our employee lied about having a sick child

A reader writes:

I’ve worked for a company for a little over 10 years. “Lysa” started soon after me. We work in a semi-small and close department, and about a year after she started she ran into a streak of bad luck. Her husband asked for a divorce and she found out her young daughter had cancer. The children’s hospital was an almost two-hour drive, so she was in the car a lot. She was tired and as a department we came together to help. People would bring her lunch and coffee and everyone pooled money and bought her a gas card.

Her daughter’s health improved, and she met a new boyfriend. She was always gushing about him, showing everyone pictures and having loud phone conversations. It became worse when he proposed because any conversation with her was about her wedding in Italy and how this weekend she was flying to Italy to check on the wedding venue and next weekend was a trip to New York for the dress fitting. (Her fiance was wealthy and was paying for everything.)

A group of coworkers decided to throw a bridal shower at the office and invite her friends and family as well. So one lunch, they headed to her mother’s house (who one of them knew) to invite her to the bridal shower. The mother’s response: “What are you talking about? She doesn’t even have a boyfriend.”

Lysa lied … about all of it. Her daughter was never sick. She was never married. She never met the rich man of her dreams, but she told us that. The long phone conversations were her talking to herself, not connected to anything (we checked the phone log). We believe the flowers and gifts she sent to herself.

When she was confronted, she said her mother doesn’t like him and doesn’t acknowledge his existence. It was the same with the daughter’s illness. She pretended it was real but it didn’t fit. She had already told us that her mother had gone with her to Italy to check out the venue and was excited. And during her daughter’s illness, she talked about how her mother was so helpful and supportive.

We reported it to management. Since it didn’t affect the business, they said there wasn’t anything they could do, but now we have a department with an outcast. Even management doesn’t believe her. When her daughter was in an accident, they asked her to bring in the police report to excuse the absence when before they would have just believed it. How should our company have handled this?

I answer this question over at Inc. today, where I’m revisiting letters that have been buried in the archives here from years ago (and sometimes updating/expanding my answers to them). You can read it here.