A popular Manheim Township athletic shoe and clothing retailer will soon be shutting its doors, stung by the sluggish economy, a string of bad luck — and a possible six-figure embezzlement.

Secret Sneaker, 409 Granite Run Drive, last week began running a going-out-of-business ad in local publications. Owner Mike Matto said the store, which opened in 1995, will be shuttered by Feb. 1.

"We've been fighting and clawing to make it" over the past year, Matto said. "We've been begging vendors, sometimes even waiting until a customer walks in to turn on the lights."

He informed his 20 employees earlier this month that they would soon be laid off.

Matto reported the alleged theft by a former employee to Manheim Township Police more than a year ago.

 "This is a very complex investigation," said Sgt. Thomas Rudzinski. The district attorney's office has been in contact with township police, but no charges have been filed.

Matto is frustrated. Though he had crime insurance for his business, and his insurer paid the claim, it wasn't nearly enough to cover the amount Matto said he lost. And the slow progress of the investigation means his business may close before he sees any resolution to his case.

But experts say the slow progress of the investigation, and Matto's frustration, aren't unique. "If it's too complicated, too difficult, [an investigation] may tend to fall by the wayside," said Christopher T. Marquet, chief executive officer of Marquet International Ltd., an investigative and security consulting firm based in Boston, Mass.

Marquet — who has a son enrolled at Franklin & Marshall College — runs a blog called "Fraud Talk." It tracks significant cases of fraud, particularly major embezzlement cases throughout the U.S. "We only talk about cases over $100,000, but there are a lot of small businesses, townships or religious organizations that have been subject to that kind of fraud.

"It is happening every day."

Another local arrest
It happened last week, as Manheim Township police charged the former general manager of Penn Cinema with stealing more than $127,000 from the movie theater.

On Thursday, police arrested Andrew Tuzzino, 48, and charged him with stealing money for a year and a half via a scheme involving phony ticket and gift certificate refunds, according to court documents.

Matto, for the past year, has been saving news stories about local employee fraud cases. He's amassed a large collection. Since last December, area police have brought charges in at least five fraud or embezzlement cases where losses totaled $100,000 or more, according to newspaper records. Since 2008, 21 cases involving theft of $100,000 or more have been reported in Lancaster County.

Matto said his ordeal began last December. After several years of downsizing — he closed Secret Sneaker's store in Rockvale Outlets and a warehouse next to his Granite Run location in 2009 — he found out in December 2010 that his business was out of money.

Some suppliers hadn't been fully paid; for the first time in 17 years he was unable to pay the rent. Matto could not figure out why, so he brought in an accountant, who in a report concluded that someone may have taken more than $115,000 over several years.

Matto contacted police, who took a statement; he also filed a claim with his insurance company, but his policy was only worth $25,000.

James C. Gibble, president of Gibble Insurance, Lititz, which sells crime insurance, said few small businesses take out such policies. "But if they did, for employee theft, they might have [coverage] for $50,000 or $100,000 — which might not be enough" to save the company.

Still, for a year Matto fought to save the company he founded in the early 1980s, when he began selling outdated sneaker samples from the driveway of his Manheim Township home.

A star basketball player at Ephrata High School in the mid-1970s, Matto played professionally in Germany before returning to Lancaster County in 1982 and landing a job selling athletic shoes to retailers for a New Jersey sales agency called Active Sports Unlimited.

When the shoe companies replaced their old models every few months, Matto and other sales representatives would be stuck with one shoe from each of about 30 pairs. Matto scrambled to find matches for the shoes from his colleagues, and sold them cheap in a garage sale every six months. Customers asked him where he got his inventory, and he'd respond: "It's a secret." He'd ultimately co-opted the line to name his business.

Matto gathered names of customers and generated a mailing list. He also ran afoul of Manheim Township officials, who determined he was running an illegal retail establishment, and threatened to fine him. He began renting hotel conference rooms and other locations for his sales, before opening the Granite Run store in 1995.

He also ran annual sales on regional college campuses that were big money-makers. As business boomed he opened stores in Rockvale Outlets and the warehouse store next to his Granite Run Drive location.

But by 2009, amid a changing market and economic downturn, those stores were shuttered. Matto acknowledged in a Feb. 2, 2009, Sunday News article that times were tough for Secret Sneaker. Sales were disappointing; small, independent shoe retailers were having a harder time staying afloat in an industry where consolidation was the norm.

Yet even after he reported the suspected theft to Manheim Township police a year ago, Matto said he thought Secret Sneaker could gut it out. But sales remained lackluster, and his back-to-school sales both locally and at colleges were virtually wiped out by Hurricane Irene. One collegiate sale was cut short, a second canceled.

Meanwhile, he said, a business owner hit with fraud has a lot more to consider than just the missing money. "It damages your credibility with vendors," he said. "You wind up with credit problems, tax problems."

Earlier this month he threw in the towel. "We have asked the police to investigate a possible six-figure embezzlement which occurred a [year] ago," he wrote in an email to employees. "My insurance company was apparently satisfied as after their investigation they paid the full amount of my insurance coverage.

"Unfortunately I never envisioned a massive loss and did not have enough coverage to save the business."

Asked what he'll do after the business shuts down, Matto said he has no idea. "Who wants to be in their mid-50s, facing unemployment?" asked Matto, who has two daughters, ages 9 and 12.

But he would like closure. "I'd really like to hear something from the police," said Matto.

Marquet, the investigator, said he often advises clients to do virtually all of the investigative legwork themselves, before even contacting law enforcement.

"But the problem with small businesses is, you're behind the curve," he said. "Your profit margin's not large, you don't have a lot of cash on hand to go hire lawyers and forensic accountants to pull it all together is a big thing.

"It's a difficult, insidious thing."

Gil Smart is associate editor of the Sunday News. Email him at gsmart@lnpnews.com, or phone 291-8817.