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.