As an assistant comptroller for Interior Crafts, Inc., in Chicago, Illinois, Todd Leparski was authorized to receive checks from Interior’s customers and deposit the checks into Interior’s account. Between October 2000 and February 2001, Leparski stole more than $500,000 from Interior by indorsing the checks “Interior Crafts—For Deposit Only” but depositing some of them into his own account at Marquette Bank through an automated teller machine owned by Pan American Bank. Marquette alerted Interior, which was able to recover about $250,000 from Leparski. Interior also recovered $250,000 under its policy with American Insurance Co. To collect the rest of the missing funds, Interior filed a suit in an Illinois state court against Leparski and the banks. The court ruled in favor of Interior, and Pan American appealed to a state intermediate appellate court.[Interior Crafts, Inc. v. Leparski, 366 Ill.App.3d 1148, 853 N.E.2d 1244, 304 Ill. Dec. 878 (3 Dist. 2006)]
(a) What type of indorsement is “Interior Crafts—For Deposit Only”? What is the obligation of a party that receives a check with this indorsement? Does the fact that Interior authorized Leparski to indorse its checks but not to deposit those checks into his own account absolve Pan American of liability? Explain.
(b) From an ethical perspective, how might a business firm such as Interior discourage an employee’s thievery such as Leparski’s acts in this case? Discuss.