The U.S Chamber of Commerce estimates that theft by employees costs American companies $20 billion to $40 billion a year. To pay for it, every man and woman working in America today contributes more than $400 per year.
The chamber also reports that an employee is 15 times more likely than a nonemployee to steal from an employer. Unfortunately, 75% of employee-related crimes go unnoticed.
One Midwest insurance man, who was too embarrassed to allow his name to be used for this story, failed to realize that a trusted employee was embezzling from him until his bank said he was $7,000 overdrawn. Fearing negative publicity, employers are often reluctant to report employee theft to the police, which leaves the criminals free to steal from others.
Theft by a trusted employee happens in small towns and big cities, but conventional law enforcement agencies lack the time or resources to investigate. As a result, many companies turn to private security firms, such as Brian Stewart and Associates Inc., to prosecute thieves.
" Along with our particular client' s accountants, we look at a company' s books, looking for red flags that indicate something is wrong," Stewart says. " For example, if sales or inventory dips, but profits or cash flow do not increase, that is a good sign. If ticket prices are marked down without permission or shipping records are not consistent with inventories, there may be a problem. Unfamiliar changes in paperwork or the way workers handle established procedures is another key factor."
Do Background Checks
"Besides fraudulent workers' compensation claims, employees steal time by taking unauthorized leave or having others punch time cards. The best way employers can deter employee theft of all kinds is to do thorough preemployment screening," Stewart says.
Stewart works for insurance companies and law firms, and he belongs to the American Society for Industrial Security (ASIS). Survey data from that organization reveals how complex and varied theft by employees is. U.S. employees are more likely to steal secrets from their employers for other U.S. firms than foreign spies are for their nations.
A 1997 study conducted by ASIS discusses intellectual property theft, including the bootleg copying of compact discs, computer programs, books, and other products covered by copyright or trademark laws. Survey statistics reveal that $44 billion worth of these products were targeted in a 17-month period. All U.S. companies could continue to lose more than $250 billion annually from this crime alone.
No one is immune from employee theft. People from all walks of life commit white-collar crimes. Catching criminals is often easier in small towns because there are fewer large businesses relying on complicated procedures. Police Chief Jan Noble of Belvidere, Ill., describes this common tactic discovered in his town of 18,000 residents:
" Sometimes employees who shoplift simply carry brand-new merchandise to the trash Dumpster outside the back door during a working day. After dark, they drive up to the Dumpster to load the merchandise into their car."
Myths about Employee Theft
The most important way to deter employee theft is to be aware and prepared for the fact that it happens. Dishonest employees avoid prosecution when managers refuse to accept the idea that trusted employees are targeting them. To encourage awareness, author and security professional John Case offers these myths and realities.
Myths and Misconceptions
Facts and Reality
Copyright 1999 Kennedy Information LLC, 800-521-0007. All Rights Reserved. Reproduction prohibited by law.