8/1
2012

Exposing Some Misconceptions About Security Technology

While it’s tempting to become impressed with state-of-the-art asset protection technology, it can prove costly to be lulled into a false sense of security. With internal theft and cargo crime spiking, the last thing that any company can afford is to be blindsided by a six or seven figure loss. However, that’s exactly what’s been happening to companies throughout the country that have placed too much confidence in the security technology they’ve acquired.

Security technology can certainly be beneficial, however there are also weaknesses in these systems that are being exploited by dishonest employees. Here are some examples:

CCTV – Although some overzealous sales people would like you to believe that the existence of a few dozen cameras throughout your facility will virtually guarantee a theft-free environment, this is simply not true. In fact, more than 90% of the companies contacting us to investigate significant theft-related loss already have video systems in place. If closed circuit television effectively deterred dishonesty, these companies wouldn’t be missing large quantities of their inventory.

Why doesn’t CCTV prevent or expose insider theft? One of the primary reasons is that fraud and collusion look exactly like standard operating procedure. There are no bells or whistles going off when employees steal product through the shipping, receiving, customer pick-up, transfer or return functions – and these are the areas where large scale theft regularly occurs in the typical distribution center.

Another reason why video systems oftentimes fail to protect companies from theft is because few executives have the time, patience or inclination to watch live or archived activity. Unfortunately, dishonest workers are well aware of this fact. In this respect, a video system is no different than a piece of exercise equipment. Simply purchasing it won’t provide any benefit. Unless it’s regularly used, it provides little or no return on your investment.

RFID – A recent DC Velocity article referenced a survey of companies using radio frequency identification systems, where nearly half of the respondents had problems, such as signal disruptions, integration issues and unit failure.

Beyond the technical glitches, it’s important to keep in mind that RFID was never intended to protect against internal theft. Designed as an operational tracking tool, it is not immune from manipulation by employees who have access to the devices. Dishonest workers intent on concealing their theft activity can defeat RFID tags and readers a number of ways, at which point the tracking capability is completely neutralized.

Bar code scanning– The forerunner of RFID is still used by many companies today. Like RFID, it provides many operational benefits. However, it won’t stop internal theft.

If, for example, a devious selector or loader wants to place four extra cases of inventory onto the truck of a driver he’s working in collusion with, he simply won’t scan the extra boxes. It’s that simple.

A similar scenario can also take place in the receiving function. We’ve caught  receivers who were paid thousands of dollars from dishonest drivers because they allowed the truckers to keep a percentage of the product they were supposed to deliver. The receivers concealed their theft by scanning the same cases multiple times, which was possible because many manufacturers don’t assign personalized bar codes for the same SKU’s.

GPS– Many companies initially invested in global positioning satellite technology when it was introduced because they thought they would be able to put a stop to trucker theft. Although GPS has been effective at exposing drivers who extend their breaks, it has been repeatedly defeated by dishonest drivers selling product off their trucks.

Dishonest drivers can have their trucks overloaded with product by warehouse personnel working in unison with them, thereby creating extra inventory that can be subsequently sold for cash.

Drivers can also prey on customers that don’t carefully check in their shipments and deliberately short them on their deliveries, which results in extra cases that could then be illegally sold.

In order to avoid detection via GPS tracking when they illegally transact the product for cash, dishonest drivers will meet  their accomplices and offload the stolen product during their authorized break periods at diners or rest stops, rather than going off route. In other cases, drivers will stay under the radar by selling the hot goods in proximity of their authorized delivery locations, claiming they were waiting for an available door to make their delivery. Consequently, drivers looking to profit at their employer’s expense are not intimated by having GPS in their vehicles.

Technology can add significant value to a loss prevention program. However, it’s not a cure-all. Carefully selecting and integrating the right technology with Best Security Practices, has provento be the most effective way to protect against internal theft.

Posted in: Blue Collar Crime, Home, Supply Chain Security
7/1
2012

Why Some Security Programs Don’t Protect Against Internal Theft

Danbee is frequently called upon to investigate white and blue collar crime by executives who wrongfully assumed that their companies were well protected. All too often, our investigations reveal that while may of these firms have allocated resources to protecting their assets, when tested; their safeguards did little to prevent them from being victimized.

In a large percentage of these cases, the companies that have incurred six or seven figure losses were guilty of making one or both of these two costly mistakes:

Being reactive rather than proactive

While some firms have learned that prevention is far less costly than apprehension, there are still many companies that haven’t gotten the message.

An example of this involved one distributor that experienced an ongoing drop in gross profit and an increase in inventory shrinkage. They had historically evaluated the success of their security program by how many individuals they caught stealing and arrested each year. However, despite the fact that they had apprehended a number of employees, their inventory shortages became worse over time.

What they failed to understand was that they were not plugging up the holes that allowed the theft to take place, i.e., not addressing the root cause of the problem. Consequently, new employees soon learned how easy it was to exploit the company’s controls. For every dishonest worker they terminated for theft, they were being replaced by new employees who learned that the risk of being caught stealing inventory was extremely low.

However, once this distributor began focusing on preventing theft, their losses dramatically declined and their bottom line improved. They learned to judge the effectiveness of their security program by how many employees remained honest, not by the number who was apprehended in the act of theft.

Becoming complacent

If you haven’t objectively evaluated your security and looked for ways to improve your loss prevention controls, there’s a high probability that your safeguards could be exploited.

All too often, companies mistake being lucky with having effective safeguards in place, only to find out how vulnerable they really were after their controls were compromised.

Prior to 09/11, there were many who attributed the absence of domestic terrorism to the effectiveness of U.S. airport security measures. As we painfully learned, many of those alleged safeguards were far more cosmetic than meaningful, and relatively easy for the terrorists to circumvent.

One way to avoid having a false sense of security is to have your physical, procedural, and electronic safeguards periodically audited and tested. While the results may be disturbing, you’re better off finding out where the weaknesses in your security program are before others have the opportunity to exploit them.

Posted in: Blue Collar Crime, Home
6/1
2012

The Biggest Myths about Business Crime

1. Myth: “Crime doesn’t pay”

Realty: Criminal activity is a multi-billion dollar problem today for American companies, with very few of the perpetrators being apprehended. Those who are caught oftentimes receive light criminal sentences. Consequently, dishonest employees and professional thieves find business crime extremely lucrative.

2. Myth: “Our security must be good because we’ve never had a major loss”

Realty: Many companies that never incurred a prior loss were subsequently victimized for six and even seven figures. Never confuse being lucky with being invulnerable. At some point, your luck may run out.

3. Myth: “My alarm company will know how to properly design a security system that will protect our inventory”

Realty: Some sales representatives sell what they want you to buy, not what you need. There is a significant difference between these two perspectives. Additionally, most salespeople are unfamiliar with the sophisticated methods used by professionals to circumvent state of the art security systems today.

4. Myth: “If any components in our alarm system weren’t working properly we would know it when we tried to arm it.”

Realty: There are several reasons why your intrusion detection system may not report that it is not functioning properly. These systems require periodic inspection and testing to insure that all the components are working properly.

5. Myth: “If we do sustain a loss due to a faulty intrusion detection system, the alarm company will be held responsible”

Realty: Almost all contracts have waivers of liability that protect the security system vendors. Read the fine print in your contract and you will probably find this type of language.

6. Myth: “It’s a good idea to integrate your electronic access cards into your alarm system”

Realty: While it may offer convenience, if an employee loses their card and fails to promptly report it, anyone finding that can bypass all your electronic protection and have uncontrolled access to your building.

7. Myth: “My camera system will keep my employees perpetually honest”

Realty: After the novelty of a new video system wears off, typically within the first few months, employees generally become aware that management doesn’t have the time or patience to spend hours each week viewing live or recorded activity.

Posted in: Blue Collar Crime, Home, White Collar Crime
4/1
2012

Finding Cost Effective Solutions in a Tough Economy: It’s Time to Think Outside the Proverbial Box

It’s no secret that the warehousing and transportation industry has been hit hard with rising costs and shrinking profit margins. With experts projecting an extended economic recovery, logistics executives are struggling with  some difficult financial decisions.

The knee jerk reaction of some when it comes to asset protection  has been to arbitrarily cut spending.  However, many companies have learned a painful lesson, which is this:  in tough economic times, security risks can be significantly higher than in normal times.

Because employees are now faced with the harsh realities of wage freezes, overtime elimination, benefit reductions, and possible job cuts, a percentage adopt the mindset that puts them in an adversarial position with their companies. When faced with rising personal expenses and reduced income, many look for an alternative means of financial support.

Employees can become resentful and sometimes even vindictive as they perceive management’s cost cutting initiatives not as a financial necessity, but as a personal attack. A percentage of the workforce may then adopt the mindset of “I’m going to do it to them before they do it to me.”  Consequently, many companies have experienced an increase in both the number of security related problems they’ve incurred as well as an escalation in inventory theft.

One distributor that recently contacted us had experienced their highest single spike in inventory shrinkage in the last 15 years.  Another company was recently victimized for over $240,000 in theft related losses by a group of long term employees who admitted they had never resorted to dishonesty prior to the last six months.

What oftentimes enables these types of crimes to take place are the reductions that some companies have made to their loss prevention programs, which have created new opportunities for individual theft, fraud and collusion, not to mention product tampering and sabotage.

Many senior executives have  asked me the best way to balance  the pressures of making needed cost reductions and the increased risk of security threats that many companies find themselves facing.  My response to this question is to search for innovative ways to reduce their security expenditures without increasing their exposure to security threats.

One  illustration of how this can be accomplished involves a company that has eight locations and one new facility on the drawing board. After carefully analyzing their security expenditures, we questioned why they intended to spend the sum they budgeted for the proposed video system in their new distribution system.

The cost for the CCTV system was, in our opinion, approximately $32,000 more than we thought it needed to be. As it turned out, this cost factor was being driven by their desire for pan/tilt/zoom (P/T/Z) cameras. When we questioned why they thought they needed them, rather than using fixed position cameras, it became apparent that there was not a well thought out reason for their selection.  Essentially they were going in this direction because that’s what they had in their existing facilities.

We pointed out the inadequacies of using Pan/Tilt/Zoom cameras in their type of operating logistics. After listening to our rational, they agreed with our logic. We also explained that fixed cameras were not only a fraction of the cost, but how they would actually provide them with a higher level of security.  Avoiding P/T/Z cameras would also save them money on repairs, being that fixed cameras have fewer moving parts and require far less service.

By utilizing the cameras we recommended, as well as substituting the type of digital video recorders their vendor had proposed with a model that we knew was of equal quality (but without some bells and whistles that we considered unnecessary), we were able to cut their capital investment by more than 52%.

Another illustration involved a company that was spending in excess of $2.8 million dollars a year in guard service  for their facilities in North America. After a study of their operating logistics and visiting several of their sites, we explained that all their facilities could be effectively protected and monitored from one central location if they utilized the right technology and security practices. The savings, even with the investment needed for the new technology, will exceed $1 million in the first year alone.

In a difficult economy, necessity does demand innovation. Rather than arbitrarily cutting budgets with a broad ax, which can end up costing far more, savvy  executives have learned that there are oftentimes ways to strategically reduce expense without increasing risk.

Posted in: Blue Collar Crime, Home, Uncategorized, White Collar Crime
3/12
2012

Anatomy of a Theft: How $182,000 of Inventory Disappeared

Here’s an actual case history that resulted in a distributor losing over $180,000 of inventory. The methodology was simple, yet effective. By taking advantage of this company’s rapid growth and lax security controls (both of which created opportunity), a devious checker disproved the old axiom that crime doesn’t pay. Reality check: crime pays quite well, which is why it occurs so frequently.

OVERVIEW:

This distributor’s trucks would be loaded during the night shift. In the morning, company drivers would make their deliveries.

When this company shipped product, labels would be applied to the outside of each case picked. Management felt comfortable that extra cases being placed onto trucks would be noticed because they would not have an affixed label. In actuality, it wasn’t difficult to circumvent the system.

By printing duplicate labels, (if questioned, the checker would claim that some of the original labels did not print well, were damaged, or lost) he was able to have extra, unmanifested boxes placed onto the trucks of the drivers he was working in collusion with.  These truckers were able to sell the overloaded product at a steep discount and still make a handsome profit. In no time, the three employees were pocketing more than $10,000 a month in cash.

Management had no idea that they were losing this quantity of product until they took an inventory. The Director of Distribution initially balked at the possibility of theft. However, when the results of the next inventory indicated even more shrinkage, he realized that he could no longer remain in denial.

WHY THIS COMPANY WAS EASILY VICTIMIZED

(1) Although this company had purchased an expensive video system, the dishonest employees knew that no one ever watched the monitors or viewed recorded activity. Additionally, the cameras were not positioned strategically, nor was the right equipment purchased. The bottom line was that the video system didn’t prevent, or even slow down, the ongoing theft activity.

(2) The company failed to provide a risk-free way for employees to report confidential tips. Management assumed that their “open door policy” would be sufficient for workers to report illegal activity.

It was later determined that other workers knew that this checker was stealing, but kept this information to themselves. They were concerned about their identities being leaked if they confided in company executives. Only after the dishonest workers were apprehended did the employees come forward and reveal what they had known all along. If this company had an outsourced 800 tip-line that offered employees complete anonymity, the employees said they would have reported the dishonest checker.

(3) The company did not have an effective security auditing program that prevented and detected shipping dock collusion. Had they maintained periodic monitoring of their drivers and checkers via unannounced security audits, the thieves would have probably been exposed long before the thefts mushroomed into a six figure loss.

Posted in: Blue Collar Crime, Fraud, Home, Supply Chain Security
12/2
2011

4 Strategies for an Effective Employee Hotline Program

Honest employees, who don’t want to work alongside thieves, substance abusers and other unsavory types, will oftentimes not come forward because they’re fearful about getting dragged into a potentially uncomfortable or even dangerous situation.

This fear factor is not completely unfounded. In fact, there is an actual term for it: “whistleblower syndrome”. There have been hundreds of cases of employees receiving threats, having their property damaged and even being assaulted after informing management about a dishonest coworker.

However, companies cannot afford to be naive and unaware about illegal and unethical activity taking place. White and blue collar employees who commit fraud, embezzlement or inventory theft, as well as harassment or discrimination can easily cost their companies six and even seven figures.

Workplace substance abuse can be equally costly. One distributor was sued for over two million dollars after a worker who tested positive for cocaine caused a serious injury to a coworker with a forklift. Prior to trial, statements were taken from an array of employees who testified that drugs were widely used and sold inside the distribution center. Fearful of the consequences, the distributor agreed to a significant settlement with the injured worker rather than go to court.

Confronted with these realities, it’s imperative that management open up a line of communication with their workforce. To be effective however, this communication line must make the employees feel safe and secure. Otherwise, it will not be nearly as effective as it needs to be.

Following these 4 guidelines will dramatically increase the success of your hotline program:

  • Offer Callers Total Anonymity, Not Just Confidentiality. The difference is that offering confidentiality means callers have to trust that you won’t reveal their identity. However, if you provide anonymity, i.e., you never require callers to provide their names, you’re giving them the security that they want and therefore increasing the odds of getting them to tell you what they know.
  • Outsource. It’s a proven fact that employees feel far more comfortable speaking with someone who won’t recognize their voice, speech pattern or accent. Additionally, callers prefer to speak with experienced professionals who routinely deal with these types of security related problems.
  • Promote It Positively and Consistently. You can avoid the “Big Brother” syndrome if you carefully word your posters and handout materials so they emphasize the benefits (which are many) of working in a theft-free, drug-free environment.
  • Talk About the Program As Often As Possible. During new employee orientations and communication meetings take some time to explain how the program operates. The more employees understand how the program works, the more likely they’ll be to use it when they become aware of illegal or unethical activity.
Posted in: Blue Collar Crime, Home, White Collar Crime
6/2
2011

Why Your Employee Dishonesty Insurance May Not Pay a Legitimate Claim

Insuring your company from employee theft is a unique form of coverage, different from loss caused by fire, flood, or even break and entry. Very few executives understand how it works, which is why so many legitimate claims are rejected each year.

If your facility is damaged by fire, water or forced entry, the physical evidence is apparent. It is essentially a matter for the insured to document the damage, tally the destroyed or missing inventory, and notify the insurance company. When it comes to documenting internal theft, however, you’re dealing with significantly different variables.

To begin with, your alarm system will not be going off in the middle of the night providing you with immediate notification that you’ve been victimized. Internal theft is a silent predator, normally taking place for months, and sometimes even years, before management becomes aware of its existence.

Another difference is the lack of readily available physical evidence that clearly proves the loss was caused by dishonest personnel. Most firms come to the realization that they are missing product only after receiving troublesome inventory reports or a confidential tip. Some warehousing executives wrongfully assume that inventory loss is the result of an operational problem, such as a software glitch, product mis-selections, or counting errors by inventory personnel, and the theft continues.

When management finally does become convinced that their loss is dishonesty related, they are faced with the difficult task of uncovering and documenting it. Unfortunately, this is not simply a matter of taking photographs of for example, water-damaged inventory. After all, it is hard to photograph product that has vanished.

It is safe to say that your insurance company will not be running to your door with a check simply because you notify them that you’ve been victimized by internal theft.

Most policies state that an insured must provide independent proof, in addition to a profit and loss statement, or inventory report, that corroborates that the theft was, in fact, committed by company employees. Consequently, the firm incurring the loss has the responsibility of performing an investigation and compiling evidence that proves that one or more employees stole the missing inventory. Without this independent corroboration, your financial computations alone simply will not count for much.

When properly prepared, and in conjunction with accurate financial computations, these forms of corroboration put the odds in your favor of having an inventory theft claim honored by your insurance company.

Undercover Reports – Factual observations made by a professional investigator working alongside company thieves.

Video Evidence – New technology makes it possible to conceal cameras inside smoke detectors, sprinkler heads and wall clocks, virtually undetectable.

Covert Surveillance Reports – Investigators who witness employees removing product from your warehouse or truck drivers delivering product to unauthorized locations.

Admissions of Guilt – Confession statements must be properly prepared and witnessed so it is clear that dishonest workers made their admissions without any duress, undue influence or coercion of any type.

Posted in: Blue Collar Crime, Cybercrime, Embezzlement, Fraud, Home, White Collar Crime
3/2
2011

Facility Break-Ins: “I Can’t Believe My Security System Was So Easy To Defeat!”

We’ve heard this statement repeatedly from executives whose companies have been victimized, usually accompanied by a dazed expression that can best be described as shock and awe.

In April 2010, a major pharmaceutical company’s Connecticut warehouse was burglarized by professional thieves who stole approximately $75 million of brand name drugs. According to reports, the thieves circumvented the electronic security systems in place with little difficulty while committing one of the largest distribution center thefts in history.

In the last few years, professional cargo theft rings have expanded their activities, no longer focusing only on trucks, rail cars and intermodal containers in transit. They have found it extremely lucrative to attack distribution centers and manufacturing plants, where they have repeatedly gotten away with millions of dollars of stolen inventory. Not bad for a few hours of work.

The truth of the matter is that these break-ins require a good deal of time to plan, prior to execution. It’s not unusual for example, for cargo rings to dispatch advance teams to surveil a targeted location for several weeks prior to their attack. Logistics such as the time the facility opens and closes, the number of employees on each shift, the traffic patterns of inbound and outbound trucks, whether there is on-site security and if so, how and where the manpower is appropriated, the design of the lighting and fencing, as well as the frequency of roving police patrols are just some of the factors that they carefully evaluate.

They’ve also been known to gain entry inside their targeted facilities posing as vendors, contractors, service people or sales representatives.

They will also have their members apply for jobs, many of whom have warehouse experience and are skilled at operating forklifts and other equipment. Once hired, they will assess the locations of all the alarm devices, what type of video system is in place, as well as the interior physical structure of the doors, walls and racking. After this information is obtained, and oftentimes photographed using concealed cameras and camcorders, they will methodically plan the most effective way to circumvent the facility’s security safeguards.

They oftentimes arrive with teams of specialists, including forklift operators, tractor trailer drivers, and surveillance personnel (who stake out the major access roads for police response) as well as technical experts who know more about electronic alarm systems than many of the companies that install them.

The end result is normally a successful heist, with the victimized company not knowing they’ve been hit until the next work shift arrives and finds that significant amounts of inventory have vanished.

Most of the companies that find their alarm systems disconnected, the video recorders missing, and several trailer loads of inventory stolen are shocked, not just by the financial loss, but by the speed and efficiency of the perpetrators.

While most victimized companies are amazed by the ingenuity and ease in which their security controls were defeated, the reality is that the professionals have been using the same methods for several years. Disconnecting phone and power lines, cutting through doors, (rather than prying them open and activating the alarm system’s magnetic contacts), and entering via the roof or wall vents, are standard operating procedure and pose little difficulty for these pros.

While there are always new, innovative methods, such as installing concealed wireless video cameras outside a building that will record employees entering their alarm codes into the lobby keypad, the professionals tend to use the same techniques that have historically been very effective for them.

To appreciate why electronic intrusion detection and video systems have been consistently compromised, it’s necessary to understand two realities about the alarm industry.

The first is that most of the sales reps that design intrusion detection and video systems have very little, if any, direct knowledge of how these professional thieves operate. While this may seem illogical, it’s none the less true.

Danbee Investigations has investigated over $100 million dollars worth of thefts by professional crime organizations. When we’re asked to conduct a post-theft investigation, we meet with representatives from the security system provider who designed and installed the facility’s electronic protective systems. During these discussions, we typically ask these sales representatives if they’re familiar with the professional thieves and their standard operating practices, i.e., how they defeat high-tech security systems. Ninety-nine out of 100 times, their response is, “No.” However, these same sales reps are the ones that distribution company executives typically rely upon to select the right technology, strategically position all the protective devices, and then properly program these systems.

Another reality is that alarm companies have minimal legal or financial responsibility for losses sustained by their customers. Regardless of whether for example, the wrong devices were selected, or if the central station operator failed to properly respond to an activation, alarm vendors have limited liability. If you doubt this, read the small print in your contract and you’ll probably find not one, but two or three causes that stipulate this.

This is not an indictment of alarm and video system providers. The reality is that they would not be able to obtain insurance if they assumed this type of responsibility. Because alarm companies could potentially be paying out millions each year, their contracts essentially state that they are not “insurers.”

Considering the limited understanding that many security system sales representatives possess, businesses should be wary about relying on a vendor to design their electronic protection. There is a significant difference between having your security systems designed by a salesman and an independent security consultant.

Posted in: Blue Collar Crime, Supply Chain Security
2/1
2011

Cargo Theft: The Latest Intelligence Regarding Professional Crime Organizations

More product than ever is being shipped to warehouses, stores and directly to consumers by truck. As a result, professional criminals have found that there is a fortune to be made by stealing these “warehouses on wheels.”

Once the exclusive domain of established organized crime families, dozens of new cargo theft rings have sprung up across the United States in the last ten years. In some parts of the country, law enforcement officials are overwhelmed and simply unable to keep up with the case load.

As reported in a 2010 Wall Street Journal article, law enforcement agencies and insurance companies are both reporting increases in cargo theft activity. Chubb Corporation, a major insurance company based in N.J., reported that insurance claims and data from other sources showed cargo thefts in 2009 increased 6.6% from 2008, and were up 23% from 2007.

Attracted by the number of trucks on the road, the lax security controls utilized by many warehousing and transportation firms, the low probability of being caught, as well as the resale value of the goods, cargo theft has become an extremely profitable enterprise. Here are some of the tactics they frequently utilize:

• They are so confident in their ability to be successful that the product is oftentimes sold before the truck thefts or distribution center break-ins have even taken place.

• They have been known to infiltrate their members into companies posing as employees, vendors and contract labor, which has proven to be an excellent source of inside intelligence for them.

• It’s not unusual for them to conduct surveillance on a targeted DC or to follow trucks for extensive periods of time before striking.

• They are extremely familiar with almost every variety of GPS, including where the antennas are concealed. Consequently, they can have most GPS units disabled within minutes.

• They frequently conduct surveillance at truck stops commonly used by drivers looking for targets.

• They have been known to lease warehouses in various parts of the country with interior loading docks to safely conceal the trucks they steal and store goods.

Posted in: Blue Collar Crime, C-TPAT, Supply Chain Security
1/3
2011

Why Theft Escalates in a Recessionary Economy

This distributor had historically been running acceptable inventory variances. Although there were occasional periods in the past where this company experienced discrepancies, management had never seen numbers this bad. Over the last six months, their cycle counts revealed an increase in shrinkage of more than 400%.

Unable to find an operational explanation for this, they decided to have a confidential investigation conducted. The undercover operation we conducted subsequently exposed a group of employees who were stealing company inventory each week. When these workers were apprehended, they admitted that while they had not previously stolen company inventory, recent events put them in a position where they felt they desperately needed extra income. After considering the alternatives, they decided that stealing from their employer provided the easiest way to supplement their income with the least amount of risk.

If you regularly read business publications, you have probably noticed more stories about business crime over the last two years. This is no coincidence. There is a direct correlation between this increase in criminal activity and the recessionary economy.

Employees are being driven to dishonest activity by financial need. With tens of thousands of companies instituting cost cutting measures, employees see their personal income at risk. Wage freezes, benefit reductions, reduced or eliminated overtime pay and vanishing bonuses, as well as plunging stock value, are the grim financial realities facing both white and blue collar workers today. In worst case scenarios, jobs are being completely eliminated and the prospects of finding a new one are bleak which is why Congress has extended unemployment benefits.

Even if cutbacks have not yet taken place, many workers believe that it is just a matter of time before their employers put them in effect. A growing percentage of employees see this belt tightening as unfair or unjustified, and at the same time feel pressured to find an alternative means of income.

Unfortunately, many workers are deciding that stealing from their company offers them this opportunity. Making matters worse, some employees rationalize and convince themselves they’re doing nothing wrong.

Employees who we’ve apprehended have offered a variety of explanations, many of them stating that they were simply taking what they felt they were entitled to. One supervisor caught defrauding his employer explained it this way, “I’ve worked hard for this company for a long time and I didn’t see the owners making sacrifices like they expected us to.”

Another dishonest distribution center employee, who was working in collusion with several co-workers, stated that he was “just doing it to them before they did it to me”.

These rationalizations don’t only extend to company workers. Unfortunately, vendors, contractors and even some customers can adopt a similar mind set when confronted with serious financial pressures.

We exposed one such theft operation that was taking place between a company driver and a customer that he regularly made delivers to. In this case, it was the customer who made the overture, asking the driver one day if he had any extra product he wanted to sell for cash. When the driver replied that he didn’t, the customer then suggested that if he reported a delivery shortage and the driver corroborated his story, there would be no way to disprove the bogus claim. The driver agreed and ended up selling the customer several cases of product for 30% of its legitimate value.

After doing this a few times, the customer told the driver that if he was able to “short deliver” other customers on his run, or arrange to have extra product “overloaded” onto his truck by other employees at his warehouse, he would gladly pay him in cash for the goods. After we apprehended the driver and then interviewed the customer, he admitted he had acted out of desperation.

Prompted by a downturn in sales and cash flow problems, this customer aggressively sought ways to generate additional profit, and before long he and the driver were netting nearly $1,500 a week by transacting stolen merchandise.

Posted in: Blue Collar Crime, Cybercrime, Embezzlement, Fraud, White Collar Crime