At the time, Smith was the bookkeeper for PBS Insurance and her husband was the sole owner.

Smith admitted in a plea agreement that, from July 2013 through April 2015, while employed as CFO of Market Finders, she generated fraudulent loan checks from her employer and diverted them into the bank account of PBS.

Specifically, Smith devised a scheme to embezzle funds from Market Finders and Market Finders Insurance Premium Budget Corp., a subsidiary of Market Finders, by creating fraudulent insurance financing contracts between Market Finders Premium Budget and existing insurance clients of PBS Insurance without the knowledge of those existing clients. Smith admitted to manipulating the records so that her theft of funds would not be detected by her employer.

False loans

Smith admitted that she and her husband used a portion of the fraudulent loan proceeds to fund her husband's business and to pay for personal expenses for herself and her husband and to pay for gambling activity.

Further, Smith used a portion of the proceeds to make payments on the previous loans she had falsely created from Market Finders Premium Budget. When the scheme was discovered by Market Finders and brought to an end, Smith had not repaid approximately $674,093.

Related: Insuring against employee fraud

Additionally, Smith admitted to failing to report approximately $258,504 in embezzled funds as income for tax year 2013 and omitting approximately $514,696 in embezzled funds as income for tax year 2014 on Form 1040 of her U.S. individual income tax return.

Steven A. Meyerowitz, Esq., ([email protected]) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law.