(FORTUNE Small Business) – It was a violently windy spring day in downtown Wichita, Kansas (think Wizard of Oz), but she insisted on standing on a street corner to smoke a cigarette. The 38-year-old mother of two still isn't used to smoking indoors. Prison does that to people. Released from jail a month earlier, Sandra (not her real name) is a convicted embezzler. As the bookkeeper for Hollow Metal Door Co., a small commercial door manufacturer, she stole almost a quarter of a million dollars from the nine-person business in the Kansas heartland. "I'm not a bad person," Sandra says, puffing nervously on a Marlboro, her petite frame and short, feathered brown hair shaking in the wind. "But I did a really bad thing."

The first time I talked to Sandra, she was eight days away from freedom, excited and a little anxious about going home. Down to her small-town high school cheerleading credentials, she is much more girl-next-door than seasoned criminal. She was confused, though, about why I wanted to talk to her. White-collar crime isn't rare, which means Sandra is not unusual. But fraud experts will tell you that small businesses are the most vulnerable to internal theft--from employees like Sandra. The typical scheme occurs at companies with fewer than 100 employees, and the average amount stolen is $120,000, vs. just $10,000 for Fortune 500 companies. The crime, spread over years, usually forces small companies into bankruptcy. This is the story I wanted to tell.

But as I learned, entrepreneurs often blame themselves when embezzlement happens, so the crime frequently goes unreported and unpunished. Meaning the Hollow Metal Doors of the world did not want to speak to me. Sandra, after weeks of phone calls, agreed to meet, despite the feelings of her protective family members and correctional officers. She decided to break the silence surrounding small business embezzlement. Teach from experience. And, maybe, help stop other Sandras.

Sandra started working at Hollow Metal Door Co. in 1987, answering phones and helping with the bookkeeping. Bill and Linda Cary founded the business in 1970, and Sandra, a young woman with a recommendation from a job-placement agency, was one of the few non-Carys to work at the intimate family company. The Carys treated her like their own daughter and took an interest in her life outside work. "They saw me get married, have kids, grow up," she says. "They were very good to me."

By 1992, Sandra was raising two sons with her high school sweetheart. She made $11 an hour at Hollow Metal Door, and her husband earned a little bit more as a machinist at an aircraft company. Money was a constant balancing act. Sandra, in charge of the family's expenses, had fallen behind on her credit card bills. She hadn't made a payment in months. The debt built up, and the banks started calling. "I panicked," she says.

Sandra doesn't remember exactly when she came up with what she calls now the "stupidest idea" to solve her problem--a solution that eventually resulted in her separation from her kids, or as she tells it, "my death." She remembers the cold, though, and thinks it must have been wintertime. For five years she spent her days at work writing the company's checks. So one day she decided to use Hollow Metal Door's account to write a check to pay off her credit card. It was for $672. "I thought, just this one time, just to get back on my feet, no one will know," she says.

But Sandra knew immediately that what she had done was wrong. She hid the transaction in the company's books by listing the check as one of its regular vendor payments. She carried the check in her purse for a week. But she couldn't come up with another solution, and Visa kept calling. She felt trapped. When she finally mailed it, she stood at the mailbox for five minutes that seemed like 50, feeling what she can describe only as "sick." "I can't even believe I did it now," she says.

But the check cleared, and nothing happened. The Carys had no reason to suspect anything improper, because she was a trusted employee and the amount was small enough to not be noticed. But instead of "just one time," Sandra wrote another check, and another, reconciling the books with phony information each time. The checks' amounts were correct, but the people that they were going to--contractors, suppliers, etc.--were made up.

She didn't use the money for luxurious spending sprees. Instead, she just used her credit cards to pay for living expenses. She'd go to the grocery store and slap down plastic, take her kids to miniature golf, go bowling with her husband--all on credit. Christmases were a "little bigger," with gifts like $100 remote-control cars for her sons. "Maybe we ate a little better," Sandra says, still shocked at how much she stole. "But I didn't shop at Dillard's or anything like that. I still went to Wal-Mart and Penney's."

For seven years she didn't tell anyone what she was doing, not even her husband. Every time the company's bank called, she would have a panic attack. "I just knew it was going to be about a check," she says, "but it never was." She made sure she was in the office the first week of every month because that's when the bank statement came in, and she had to hide her canceled checks. She was on top of the company's finances, and claims never to have written any checks during lean times. "As crazy as it sounds, it was so easy after a while," she says, wincing at her own words. "It had gotten to the point where it truly didn't feel like I was doing anything wrong."

Her undoing was taking a week's vacation--a gift from her parents--in January 1999. It wasn't the beginning of the month, so she thought it would be okay. But while Sandra and her family were on a golfing trip in the Carolinas, one of her old canceled checks surfaced at Hollow Metal Door. Her first day back at the office, Bill Cary met her holding the check. "He asked me if I did this, and all I could say was 'yeah,' " she says. "I cried so hard, I can't remember if he cried too."

Sandra was immediately fired, and Bill, a mild-mannered man who did not lose his temper, watched her clean out her desk. His wife, Linda, handed her Psalm 51, the Penitent's Prayer: "Have mercy upon me, O God...Wash me thoroughly from mine iniquity, and cleanse me from my sin." For the first time since writing that first check for $672, seven years earlier, she thought about going to prison. "I had convinced myself that people don't go to jail for that," she says. "They go for hurting each other, killing each other."

It took a year before Sandra was indicted. A police investigation during that time revealed that she had used the company account to write 88 checks, totaling $248,383, to pay her Visa, MasterCard, and Discover Card bills. In March 2000, Sandra, over the cries of her sons, who were then 8 and 12 years old, pleaded guilty to eight criminal counts of bank fraud and interstate transportation by mail of forged checks. "We just lived," she says, her eyes glazed with tears. "Honest to God, we used that money to just live."

Unfortunately there was another family, the Carys, who were trying to live too. Although Sandra says that Hollow Metal Door was doing well, with revenues between $2 million and $3 million a year, there were signs that the business was feeling the strain. At Sandra's sentencing, owner Bill Cary testified that his company would spend the next decade making up for the loss from her theft. Hollow Metal Door had just gone through a major expansion, moving out of a small rented shop into a new $580,000 facility that it had built, when Sandra started embezzling. Not suspecting theft, Cary thought the expansion was to blame for the money running out faster than he anticipated. Cary declined to talk to FSB for this story. At Sandra's sentencing, though, he said, "I've worked ten- to 14-hour days for 30 years. My sons have worked summers. My wife has mopped floors and cleaned bathrooms." Turning toward Sandra, more than a year and a half after that emotional scene when he had watched her clean out her desk, he added, "She wiped out years of my hard work."

Faced with 16 years in potential jail time, Sandra received the minimum 18-month sentence, so that the first-time offender could start paying restitution to Hollow Metal Door as soon as possible. In September 2000, she entered her new home for the next 16 months at Carswell minimum-security federal prison in Fort Worth.

Sandra cried during her first night in prison. She wore her wedding ring and a Saint Christopher medallion that her sons had given her the night before. Her children wore matching medallions, and all three agreed not to take them off until "Mommy came home."

While in prison, Sandra met others who had embezzled money from their employers by writing false checks. After seven years of silence, she says, "it was almost a relief to get to prison and be able to finally talk about it." Still ashamed, she didn't tell anyone for months how much she had stolen. Then she discovered that many of her fellow inmates had taken much larger amounts. "I stole a lot of money," she says. "But thank God it wasn't more."

Since she's been home, life, of course, has been different. Sandra now works as a gofer--making deliveries, doing errands--at the aviation plant where her husband also works. She pays $100 a month in restitution, and will be paying off her debt for at least the next 20 years. The monthly payments will be evaluated every six months by the courts and go up or down based on her household income.

Each month she also turns in her receipts for everything--including cigarettes--to her probation officer, who keeps track of what she spends. Christmas won't be as big anymore. Instead of remote-control cars, each kid got a sweatshirt this year. When her older son asks to play paintball with his friends, she tells him no, they don't have the money. "Obviously money is a big thing. I owe so much. But I don't think I worry about it as much anymore," she says. "Of course, I don't do the bills anymore either. My husband took the checkbook."

The guilt, the shame, and the tears are still there, but getting better. "There has to be a point where instead of crying all the time, you look back and say, God, you were so stupid," she says. The three Saint Christopher medallions hanging over her kitchen table are a constant reminder. "I'm cried out. I told my husband I'm tired of being on my knees and asking for forgiveness. I need to stand up."

Sandra hasn't seen the Carys since her sentencing. Although she admits she won't be able to face her old bosses anytime soon, she did write them a letter from prison apologizing for the hurt she had caused. So far, Hollow Metal Door Co. has beaten the odds and is still in business. And Sandra is convinced, and takes some comfort from it, that the Carys, stung once, could never have this problem again.

But could you?