Judy Young v. Sandra Delgado (2013)

MEMORANDUM OF DECISION

This is an action alleging theft and embezzlement by the defendant while she was employed by the plaintiff.   On June 25, 2013 and July 11, 2013, this matter was tried to the court.   Testimony was received from nine witnesses;  11 documents and two discs containing security camera videos were admitted as full exhibits.

I. FINDINGS OF FACT

This court, having carefully reviewed the documentary exhibits and evaluated the demeanor and credibility of the witnesses, having analyzed and weighed the evidence according to the applicable standards of law, and having considered the parties' arguments made to the court, finds the following facts to have been proven by a fair preponderance of the evidence.

The plaintiff Judy Young is the owner of four different McDonald's restaurant locations in the Hartford area, and has been in the business of owning and operating McDonald's restaurants for twenty years.   The plaintiff works with her daughter, Anika Young to oversee the operations of six McDonald's restaurants (two locations are owned by the plaintiff's daughter).   Anika Young oversees the day-to-day operations of the restaurants, while Judy Young handles the overall administration of the organization, which has approximately 270 employees.

The incidents which gave rise to this lawsuit occurred at the McDonald's restaurant located on Brainard Road in Hartford.   From at least January 1, 2011 through March 14, 2011, the defendant was employed by the plaintiff and worked in a position variously described as the “restaurant manager” or the “store manager” or the “general manager” at the Brainard Road location.   Regardless of the exact title, it was clear that the defendant was the person in charge of the operation at the Brainard Road location, required to see that the location met all McDonald's standards, and supervising eight “shift managers” and a crew of 30 or more cooks and cashiers.

The plaintiff had, as part of required operational procedures, prescribed methods and policies for the handling of cash receipts.   In summary form, those procedures were that the shift managers, at or near the end of a shift, would close out a cash register and count the cash in that cash register drawer.   In effect, the cash received for that shift would be removed from the drawer and counted, with the beginning balance of cash retained in the drawer for the benefit of the next shift so they could make change.   The cash counted would be reconciled with a computer “cash report” for the amount of cash sales conducted at that particular cash register.   All sales were recorded on the “ISP” (In Store Processor) system.   Access to the system required a password, and the shift manager would use his or her own password to access the system.   In addition to using the ISP system to retrieve the data as to how much cash was taken in at a particular register, the shift manager would also input into the ISP system the information regarding the cash being deposited to the bank.

Once the deposit data was in the ISP system, a deposit bag would be made up.   The shift manager would take the next in a series of sequentially numbered plastic deposit bags, and place the cash with the appropriate documentation in that bag.   The bag would then be inserted through a slot into a “drop safe.”   The drop safe was located inside a larger safe—sometimes referred to as the “work safe” or the “day safe.”   The day safe could be opened by the employees but the drop safe inside it could not.   The drop safe could only be opened by Dunbar Armored employees when they made their periodic pick-ups of the location's cash deposits.

Information regarding the bag number, the date of the deposit, the amount of the deposit, and the shift manager making the deposit would all be recorded in a red “Dunbar Book.” An exemplar of a Dunbar book was made Exhibit 22 at the trial, but basically the book is a running log of the deposit bags put into the drop safe by the shift managers, alongside a running log of the deposit bags picked up by the Dunbar personnel.

According to the plaintiff's procedures, the restaurant manager supervises the cashing out procedure, but there is no reason for the restaurant manager to actually handle or count any cash.   That was to all be done by the shift manager.

During her tenure as restaurant manager, the defendant engaged in several practices regarding the handling of cash that did not comply with the plaintiff's established procedures.   The defendant would instruct her shift managers not to count out the cash drawers and prepare the deposits, insisting that she would do it for them, using their ISP passwords.   Video surveillance footage recorded the defendant handling cash, re-bagging a deposit, not entering the deposit in the computer system, storing cash in the day safe and other practices that were completely inconsistent with established procedures for the proper handling and accounting of cash receipts.

In March of 2011, accountants at Landau, Arnold and Laufer LLP, the accounting firm which audited the plaintiff's business accounts and prepared monthly reconciliations of accounts for the McDonald's franchisor, noticed suspicious discrepancies in the February 2011 daily deposit records for the plaintiff's Brainard Road restaurant.   Romeo Bertolini, an accountant with the Landau, Arnold and Laufer firm, testified at trial and the court found his forensic examination of the deposit records to be thorough, and his explanation of the “deposit lapping” scheme that was apparent from those records to be rational and reasonable.

A “deposit lapping” scheme involves an initial misappropriation (or several misappropriations) of a bank deposit which is then attempted to be covered up by using current deposits to cover those past deposits that have not cleared the bank.   In theory, a deposit lapping scheme can continue indefinitely, as long as the embezzler can continue to control the preparation of the deposits.   In this case, cash would be removed from current deposits and then used to complete a deposit which had been already logged into the ISP system, but not yet placed in the drop safe.   As a result of holding deposits (so that cash from one can be used to complete another) rather than immediately putting them in the drop safe there will necessarily be a delay in having the deposit picked up and credited by the bank.

Based on experience derived from auditing literally hundreds of McDonald's operations, the accountants recognized the characteristic signs of a deposit lapping scheme in the inordinate delay between deposits being recorded in the ISP system and being credited at the depositary bank.   Several examples were shown of a typical deposit transaction from the Brainard Road location with an ISP deposit entry on one date, followed by a Dunbar pick-up of the deposit one or two days after that, followed by the deposit crediting to the plaintiff's bank account one or two days after the pick-up.   Therefore, a delay of up to 5 days between the date the deposit was entered in the ISP and the deposit clearing the bank was to be expected, but the Brainard Road location was showing deposit delays in some cases in excess of twenty days.

Mr. Bertolini testified that $66,007.35 of deposits in February of 2011 had been used to cover deposits that were missing from January of 2011.   That required the use of March deposits to cover the missing February deposits.   As of March 14, 2011, $15,210.26 of current deposits had been used to cover the missing February deposits, but there were several deposits logged into the ISP system in February that had not yet been credited by the bank by March.

On March 14, 2011, the accountants notified the plaintiff Judy Young by telephone of the discrepancies in the deposit accounts.   Judy Young then called her daughter, Anika Young, and informed her of the accountant's report that several deposits from the Brainard Road location during the previous month did not “clear the bank.”   She asked Anika to go to the Brainard Road location and investigate the situation.

On the same date, Anika went to Brainard Road to speak with the defendant.   The defendant said she would “investigate” the missing deposits and let Young know what she found.   Anika Young then went to a downstairs office in the restaurant to work on some other business.   Approximately 15 minutes later, Young came back upstairs and observed Sandra in the lobby of the restaurant with the red “Dunbar Book” and a pen, writing in the Dunbar book, “changing names and dates.”   There was no logical, reasonable or rational reason for the defendant to have the Dunbar book outside the office, to be writing in it, or to be changing any information in it.   Anika Young immediately fired the defendant Sandra Delgado.

Later that same day, the defendant Delgado was in communication by telephone with Flora Linares, who was employed at the time as a shift manager at the Brainard Road location.   The court found Ms. Linares' testimony to be credible, and found it to be totally corroborated by the surveillance video and Ms. Linares' cell phone records.   The defendant called Ms. Linares while she was working as shift manager at Brainard Road on the night of March 14.   Delgado asked Linares to get the current Dunbar books from the office, put them in a plastic bag, and “get them ready,” because she (Delgado) was going to come by the restaurant and pick them up.   Linares did exactly that.   Delgado called from her car in the parking lot and asked Linares to bring the Dunbar books to her in the parking lot.   Linares went to the car and handed the books over to Delgado, who told her “if anyone asks you anything, you know nothing.”

The Dunbar books for the period from January through March 2011 were never seen again.   There is a strong and very reasonable inference that, were those books available, they would contain additional evidence of the suspected deposit lapping scheme.

Although the defendant testified and denied virtually all of these events, the court does not credit her testimony.

II. ANALYSIS

A. Discussion:  Statutory Theft

In her complaint, the plaintiff alleges that the defendant committed statutory theft in violation of General Statutes § 52–564.  “[S]tatutory theft under ․ § 52–564 is synonymous with larceny [as defined in] General Statutes § 53a–119;  ․ and the definition of larceny includes various fraudulent methods of taking property from its owner.”  (Citation omitted;  footnote omitted;  internal quotation marks omitted.)  Stuart v. Stuart, 297 Conn. 26, 41, 996 A.2d 259 (2010).  “Pursuant to § 53a–119, [a] person commits larceny when, with intent to deprive another of property or to appropriate the same to himself or a third person, he wrongfully takes, obtains or [withholds] such property from [the] owner.”  (Internal quotation marks omitted.)  Hi–Ho Tower, Inc. v. Com–Tronics, Inc., 255 Conn. 20, 44, 761 A.2d 1268 (2000).   The standard of proof applicable to statutory theft “is the preponderance of the evidence standard.”  Stuart v. Stuart, supra, 297 Conn. 44.

The court finds, based on the totality of the evidence, including the conduct of the defendant herself, that the plaintiff has proven the elements of statutory theft.   The court is persuaded that it is more likely than not that the defendant wrongfully took cash deposits belonging to the plaintiff, then engaged in a pattern of utilizing current deposits to cover the missing cash that had not been deposited in the bank.   When it became apparent on March 14, 2011 that the scheme had been uncovered, the defendant continued to cover her tracks by attempting to alter the Dunbar books and, failing that, by removing the Dunbar books from the restaurant under false pretenses.

The court finds that the value of the cash taken is $50,797.09.

B. Discussion—Treble Damages

The plaintiff seeks treble damages pursuant to General Statutes § 52–564 for the defendant's theft.  Section 52–564 provides, “Any person who steals any property of another, or knowingly receives and conceals stolen property, shall pay the owner treble his damages.”   Under this mandatory language, where liability is found, the damages are to be trebled.   See Stuart v. Stuart, supra, 297 Conn. 53, n.14 (§ 52–564 contains mandatory language).   Accordingly, as to count two, concerning statutory theft, the plaintiffs are awarded treble damages in the amount of $152,391.27.

III. CONCLUSION

For the foregoing reasons, the court finds in favor of the plaintiff.   Judgment enters for the plaintiff in the amount of $152,391.27, plus costs to be taxed by the clerk.

BY THE COURT,

Sheridan, J.

Sheridan, David M., J.