Fraud Busting: Body Language Expert Traci Brown Interviews Fraud Victim Susan Frew
Small business fraud sucks. And Susan Frew knows a thing or two about it.
Watch to learn what she wishes she knew that would have prevented $700k of fraud in her business.
Here’s the Transcript
Traci Brown: Hey, I’m Traci Brown, the fraud busting body language expert, on the downside of a cold – I’m almost over it – but fraud does not wait, and so we are talking to Susan Frew today. Susan is a really good friend of mine. She is the CEO of Sunshine Plumbing, Heating, and Air here in Colorado and unfortunately, the victim of an internal fraud and also some cybercrime that added up to about $700,000. She was so stressed out about it, I was actually worried about her, but she is on the good side of things and making a comeback, turning the business around, and getting back on track. I’m going to turn it over to you, Susan. Why don’t you tell us a little bit about you and a little bit about what happened and some of the things that you wish you would have known before now.
Susan Frew: Well, I was a business coach before I owned Sunshine Plumbing, Heating, and Air, and just oddly, I coached 17 different trades, 150 different companies, so I’ve learned a lot of things. I also had coached all the way through the recession, so keep that in mind for a moment because mainly what I did in the recession is I was a turnaround expert because that’s all we could do at that time was try to hang on or turn it around. But in 2014 I took over my family – mine and my husband’s – plumbing, heating, and air conditioning company. I was still coaching and speaking and doing things on the side, so I wasn’t really there 100%, and I made a very bad hire. I hired a person who indicated they had a lot more experience than they did, and I also had an outside bookkeeping firm that was supposed to be, sort of, looking in on this person. That process really wasn’t dialed in. But my thought when I was traveling, I believed in my heart of hearts that I could see everything that was going on in the business. I could see the Quickbooks, the bank balance, where all our trucks were. I could see our CRM, how much money we were making. I was getting Spanish reports from everyone in the company every single day, so I figured I was protected. Of course, we run a background check on every single person that works for us, however, this person’s background came up with nothing. What we have found out since then, it is actually four pages of almost all financial crimes, and the reason it’s not on the background check is because it’s not – some of the things they weren’t arrested for. Charges were filed against them in a court.
Traci Brown: So that wasn’t on a background check?
Susan Frew: No. It wasn’t. My lawyers actually found it. They researched the background. The police didn’t find it. The district attorney didn’t find it. The lawyers have a system that they can look up. They can pay $10 and it’s a full background of any lawsuits, bankruptcies, things like that, that wouldn’t necessarily be on a criminal background check.
Traci Brown: Wow.
Susan Frew: All of that. I was traveling a lot and what I did is, I thought I did a really great, brilliant idea and I bonused my employee for making budget. Okay. Well, the bad part of that is that in order to make budget, my employee wasn’t paying certain bills, including shorting the IRS, and she was also the person getting the mail.
Traci Brown: Oh boy.
Susan Frew: The mail, and I wouldn’t see what was going on. You know, I had a feeling some things were going on, so I started digging a little bit further, and then we let her go – she was with us for about three years – but when we let her go, oh my goodness. I am still getting hit with things that I had no idea were going on. When I started getting the mail, it was a huge eye opener, and I then I started getting this really nice certified mail on Saturday. The IRS likes to send out certified mail on Thursday so you get it on Saturday when you’re home.
Traci Brown: Oh boy.
Susan Frew: It’s so stressful because there’s absolutely nothing you can do until Monday. You can’t call. You can’t make an inquiry. Nothing. You just have to hang onto it. I’ll tell you, it was the most stressful time of my life, and we almost sold our company because of it.
Traci Brown: Okay. Let’s dig in a little bit. What would you have done differently? Let’s start at the hiring process. Let’s just talk about that real quick. Were there signs in the interview? Do you think you just wanted someone really bad and overlooked some things? What would you have done differently in the hiring process?
Susan Frew: We really wanted someone quickly because I was traveling and I also had some health problems at that time, so I really needed someone who had a full bookkeeping background. We have always been, I think, a really generous employer, and this person came to us and they had been newly sober and had this great story about how they were turning their life around. We always want to help people if we can. But I should have known. The person wasn’t even working for us for a month and they asked for an advance to pay their rent.
Traci Brown: Oh. Okay.
Susan Frew: Then, they moved out of their one house and moved into another, like by the cover of darkness with all their children, because they were skipping out on the rent, so there’s a sign. There were just so many signs. This person was spending way more money than I knew than she could afford. It was crazy some of the things that she would do with her money, which I wasn’t even doing.
Traci Brown: Like what? What did you notice?
Susan Frew: Mink eyelashes. Botox. Massages. Personal trainer. Took the entire family to Mexico to an all-inclusive resort, a family of five. That’s some serious money right there.
Traci Brown: Yea, yea. And you were paying her bookkeeper type wages, right?
Susan Frew: Yea. Her husband was in the painting business.
Traci Brown: Got it. Okay. Okay. You’re noticing all these things, like in the office at work. At what point did you start to go, wait a minute, it’s not matching up here? Or did you?
Susan Frew: This is what we do now in our company. This was sort of the catalyst to that advance that we gave her. We will not give anyone an advance anymore. We will pay for people to go through Dave Ramsey’s course and once they get their $1,000 saved up, their emergency fund, we will give them $250 to put in their bank account. That’s our response to someone wanting a cash advance. We won’t do that anymore. That’s one thing that came out of it. But I was just getting really concerned about a lot of different things. I had a gut feeling. I also have a friend who’s a consultant who came in and was like, she was not on board with this person. She was like, you know what, I don’t trust her. I don’t know what it is. There is just something wrong.
Traci Brown: The consultant or the bookkeeper?
Susan Frew: The consultant.
Traci Brown: Okay.
Susan Frew: Yea, and I didn’t listen. I was defending her. You know, in a small company you get to be like family, right. You know everybody’s story. You know their family, their pets, everything. I just really ignored a lot of things.
Traci Brown: Got it. Okay. Moving forward from hiring and noticing there was some funny expenditures going on outside of work, and it didn’t quite match up. What was the next thing that you saw or looking back that you wish you would have paid attention to?
Susan Frew: Well, the mail is the biggest thing. I mentioned that earlier. But that is really critical.
Traci Brown: Talk about that. Yea.
Susan Frew: Everybody needs to get their mail. Don’t let anybody ever get it. I know it’s a hassle, but I have it sent to the house now. But another thing that I noticed is I was telling her all the time, hey, I’ve got a lot of points on my King Soopers if you want to use it for gas. She would never take advantage of that, and that was really odd to me because she was usually looking for something free or whatever. It turned out that she had applied for a company gas card, under my name and called the gas card company, and she was the person who ordered the gas card, because we have 14 trucks and each truck has a card. It was her job to look through the gas bill because we always know that technicians could fill up a spouse’s vehicle or something like that, so we would have her looking through the card. She knew I didn’t look at it.
Traci Brown: Oh.
Susan Frew: Ordered herself a gas card and for three years every single Friday she was filling up four cars.
Traci Brown: Oh. And she had four cars.
Susan Frew: Yea. It was here family’s cars.
Traci Brown: Oh boy.
Susan Frew: Or selling the gas at the pump, which is possible. Every Friday she would get a car wash, and she would go into the little store and buy things, milk, bread, and eggs, and things like that. She’d get half of her grocery shopping done. The thing that was really weird is she had all these tow truck charges on the gas card, and we couldn’t figure out what the heck that was, so the police think she was selling tow truck charges, like on Craigslist or something, like a cheap tow, or whatever. She would use our card and then the people would pay her, because I don’t know why she would be using a tow truck that many times.
Traci Brown: Right. Right. How interesting. Okay. Tip #2 then is: Get your mail sent to your house. I had heard that from fraud investigators.
Susan Frew: Or a P.O. Box. We don’t have any mail going to where anyone can get it but me. I’m the only one with a key.
Traci Brown: Got it. Got it. Okay. What happened next? What else can people learn from this so that they don’t have this kind of loss?
Susan Frew: My outside bookkeeper had gotten really ill during this time, and she had someone at her office managing our account. That wasn’t the smartest thing. I think the key is you have to have a really good outside bookkeeper/accountant that you trust and that you know and that everyone in their company is really high level, so that they can be overseeing the nuances. But what I have done and not everybody’s willing to do this, but I have a person come into my shop three hours a week and sit with me, and I’m learning the nuances of Quickbooks. Now, I know financial reports really well, you know, balance sheet, all that. But it’s the trickery that could happen on the backend of Quickbooks, alright, that is what I didn’t know how to follow, and now I’m learning that. So the next person I hire in this role, I will have a better opportunity to supervise them because I will understand more.
Traci Brown: Oh, wow. Okay. Because you were looking at your Quickbooks every day, and you thought you had it down. What were some of the tricks that she was . . . because you can move money from accounts and all sorts of stuff, what was her favorite trick?
Susan Frew: Well, what she was doing was she wasn’t putting all of the bills into the bill tracker, right, into the accounts payable. You look at your accrual profit and loss, it shows that you’re a lot more profitable than you really are. Now we use a system called bill.com, and I can see every single bill in there. I know when it’s due, who it’s from, everything, and I’m connecting with all of my vendors electronically, so the bills can come directly into bill.com and then that feeds it to Quickbooks.
Traci Brown: Oh.
Susan Frew: Those products together, I think, are a really good accountability method.
Traci Brown: Wow. Okay. Good. Now, what happened next? Take us deeper into this story, because eventually, you let her go, right?
Susan Frew: I did. That’s when I found out a lot of this stuff. It took 19 months for the police make an arrest. A lot of things had happened. We’re in an unincorporated county, so we had to go through the Sheriff’s Department and then there was an election and that sheriff didn’t get re-elected so we had to start all over again.
Traci Brown: Oh man.
Susan Frew: It was just a huge hassle. Finally, a few months ago, she was arrested, and now we’re going to go to court on February 25th. But what happened to us is I was so stressed over this whole situation that I looked at selling my company. But we had so much debt, and we were a company . . . I used to go on TV and say how we were debt free, and Dave Ramsey endorsed my company because we were debt free. It was so painful for us to then have this debt. What I did was this: I sent a letter to every single creditor and I said, I know we owe you money, and we are going to pay you back. It’s going to take a lot longer than you would like, but it’s the best I can do. Then I got a business evaluation, thinking I might sell, and I’m able to sell the company to cover the debt, but we would walk away with nothing.
Traci Brown: Oh. Ouch.
Susan Frew: We don’t want to do that. We invested a lot in this company, not only sweat equity, but all of our resources in this company. What I first told you in the beginning, I used to be a business coach during the recession, and I did a lot of turnaround. The #1 turnaround trick is to cut expenses the best you can. The building we were in, a 3,800 square foot building, a huge parking lot, it parked all our trucks outside, we didn’t really need it. If you look at all the expenses there, it’s about $7,000, so I took the office operations and I moved them into my house.
Traci Brown: Okay.
Susan Frew: It feels safe here. I had an unfinished basement. I brought the cubicles, the carpeting, the whole IT system is in the ground floor of my house. I’m speaking to you from the third floor suite of Sunshine Plumbing, Heating, and Air. Every single day my office will come over here. We’ve been able to cut a significant amount out of our budget. Then I got a shop down in southern Commerce City, which is actually better because it’s closer to some of the areas that we serve, and we started operating there. I will tell you something else that happened now.
Traci Brown: Okay.
Susan Frew: There is all this talk about vulnerable leadership. Well, I would try that on for size, even though that’s not really my way. All of my employees know what was happening, and I was totally upfront and laid it all on the line. Every single one of my technicians is gone.
Traci Brown: So they left, or . . .
Susan Frew: Yes.
Traci Brown: Why did they? Because they didn’t trust what was going on or their future?
Susan Frew: Yea. They were concerned about their future. I was cutting back on a lot of things. My previous employee had put together this really great pay plan for them that was ridiculous, and we couldn’t afford to do it anymore, so one by one they all left. We moved into the house. We moved into the small shop. We did all of this in mid-October. I’m happy to say now, here we are in January. I have completely filled every single truck but one.
Traci Brown: Oh, wow.
Susan Frew: The office dispatchers love it here in the house. They love it. It’s like a pajama party but you have to answer the phone. I cook for them. We have dogs here. It’s just fantastic. It was the best thing that we ever did. I am so less stressed out. Another thing we do which is really fun, every Friday we have Fun Friday Payday, and we go through bill.com, and we click bills that we’re going to pay and whatever money in the account every Friday we just pay it. We believe we’re going to be completely debt free within 18 months.
Traci Brown: Eighteen months. Wow. Now, you were having problem with some of your employees. I would hear the stories of the guys in the trucks. Would you say that this turned out to be a blessing in disguise? Are you there yet?
Susan Frew: Oh yea.
Traci Brown: Tell me about that.
Susan Frew: Our new crew is fantastic. We have totally changed our culture. I think before we were the tail wagging the dog because there is a workforce shortage, so we were sort of like, oh, we have to coddle everybody because we could lose them. You know what, we have already lost everything. We had everybody leave. So be it. I’m not bending over backwards like that, and we are still a fantastic employer. Inc. magazine gave us Best Workplace this last year.
Traci Brown: I love it!
Susan Frew: And we got Inc. 5,000 Best which was really crazy considering everything that was going on. They don’t ask those questions on the application. It’s just been so much better, and we are so profitable now.
Traci Brown: Nice.
Susan Frew: Our P&L looks better than it has ever looked. Totally cranking. Then, do you know about what happened next?
Traci Brown: No. I don’t think so.
Susan Frew: This is really huge. We have some friends in the plumbing and heating industry that owns a company. They were down south. They were originally out of Parker, then Centennial. We’re in Colorado. They decided at the end of last year, 2019, they were going to move to Texas, and they were going to start over with this new company and so and so forth. They were selling their company for $400,000. They asked us, hey, do you guys want this? We’re like, are you serious? We don’t have 20 cents to rub together. We cannot buy your company. Eventually, they had no offers, what have you, and the reason was they didn’t have a lot of employees. They did have 10,700 customers in their database though. Probably around the end of the summer, they reach out to us again. They say $150,000.
Traci Brown: Oh!
Susan Frew: They were going to sell some of their equipment to somebody else. I was like, I’m sorry, we can’t. December 1st, they call, $20,000 and you get my 10,700 customers, all of my commercial accounts, you can make payments, and you get my awesome employee. Do you want it or not? Okay.
Traci Brown: Yea. Totally.
Susan Frew: Now between her database and mine, I have 27,000 customers.
Traci Brown: Wow! That is crazy.
Susan Frew: I’ve been able to shut off all my marketing, which last year I spent $120,000 on marketing.
Traci Brown: Now, you have zero in marketing because you have such a following.
Susan Frew: Right.
Traci Brown: The database. Oh my gosh, Susan, this is the most awesome end to a fraud story I’ve ever heard.
Susan Frew: It made us act.
Traci Brown: It goes back to you deciding to roll up your sleeves and turn this thing around. A lot of people wouldn’t have had that gumption to do that because it was hard. I remember you making that decision.
Susan Frew: It was awful, Traci. I wanted to quit so bad. I actually went to the bankruptcy attorney. Years ago when I was coaching, I had coached all these bankruptcy attorneys so I knew who was the man in town. I laid out all my stuff. Like, you’re not there. I’m like, what do you mean? I can’t even sleep. I’ve got all this debt. He’s like, you’re not even there. You’re still paying all your bills. You’re not behind on any credit cards. Nobody’s repossessed any cars. You are not even delinquent on everything. But I’m like, ugh! He told me no.
Traci Brown: Wow.
Susan Frew: There is an IRS situation, and that’s nothing to sneeze at, but I do have really good lawyers working on that and they are creating an Offer in Compromise and a payment plan for us to get caught up. Yea, I mean, it was so hard for us. But moving into the house and really downsizing to a more manageable way and then creating that smaller shop, it’s changed our culture, it’s changed our future. We are going to give some employee ownership to two of our employees who are with us. They’re going to become owners of Sunshine. They’ll have a 10% share.
Traci Brown: Oh cool. Alright. We are going to wrap this up. What is your last tip for business owners to not put themselves in this situation? What’s the last thing that people need to look for or do so that they can just stay solid how they are and not have to go overboard with fraud?
Susan Frew: Be mindful of the quirks and habits of your employees. That was something that I was ignoring in a big way. My employee was doing all of these things and driving this much fancier car than what I had. That was like one of the things. Really pay attention to that. If you are not getting a good reading on your background checks, switch companies. Like Pinkerton, they’re super expensive but they pick up everything.
Traci Brown: So, spend the money there.
Susan Frew: Absolutely. And do your parking lot audit. That’s what it’s called, to check people out.
Traci Brown: Susan, I’m so thrilled about the turnaround and where you’re going. I love it. Congratulations. I’m sorry that all the bad stuff had to happen, but I’m really proud of you for sticking with it. If people in the Denver area need plumbing, heating, and air, how can they get a hold of you?
Susan Frew: Sunshine Plumbing, Heating, and Air. We have a website. We’re also known as Sure Comfort Services. We haven’t actually changed the name of the other company yet. We’re going to work through that in the next couple of months. Online is the best way to find us.
Traci Brown: Okay. Good deal. We’ll have that link in the show notes here below. Thank you so much, Susan.