check for 4,000 is drawn on
  Bank A and deposited into Bank B.
• On January 3rd, the employee cashes a 4,000
  check payable to Cash and drawn on Bank B.
• The employee then deposits sufficient funds into
  Bank A and drawn on Bank B.
• The process of using the money float continues.

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Schemes Cont

• Vendor Scheme employee establishes dummy
  vendors and creates dummy invoices.
• Padded Expense Scheme employee creates
  fictitious invoices and submits them for
  reimbursement.

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Practical Exercise

• Everyone, please take out a few coins, count
  them, place them in the plastic bag provided to
  the person on the far left and pass it onto the
  next person.
• Person on the far right, safeguard the gift that
  has been provided to you.
• Mr. or Ms. Far Right, raise your hand when you
  have received your gift of money.

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Mistakes Made

• First you allowed a third party, me, to direct
  you on what to do with your money.
• Secondly, you entrusted your money to Mr. or Ms.
  Far Right whom you likely did not know, did not
  run a background check on and did not get a
  receipt for your monies.
• Thirdly, Mr. or Ms. Far Right gleefully took your
  money without making an entry into a financial
  record and without giving you a receipt.

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Lessons Learned

• Embezzlement can be easy if you let your guard
  down.
• Safeguards are needed to prevent misappropriation
  of monies.
• Now Mr. or Ms. Far Right, please pass the bag to
  your left so that each person can remove their
  misappropriated funds.

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Safeguarding Measures

• Instill a climate of accountability in all areas,
  particularly in the area of finances.
• Examine current procedures and implement internal
  controls.
• Separate assigned job tasks, such that the
  employee receiving payments is not the same
  employee making entries into the accounts
  receivable record.

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Safeguarding Measures

• Conduct periodic audits and address entries that
  are questionable.
• Review your internal controls on a regular basis.
• Conduct background checks on prospective
  employees.
• Know your employees such that any change in
  behavior may warrant further examination.

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Crime Policy

• Covers forgery of checks, drafts or promissory
  notes by a non-employee third party
• Covers theft, disappearance and destruction of
  money and securities which are stored in a locked
  safe, vault, cash register, cash box located on
  the premises
• Covers robbery and safe burglary of property,
  other than money and securities

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Safeguarding Measures

• Educate your employees on safety.
• Never open or close your office alone.
• Use a radio or television so that a potential
  intruder will assume others are in the office.
• Avoid signs on the windows which obscure
  visibility.
• Keep valuables locked.

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Safeguarding Measures (cont.)

• Avoid routine bank transactions and banking days.
• Always us more than one employee for banking
  errands.
• Use surveillance wherever possible.
• Maintain only minimal dollars in the safe.
• Never disclose internal financial practices to
  third parties.

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Your Property Team is Ready to Assist
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Contact Information

• Ray Louviere
• Office of Risk Management
• P. O. Box 91106
• Baton Rouge, Louisiana 70821-9106
• 225-342-8438

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• Questions
• And
• Comments

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Thank You