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Somebody’s Watching You
Security boss calls employee theft in hard times ‘worst I’ve ever seen’
By Danek S. Kaus
The struggling economy has created yet one more problem for business owners: skyrocketing employee theft.
In a normal economy, about 30 percent of workers steal something from the company, said Thomas Martin, president of Martin Investigative Services, in Newport Beach, Calif., author of the book, “If You Only Knew.”
In this economy, about 80 percent of employees are stealing, Martin estimated. He bases this assessment on conversations with other top-tier national investigation firms.
“It’s the worst I’ve ever seen,” the former Drug Enforcement Administration agent said. “Five years ago I would have never thought it would be this bad.”
His company helps businesses to keep product, money and profits from slipping out the back door, metaphorically and literally.
He believes there are three types of employee thieves. Some are just plain thieves by nature. Some feel entitled.
“They look at their paycheck and see how much money the company makes, and they feel they should have a bigger share,” Martin said.
Others are desperate, facing loss of their homes and vehicles.
He believes that Clark County has some of the worst problems of any metropolitan area. He attributes much of it to the high unemployment and home foreclosure rates and that the economy is based on gambling.
“It’s just the nature of the economy,” Martin said. “Some casinos are down 16 to 20 percent.”
People steal time, money or products from their employers.
They steal time by having friends punch their time cards for them when they are not even on site. Martin said such practice is rampant in this area.
Employees are seldom able to steal money outright from the casinos, most of which have first-class security, but they steal from the associated hotels and restaurants, walking out with food, bed sheets and such.
As people brace for pending layoffs, many are faking on-the-job injuries to collect workman’s compensation and other remuneration.
“A guy may say he injured his knee and then we videotape him at the mall walking around with his kid,” Martin said.
Companies not only pay money for these fake injuries, they are also hit with higher insurance premiums, the cost of which is passed on to customers.
Manufacturing and distribution plants are prime candidates for outright theft of product.
“If you have 500 employees and they each steal a six-pack, it’s not the end of the world for a big company. But if they each steal one to two cases a week, it’s going to have an impact,” Martin said.
His investigators are able to ferret out thieves not by going undercover, which is time-consuming and expensive, but with interrogation.
“It doesn’t take long to find out who’s doing it,” Martin said. “If you have world-class investigators you should be able to quickly identify three to four people. Each guilty person implicates someone else, who in turn implicates another worker. Once they start, it’s like rats leaving a burning ship.”
In an Orange County, Calif., bottling plant, he and his investigators determined that all of the 45 nonsupervisory people working in the warehouse were stealing. All were fired.
“Our problem is not finding out who’s doing it,” Martin said. “It is firing people and leaving Corporate America without someone to do the work.”
When theft is suspected, he suggests calling in a good local investigative company, one with former federal agents.
“But if you’re not saying ‘wow’ in two to three days, get rid of them,” Martin said. “Be vigilant. Don’t let the head of security pick the people from the outside. They’re probably going to pick a buddy and will probably not be as objective as you.”
He also recommends installing security cameras. His company does not deal with this equipment but will recommend a list of qualified companies to choose from.
Many businesses use Henderson-based Sting Surveillance for surveillance equipment.
“We put systems into a business that are designed to help people manage their business better,” company owner and chief executive officer Jonathan Fine said, “such as point-of-sale at a bar, where you can see what bartenders are pouring and if they are ringing up the sales properly.
“This type of equipment can also be keyed to time machines, to make sure it is the right person signing in, and to control access to the site, to make sure it is the right person and the right place and time. We are basically using technology and smarter systems to help owners control the environment in their business.”
Fine used one of his systems to catch a bartender stealing at a club he owns.
“She was serving the $7 beers and ringing up the $6 beers,” he said.
The bartender did this 250 times on the day he caught her.
His systems have also caught employee-thieves at a chain of cell phone stores. The thieves were previously able to steal products in stores that had traditional security cameras. They had broken in at night and avoided identification because they knew where all the cameras were.
Fine installed smart cameras with excellent resolution that were tied into alarm panels.
“With typical systems it can take several minutes for the security company to determine the exact nature of an incident and respond, according to Fine. “With our system, if somebody throws a rock through the window, we see the video before the rock hits the floor,” Fine said.
In one case, a nonemployee broke into a local coffeehouse. The police arrived in two minutes and caught the thief, who had four safes from other businesses in his vehicle. Those businesses did not know they had been robbed.
“We got four new clients that day,” Fine said.
He estimates that the percentage of crimes committed by people on the inside varies with the type of business. And theft can range as high as 60 percent, especially in bars, which handle a lot of cash.
Some theft is committed by the most trusted members of the staff, according to Wally Behrenz, director at Meridian Business Advisors in Reno.
His firm is often hired to do forensic accounting, looking for signs of embezzlement.
“This is one of those times in which crime really does pay,” Behrenz said. “The guy who sticks up a liquor store at least announces his intention, but the person who invites trust and who steals from you while smiling at you usually gets 10 times what the liquor store guy gets, but usually does not get prison time unless the amounts are large,” Behrenz said.
He said courts traditionally do not look at embezzlement as a violent crime and therefore give a slap on the wrist.
“These people are not considered a menace to society,” he said. “But if you look at the statistics, white-collar crime is far and away the largest siphon of funds. An embezzler gets hundreds of thousands, if not millions, of dollars.”
Another reason this crime is seldom punished is that employers are usually reluctant to press charges, and settle for termination. They also do not pass on damaging information about embezzlers who apply for jobs elsewhere when potential bosses call for a reference because they fear the criminals will sue them.
To make matters worse, Behrenz said, most prosecutors don’t understand the intricacies of prosecuting this type of crime and don’t want to take the time to learn them.
“They’d much rather take a drug case to court than prosecute a white-collar crime,” he said. Lately, however, the courts are starting to take the crime more seriously and are giving prison time when the amounts involved are fairly large. Behrenz said that employers can take steps to reduce their risk. One is to observe the employee’s lifestyle. “Are they living beyond their means, running up lots of debt that necessitates the need for more money?” Behrenz said.
Another red flag happens when the employee constantly asks for an advance, which could indicate a high lifestyle, gambling debts or a drug problem.
He also recommends doing background checks.
James Conklin, owner of Exfed Investigations, is a former DEA agent and a former member of the Gaming Control Board. He does background checks on prospective employers as well as businesses.
In one recent case, someone was passing stolen checks from a local construction company. The company had an “open door” policy, which made them an easy target, Conklin said. He determined that the culprit was a former employee who had been fired.
Conklin also does security consulting.
He said Microsoft came to him after the company sent a company $50,000 in software and wasn’t paid. The company didn’t exist. The software was a front for a con man who routinely stole from business this way and then sold their products.
This is a common problem in Nevada because it is so easy to incorporate in the state, Conklin said.
He offers advice on reducing the chances of being scammed:
Before you get into business with people you should at least know something about them. If they give you an address, Google it and see what comes up. Call the Better Business Bureau. Check corporate records online.
Contact the Secretary of State’s office to see whether the company exists, if whether it is in any kind of default and to determine what names are associated with it.
“You can do your own homework, but if you are going to invest serious money, it’s worth spending $500 to $1,000 to hire a pro,” Conklin said.