Between January 2004 and last month, a Boston area women employed as a bookkeeper at a drywall company embezzled more than $1.1 million from her employer, the Boston Globe reports today. Her method: forging some 450 checks "to herself, her credit card company, her mortgage firm, and other businesses to which she owed money," the Globe says (for the full text of the article, click here). "She alledgedly covered up her activities by entering legitimate payees for each check."

Unfortunately, this is an all-too-common problem at smaller companies. Three years ago, frequent Inc. contributor John Grossmann wrote a "Case Study" (here's the link) about Graff-Pinkert, a family-run business in Oak Forest, Ill., that buys and sells machine components. The company had recently discovered that a bookkeeper there stole $200,000 from company accounts. The next year, at the annual Inc. 500 conference, the CEO of one of the fastest-growing companies in the country told me that, after reading that article, he went back and took a closer look at his books. Lo and behold, his bookkepper had embezzled more than $700,000!

One of the interesting things about these embezzlement cases is that, typically, embezzlers move from job to job, employer to emplyer, and crime to crime somewhat undetected. Only after a scam is revealed and former employers are contacted does an entrepreneur learn that the crook had a history of stealing from a previous employer.

Companies also hush up these crimes out of embarrassment or fear that their customers or competitors will find out, and that their reputations will be tarnished. "The tendency for many business owners is not to prosecute," entrepreneur Lloyd Graff told Inc. in 2003. "They don't want their dirty laundry in public and don't want to look stupid for allowing someone to so easily take advantage of them."

What do you think? Should companies make more of an effort to pursue legal action once an embezzler is discovered? Does a company have a moral obligation to inform someone calling for a reference that a former employee had his or her hand in the till? And how widespread do you think embezzling like this is? Do you have an experience to share?