It was 2010, and Russ Christensen’s business was bleeding. But from where?
Despite a steady stream of work—including lucrative contracts painting Mormon churches and properties worldwide—the owner of Professional Painting Inc., in Murray, UT, was barely keeping his head above water.
|The last month she was there, she took every check that came|
through the door,” says Russ Christensen.
“I knew I had a good price on these jobs,” Christensen says now. “But for some reason, we weren’t making money, and I didn’t know why.”
“Where were we going wrong?”
Discovery and Betrayal
He decided to have his comptroller, a degreed accountant and lifelong friend, go over the next two jobs with a fine-toothed comb, just to see what he could find.
What he found was betrayal—and more than a million dollars missing.
On Monday (April 9), the betrayer— Pamela Jane Madsen, 39, Christensen’s longtime secretary—was sentenced to nearly four years in prison for stealing nearly $1.4 million from her employer over three years.
“I trusted somebody, and I got burned,” Christensen says now.
‘We Lost Our Eye on the Ball’
Madsen, of Bluffdale, UT, pulled off a breathtaking series of embezzlements so seamless that even the company’s comptroller did not catch on, Christensen said in an interview Thursday (April 12).
Madsen had worked for Christensen without a problem since 2000. She was hired after an extensive search of pre-screened candidates by three recruiting companies and nine personal interviews.
Then, in 2007, busy with his dying father (who started the business) and other aspects of the company, Christensen made two decisions that he would live to regret: He began to allow Madsen to open the company’s mail, and he allowed her to make bank deposits.
It was a combination that would drive his company, founded in 1981, to the brink of ruin.
“I got so busy that we lost our eye on the ball, and she knew it,” he said.
Cooking the Books
Christensen said that although he and Madsen had invoiced jobs together, he then allowed Madsen to open the mail, collect and post the checks, and update the books.
Between invoice and internal reviews, he later learned, Madsen doctored the books to make billing and payments balance, authorities said. When the controller did his audits later, everything appeared to be in order.
What Christensen didn’t know was that Madsen had secretly opened a new bank account for a business called “Professional Painting Incorp.” and began diverting payments there. She was the only signer on the account.
Because the names of the companies were so similar, banks did not question the deposits, Christensen said
Lost and Found
The scheme continued until August 2010, when Christensen told the comptroller to put two particular jobs under a microscope. Anomalies then became obvious, and the controller confronted Madsen.
Unfortunately, said Christensen, he was out of town at the time. And after the controller left that day, all of the computers were scrubbed, job files were purged and destroyed, and the company’s safe was stolen from the office. Madsen, too, disappeared.
Nine months later, the Internal Revenue Service Criminal Investigation Division found Madsen living outside Dallas, TX, and she was indicted http://www.paintsquare.com/news/?fuseaction=view&id=5990 on nine counts of money laundering and mail fraud.
Fighting for Survival
While Madsen was at large, Christensen worked to save his company.
“It’s a nightmare that I would not want anyone else to go through,” he said. “The day she left, we had no money in the bank. Literally nothing. The last month she was there, she took every check that came through the door.”
He is particularly bitter that two days after he was forced to rescind the staff’s 401(k) benefits—sad-news letters that Madsen typed and mailed—she stole a $63,000 check that would have covered the plan for an entire year.
“That’s how cold she was,” he said.
During the hardest of the hard times, Christensen was forced to take back all employee benefits to keep the company afloat. Everything has now been restored.
Guilty Pleas and Snowmobiles
Madsen eventually accepted a plea agreement and pleaded guilty to some of the charges (but not to the thefts from the office on her last day).
On Monday, U.S. District Judge Ted Stewart sentenced her to 46 months in federal prison and ordered her to pay $1,351,102.74 in restitution. She also must forfeit three snowmobiles and three four-wheelers.
When she finishes her prison sentence, Madsen will be on supervised release for five years.
Christensen knows that he is unlikely to see most of his money again. He also knows he would see more money if Madsen were employed, rather than in prison. But he wanted her behind bars, he told the judge.
“Luckily, we stayed alive,” Christensen said. “We stayed in business. I really have to thank our employees. We’ll be lucky to get a pittance back. But we prefer the jail time, even though the longer she is in jail, the less we get.”
Christensen’s business has changed, and so has he. He has tightened his procedures and now audits monthly. No one else opens the mail or delivers deposits.
“We should’ve caught her, we should’ve been on top of things,” he says.
Even worse than the financial hit to his business and employees, however, is the betrayal.
“I don’t want this to happen to anyone else,” he says. “The money’s always replaceable. But [the experience] changes you.
“It changes how I do business and how I treat people.”