Banking on Instinct by Susan Knox

Banking on Instinct

Susan Knox

I’ve conducted a lot of audits in my day and overseen many more, but until one spring day in 1965, I’d never come face to face with an embezzler. Jay Reynolds, a New York businessman, engaged my accounting firm to assess the financial viability of a Cincinnati manufacturing firm. Even though I’m managing partner, I decided to oversee the project—Reynolds might become a long-term client, and I wanted to keep him happy.

The Capitol Machine Company employed fifty workers in their machine shop and produced components for large refrigeration units. The accounting office had one employee, Ethel Franklin. She’d been with the owner, Bill Simmons, since he started the company just prior to World War II. Ethel did everything in the front office—answered phones, opened mail, logged checks, made bank deposits, greeted visitors, paid bills, wrote paychecks, typed invoices, retained files, prodded late payers, kept the general ledger, produced the monthly profit and loss statement, maintained the equipment ledger and calculated daily production.

Bill signed the checks, but he trusted Ethel and paid little attention to supporting detail. His focus was on the daily production reports and new orders. Our audit team’s assignment was to verify she was performing her job properly and the financial statements reflected the correct earning power, assets and liabilities of the company. But there were no checks and balances in this system. Ethel did everything without scrutiny. The audit had to be expanded.

Our examination revealed that Ethel’s work was impeccable. Her files were neat, complete, and in good order. Invoices were correctly billed for both quantity and pricing. She made bank deposits every working day and balanced the bank account every month. Payroll checked out. The general ledger was in good shape. But when I looked at the salary ledger for the men in the front office and Ethel, I saw that she was paid a fraction of what they received. Year-end bonuses were generous for the men, a pittance for her. She knew exactly what everyone earned because she wrote the checks.

On top of that, her salary was way under market value for the work she did. I’d read of cases where an employee like Ethel felt underpaid and decided to give themself a raise. I had no evidence of embezzlement, but my antennae were up. I needed to further investigate.

To save time, I decided to take advantage of my relationship with the president of Cincinnati National Bank, where Ethel deposited her paychecks. He was a friend as well as a client, and I asked him to quietly look for accounts under Ethel’s name. He agreed. Because it was unethical and probably illegal, I told no one about my query. I felt uneasy using our connection this way, but I was willing to take a shortcut to see if anything was amiss in her personal accounts.

He called me two days later. Ethel had a checking account at the nearby branch office with a hundred bucks in it and a savings account in the main downtown office holding more than $50,000. A large amount for a clerk who earned peanuts.

I kept this information to myself, and rather than use my auditors, I personally investigated the possible embezzlement. I got a list of dates and amounts deposited to her savings account and went through the company’s canceled checks, trying to match the dollar amount on the check with her deposit. I discovered that Ethel regularly typed up invoices for fictitious companies, wrote checks for the phony charges, and deposited the checks into her personal account. She was careful, only one or two a month, and she used a rubber stamp with the fake company’s name to endorse the check so it couldn’t be easily traced to her.

As I thought about her motive, I realized she didn’t spend the money on herself in an obvious way. Her clothes were inexpensive, she took the bus to work and brought her lunch from home, and when I drove by her apartment building, I could tell the rent was low. Maybe Ethel wanted to fund her old-age account. There’s no way she could save enough for retirement on her salary.

I decided to take the findings to Bill. One has to be careful in these situations. I liked Bill, liked how he’d pulled himself up and created a successful business, but I knew he’d be sensitive to criticism and embarrassed that he hadn’t spotted the scam. I made an appointment to see him.

Bill Simmons is a short, quiet, richly tanned, self-educated businessman, who smells strongly of English Leather. I doubt he finished high school, but he’s got a knack for machines. As a teenager in the early 1930s, he landed a job in a two-man machine shop and learned all he could. By the beginning of World War II, he had his own shop and went on to make a bundle machining metal components for the war effort. His was an American success story.

“Good morning, Bill,” I said as I walked into his fancy office furnished with a tan leather sofa, Tiffany lamps, navy silk drapes, and a heavy walnut desk. This was where he received visitors. His working office had a beat-up metal desk and a large plate-glass window that opened out into the machine shop and smelled of oil and metal filings.

I sat down. Ethel bustled in with coffee, china cups and saucers, cream, and sugar. After she left, I got up and shut the door. Bill looked at me, surprised, then worried. I cleared my throat and decided not to plunge into the bad news just yet. “The audit’s almost completed,” I told him. “The inventory checks out, the equipment record is accurate, your customers seem prosperous and pay on time. There’s just one thing we need to discuss.”

Bill interrupted. “It’s Ethel, right?”

 When I looked up, I’m sure my face said it all. “Well, you don’t pay her very much.”

“It’s not a good idea to pay females too much,” Bill said. “They don’t need as much money as men. I always take Ethel out for lunch at Christmas and give her a big ham and a fifty-dollar bill. She’s never asked for more money, but I give her a small raise every few years. Men still need jobs. Don’t want to tempt girls back into the workforce with high wages like we did during the war. After all, they have families to raise, husbands to take care of. At least most of them do. Ethel’s an exception. Far as I know, she’s never been married.

“I’ve always liked Ethel on the front desk. She’s a great gal, and she greets visitors with a smile. I get a kick out of watching manufacturer’s reps walk in and see her for the first time. They’re always tickled with her smile, but their eyes immediately drop to her tits—Ethel’s built like a brick shit house. She could give Jayne Mansfield a run for the money.”

I’d never heard Bill string more than two sentences together at a time, but on this subject he was eloquent.

“Ethel does everything in the front office. I don’t know how she manages, but it’s saved me a lot of money, not having to hire more girls, and Ethel does a great job.

“That she does.”

“I know she’s looked at the cost of producing the M-20 manifold. She’s got some fool idea we’re losing money.”

“Yes, I’ve seen her work.”

Bill interrupted again. “But that’s not going to kill the deal, is it? Reynolds won’t pull the plug over this, will he?”

I realized Bill didn’t have a clue about Ethel’s embezzlement; he thought she’d put the deal in jeopardy by her questions on the underpriced part.

“I doubt it. The price can be adjusted, but it may be that lost money on this part is enabling the business as a whole to be successful.”


“It’s like a loss leader. We’d have to do a more thorough cost accounting. Ethel’s made a good start, but she doesn’t know how to allocate overhead.”

I’m not sure why I hesitated to tell Bill he was being cheated. Something held me back. Maybe I didn’t need to tell him. Bill wasn’t my employer; Reynolds paid me. I hadn’t felt this muddled, this indecisive since Cora told me she was pregnant and we had to get married. And that was over twenty years ago. I decided to wait, give it some more thought.

As I left Bill’s office, Ethel looked up from her desk and smiled. “You’re a good man, Daniel Byrne.” Did she have a listening post? I didn’t trust myself to ask her what she meant, just tipped my hat and muttered I was late for another meeting.

I got into my pink Cadillac (Cora’s idea) and sat there for a while, trying to straighten out my head. I decided I didn’t have an ethical requirement to inform Bill. Reynolds was my employer, and how big a difference would this make to him? Actually, the company was more profitable than we realized, which meant that Reynolds was getting an even better deal. My job was to determine if the company was a viable concern, and it was.

Then there was Ethel. I felt sorry for her. I could understand she wanted to punish Bill for his parsimony and poor treatment of her. I didn’t think she was a bad person, and she was smart and efficient. She’d played a big part in making the company successful.

I had an idea. I went back to Ethel’s office. When I walked in, she looked up, surprised.

“Here’s the deal, Ethel. I need an office manager, someone with your smarts, someone who can track personnel and paperwork, someone who can tell me who is forging positive connections and who’s alienating clients, someone who looks for improvements and possibilities in the practice. You wouldn’t be responsible for billings, collections, or deposits. No money handling.”

“Wow,” she said softly, looking down at her desk.

“You’d be paid what you’re worth. About four times what you officially make here.” She got the inference, paled a bit. She took a deep breath and looked up at me. “I understand, Dan. I’d like the job, but I hate to leave Bill in the lurch.”

“Bill will be fine. Reynolds wants to move fast, bring in his New York staff to create systems the way he likes them. You’ll be out in weeks, and Bill will be out in less than a year.” Ethel stood up and shook my hand. “I won’t let you down,” she said.

I’m not an impulsive man. My attraction to the accounting field and the rigor with which accounting is practiced doesn’t leave room for imagination or gut feelings. But I’d placed a big bet on my intuition. I wouldn’t report the embezzlement to Reynolds. If any word of Ethel’s theft and my cover-up became known, I’d be out of a job. Partners can retire at fifty-five with generous benefits, but I had twelve years to go, and if I were fired, my pension would be forfeit.

I went home, poured a stiff scotch, and went to my den. I wasn’t second-guessing myself . . . well, not much. It was out of character, but I had a strong hunch about Ethel’s abilities. Our Cincinnati office produced income in the middle of the Price Waterhouse pack. Out of 150 offices, ours ranked 80 in gross income and 90 in profits. I wanted to develop new business, lower expenses, and increase revenue. I thought Ethel could ferret out problems, find ways to improve our numbers. She would hear things I’d never hear. Who slacked off? Who padded their hours? Who was industrious? Who had creative ideas? I wanted a smart person in the mix, loyal to me. Ethel would be beholden, but I would treat her fairly and respectfully.

I was right. Ethel had a talent for improvements, and she was discreet. I doubt anyone ever figured out how much she helped me. I got a lot of credit, and I deserved a lot of it, but we made a good team, and together we kept the practice growing and more profitable.

My only problem with Ethel came a few years later. Cora rarely came to the office. She saved her appearances for the social aspects of the business. I seldom discussed business with Cora, and she seldom asked questions about my world. We had an unspoken understanding: Cora managed the home front, including the children and our social life; I made the money and devoted my time to the business.

Ethel and I were in my office laughing about some naïve missteps by two new auditors. Ethel was leaning toward me saying, “Can you imagine these guys in bed . . .” when Cora walked in unannounced. I could see on her face what was running through her mind. They’re very friendly. That’s hardly a fit topic. Why is Dan spending time with a clerk? I’ve never heard him mention any female staff.

“Cora, what a pleasant surprise,” I said, giving her a quick hug. I felt my forehead dampen and hoped she didn’t notice. I pulled out a chair. “Please have a seat. This is Ethel Franklin, our office manager. We were reviewing some staffing issues.”

Cora behaved like a champ and greeted Ethel cordially. I think Ethel knew what was on Cora’s mind, and after the introduction, she gathered her papers, got up, said, “A pleasure to meet you, Mrs. Byrne,” and left the room.

Cora didn’t stay long. She updated me on a dinner we were to host and some new people she’d invited. She smiled when she left but didn’t kiss me goodbye. That troubled me. It was out of character.

I drove home that night and pondered how to deal with Cora’s suspicions. I’d never cheated on her, and I never would, and I was concerned she had doubts. I wanted to explain the situation, but did I trust Cora’s discretion enough to tell her Ethel’s full story? If I told her would I be able to sleep at night, or would I worry she might slip and tell her mother or a good friend? Would she understand that if my actions were known, I‘d be out of a job and a pension? Maybe it wasn’t fair to burden Cora with this knowledge. I tried to sort out the pros and cons before I got home. As I pulled into our driveway, I reached my decision.

I entered the house and found Cora sitting in the living room. She’d been crying. Her eyes were red-rimmed, her nose pink and raw-looking. She’d probably had a long phone conversation with her mother about the affair I was conducting with my buxom office manager.

I greeted her quietly, got no response, and went to the portable bar cart at the back of the room. I poured us both scotches, the good stuff, single malt 18-year Laphroaig—ice and water for her, neat for me—and sat on the sofa opposite her. Her face was like stone as she looked into her drink.

I cleared my throat. “Cora, I know what that meeting with Ethel looked like, but let me tell you how Ethel came to the firm and how it’s worked out over the last five years.” Cora shifted in her seat, sipped her scotch, and looked up at me. I took that to mean she was ready to listen. I told Cora how I’d met Ethel while we conducted an audit of the company she worked for and how she practically ran the business. How she’d worked for Bill Simmons for over twenty years, made a low salary with infrequent raises, how underappreciated she was, how Simmons and others leered at her, discussed her physical attributes in voices loud enough that she could hear. How I spotted her talents, realized she could help me grow the firm, and offered her a job. How I was right, we made a good team and increased billings and the profit margin. How it was strictly business between the two of us. As I told her Ethel’s history, Cora’s face softened. I could tell she understood and believed me. I didn’t mention the embezzlement and my cover-up.

Cora got up, crossed the room, and kissed me on the forehead. “You’re such a straight arrow, Dan. I should know you’d never do anything disreputable. Thank you for telling me. Are you hungry? I’ll get dinner started,” and she left the room.

I sat back and took a big swig of scotch. I’d made the right decision—my office manager was not suspect, Cora trusted me, and my secret was safe.

About the Author

Susan Knox’s stories and essays have appeared or are forthcoming in Blue Lyra Review, CALYX, The Forge, The MacGuffin, Sequestrum, Zone 3, and elsewhere. She has been nominated for a Pushcart and Best of the Net award. She and her husband live in Seattle, near Pike Place Market, where she shops most days for the evening meal.