Inge Sebyan Black
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educators, states that their findings show evidence that a willingness to cheat
has become the norm. The 2008 study found that young people believe that
ethics and character are important but are cynical about whether a person
can be ethical and still succeed.
THE DISHONEST EMPLOYEE
Because there is no fail-safe technique for recognizing the potentially dis-
honest employee on sight, it is important to try to gain some insight into
the reasons that employees may steal. If some rule of thumb could be devel-
oped that will help identify the patterns of the potential thief, it would pro-
vide some warning for an alert manager.
There is no simple answer to the question of why previously honest peo-
ple suddenly start to steal from their employers. The mental and emotional
processes that lead to this change are complex, and motivation may come
from any number of sources.
Some employees steal because of resentment over real or imagined
injustice that they blame on management indifference or malevolence.
Some feel that they must maintain status and steal to augment their incomes
because of financial problems. Some may steal simply to tide themselves over
in a genuine emergency. They rationalize the theft by assuring themselves
that they will return the money after the current problem is solved. Some
simply want to indulge themselves, and many, strangely enough, steal to
help others. Alternatively, employees may steal because no one cares,
because no one is looking, or because the absence or inadequacy of theft
controls eliminates the fear of being caught. Still others may steal simply
for excitement.
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145
The Fraud Triangle
A simplified answer to the question of why employees steal is depicted in the
fraud triangle. According to this concept, theft occurs when three elements
are present:
1. Incentive or motive
2. Attitude/rationalization or desire
3. Opportunity
In simple terms, incentive or motive is a reason to steal. Motives might be
the resentment of an employee who feels underpaid or the vengefulness of
an employee who has been passed over for promotion. Attitude or desire
builds on motive by imagining the satisfaction or gratification that would
come from a potential action: “Taking a stereo system would make me feel
good, because I always wanted a good stereo system.” Opportunity is the
absence of barriers that prevent someone from taking an item. Desire and
motive are beyond the scope of the loss-prevention manager; opportunity,
however, is the responsibility of security.
A high percentage of employee thefts begin with opportunities that are
regularly presented to them. If security systems are lax or supervision is indifferent, the temptation to steal items that are improperly secured or unac-
countable may be too much to resist by any but the most resolute employee.
Many experts agree that the fear of discovery is the most important deter-
rent to internal theft. When the potential for discovery is eliminated, theft is bound to follow. Threats of dismissal or prosecution of any employee found
stealing are never as effective as the belief that any theft will be discovered by management supervision.
Danger Signs
The root causes of theft are many and varied, but certain signs can indicate
that a hazard exists. The conspicuous consumer presents perhaps the most
easily identified risk. Employees who habitually or suddenly acquire expen-
sive cars and/or clothes and who generally seem to live beyond their means
should be watched. Such persons are visibly extravagant and appear indif-
ferent to the value of money. Even though such employees may not be steal-
ing to support expensive tastes, they are likely to run into financial difficulties through reckless spending. Employees may then be tempted to look beyond
their salary checks for ways to support an extravagant lifestyle.
Employees who show a pattern of financial irresponsibility are also a
potential risk. Many people are incapable of handling their money. They
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The Art of Investigative Interviewing
may do their job with great skill and efficiency, but they are in constant dif-
ficulty in their private lives. These people are not necessarily compulsive
spenders, nor do they necessarily have expensive tastes. (They probably live
quite modestly, since they have never been able to manage their affairs
effectively enough to live otherwise.) They are simply people who are un-
able to come to grips with their own economic realities. Garnishments or
inquiries by creditors may identify such employees. If there seems a reason
to make one, a credit check might reveal the tangled state of affairs.
Employees caught in a genuine financial squeeze are also possible prob-
lems. If they have been hit with financial demands from illnesses in the family
or heavy tax liens, they may find the pressures too great to bear. If such a
situation comes to the attention of management, counseling is in order.
Many companies maintain funds that are designated to make low-interest
loans in such cases. Alternatively, some arrangement might be worked
out through a credit union. In any event, employees in such extremities
need help fast. They should get that help, both as a humane response to their
needs and as a means of protecting company assets.
In addition to these general categories, there are specific danger signals
that should be noted:
•
Gambling on or off premises
•
Excessive drinking or signs of other drug use
•
Obvious extravagance
•
Persistent borrowing
•
Requests for advances
•
Bouncing personal checks or problems with creditors
What Employees Steal
The employee thief will take anything that may be useful or that has resale
value. The thief can get at the company funds in many ways—directly or
indirectly—through collusion with vendors, collusion with outside thieves
or hijackers, fake invoices, receipting for goods never received, falsifying
inventories, payroll padding, false certification of overtime, padded expense
accounts, computer records manipulation, overcharging, undercharging, or
simply by gaining access to a cash box or company goods.
This is only a sample of the kinds of attacks that can be made on company
assets using the systems set up for the operation of the business. It is in these areas that the greatest losses can occur because they are frequently based on a
Internal Investigations and Controls
147
systematic looting of the goods and services in which the company deals and
the attendant operational cash flow.
Significant losses do occur, however, in other, sometimes unexpected,
areas. Furnishings frequently disappear. In some firms with indifferent traffic
control procedures, this kind of theft can be a very real problem. Desks,
chairs, computers and other office equipment, paintings, rugs—all can be
carried away by the enterprising
employee thief.
Office supplies can be another problem if they are not properly super-
vised. Beyond the anticipated attrition in pencils, paper clips, notepads,
and rubber bands, sometimes these materials are stolen in case lots. Many
firms that buy their supplies at discount are in fact receiving stolen prop-
erty. The market in stolen office supplies is a brisk one and is becoming
more so as the prices for this merchandise soar.
The office equipment market is another active one, and the inside thief is
quick to respond to its needs. Computers always bring a good price, as does
equipment used to support high-tech offices.
Personal property is also vulnerable. Office thieves do not make fine dis-
tinctions between company property and that of their fellow workers. The
company has a very real stake in this kind of theft because personal tragedy
and decline in morale follow in its wake.
Although security personnel cannot assume responsibility for losses
of this nature because they are not in a position to know about the prop-
erty involved or to control its handling (and they should so inform all
employees), they should make every effort to apprise all employees of the
threat. They should further note from time to time the degree of carelessness
the staff displays in handling personal property and send out reminders of the
potential dangers of loss.
Methods of Theft
A 2007 report by Gaston and Associates reported that the American Manage-
ment Association believes that 20 percent of business failures were the result of employee dishonesty. In addition, a 2010 report by the Association of Certified Fraud Examiners estimates that 5 percent of total revenue losses for most
companies are from employee fraud of some type (2010 Report to the Nation,
p. 4). Therefore, there is a very real need to examine the shapes that dishonesty frequently takes. There is no way to describe every kind of theft, but some
examples may serve to give an idea of the dimensions of the problem:
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The Art of Investigative Interviewing
1. Payroll and personnel employees collaborating to falsify records by the
use of nonexistent employees or by retaining terminated employees on
the payroll
2. Padding overtime reports and kicking back part of the extra unearned
pay to the authorizing supervisor
3. Pocketing unclaimed wages
4. Splitting increased payroll that has been raised on signed, blank checks
for use in the authorized signer’s absence
5. Maintenance personnel and contract servicepeople in collusion to steal
and sell office equipment
6. Receiving clerks and truck drivers in collusion on falsification of mer-
chandise count (extra unaccounted merchandise is fenced)
7. Purchasing agents in collusion with vendors to falsify purchase and
payment documents (purchasing agent issues authorization for pay-
ment on goods never shipped after forging receipts of shipment)
8. Purchasing agent in collusion with vendor to pay inflated price
9. Mailroom and supply personnel packing and mailing merchandise to
themselves for resale
10. Accounts payable personnel paying fictitious bills to an account set up
for their own use
11. Taking incoming cash without crediting the customer’s account
12. Paying creditors twice and pocketing the second check
13. Appropriating checks made out to cash
14. Raising the amount on checks after voucher approval or raising the
amount on vouchers after their approval
15. Pocketing small amounts from incoming payments and applying later
payments on other accounts to cover shortages
16. Removal of equipment or merchandise with the trash
17. Invoicing goods below regular price and getting a kickback from the
purchaser
18. Manipulating accounting software packages to credit personal
accounts with electronic account overages
19. Issuing (and cashing) checks on returned merchandise not actually
returned
20. Forging checks, destroying them when they are returned with the
statement from the bank, and changing cash account records
accordingly
21. Appropriating credit card, electronic bank account, and other elec-
tronic data
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149
The Contagion of Theft
Theft of any kind is a contagious disorder. Petty, relatively innocent pilfer-
age by a few employees spreads through a facility. As more people partici-
pate, others will follow until even the most rigid break down and join in.
Pilferage becomes acceptable—even respectable. It gains general social
acceptance that is reinforced by almost total peer participation. Few people
make independent ethical judgments under such circumstances. In this
microcosm, the act of petty pilferage is no longer viewed as unacceptable
conduct. It has become not a permissible sin but instead a right.
The docks of New York City were once an example of this progression.
Forgetting for the moment the depredations of organized crime and the cli-
mate of dishonesty that characterized that operation for so many years, even
longshoremen not involved in organized theft had worked out a system all
their own. For every so many cases of whiskey unloaded, for example, one
case went to the men. Little or no attempt was made to conceal this pilfer-
age. It was a tradition, a right. When efforts were made to curtail the prac-
tice, labor difficulties arose. It soon became evident that certain pilferage
would have to be accepted as an unwritten part of the union contract
under the existing circumstances.
This is not a unique situation. The progression from limited pilferage
through its acceptance as normal conduct to the status of an unwritten right
has been repeated time and again. The problem is, it does not stop there.
Ultimately pilferage becomes serious theft, and then the real trouble starts.
Even before pilferage expands into larger operations, it presents a difficult
problem to any business. Even where the amount of goods taken by any
one individual is small, the aggregate can represent a significant expense.
With the costs of materials, manufacture, administration, and distribution
rising as they are, there is simply no room for added, avoidable expenses
in today’s competitive markets. The business that can operate the most effi-
ciently and offer quality goods at the lowest prices because of the efficiency
of its operation will have a huge advantage in the marketplace. When so
many companies are fighting for their economic lives, there is simply no
room for waste—and pilferage is just that.
Moral Obligation to Control Theft
When we consider that internal theft accounts for at least twice the loss from
external theft (that is, from burglars, armed robbers, and shoplifters com-
bined), we must be impressed with the scope of the problem facing today’s
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The Art of Investigative Interviewing
businesspeople. Businesses have a financial obligation to stockholders to earn
a profit on their investments. Fortunately, steps can be taken to cont
rol
internal theft. Setting up a program of education and control that is vigor-
ously administered and supervised can cut losses to relatively insignificant
amounts.
It is also important to observe that management has a moral obligation to
its employees to protect their integrity by taking every possible step to avoid
presenting open opportunities for pilferage and theft that would tempt even
the most honest people to take advantage of the opportunity for gain by theft.
This is not to suggest that each company should assume a paternal role
toward its employees and undertake their responsibilities for them. It is to
suggest strongly that the company should keep its house sufficiently in order
to avoid enticing employees to acts that could result in great personal tragedy
as well as in damage to the company.
Employment History and Reference Checking
The key to reducing internal theft is the quality of employees employed by the
facility. The problem, however, will not be eliminated during the hiring
process, no matter how carefully and expertly selection is made. Systems of
theft prevention and programs of employee motivation are ongoing efforts
that must recognize that elements of availability, susceptibility, and opportu-
nity are dynamic factors in a constant state of flux. The initial approach to the problem, however, starts at the beginning—in the very process of selecting
personnel to work in the facility. During this process, a knowledgeable
screener who is aware of what to look for in the employment application
or reśumećan develop an enormous amount of vital information about the
prospective employee. Some answers are not as obvious as they once were,
and the ability to perceive and evaluate what appears on the application or
reśumeís more important than ever as applications become more restrictive
in what they can ask.
The increased focus on screening and background checks over the past
decade is a direct result of the following:
•
A rise in lawsuits from negligent hiring
•
An increase in child abuse reporting and abductions, which have resulted
in new laws that require criminal background checks for anyone who