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Slide 1: Who Steals From Their Employer? As business owners we want to trust the people that work with us in our companies. They help run our businesses. We know the names of their children, their dogs, their cats and their spouses. They help our customers; they perform vital functions that we couldn’t do without them every day. So, why is embezzlement so prevalent and how do we figure out who the dishonest employees are? While we can use business security camera systems to help protect our property along with some form of key card access system, we’re still susceptible to human nature, to try and circumvent security. There is a widely accepted principle in the fraud and investigations realm called the 10:10:80 rule. It states that ten percent of employees will steal no matter what. It is simply in their DNA. Conversely, there are ten percent of employees that will never steal. That is also how their DNA is written. The other eighty percent of us, yes I said us, will steal based on various factors. Two of the primary factors are need and opportunity. An employee’s need is very subjective. I might feel that I really need that new sports car, but in reality I simply want it. On the other hand, a father that is unable to provide essential things, such as food and medicine for his children also creates a need. That really is the point, whether it is food, clothing and shelter or a materialistic item, a person’s needs are beyond the employer’s control. What the employer must, therefore focus on is the opportunity. Dr. Donald R. Cressey broke these factors into three points or legs, and called it the "Fraud Triangle. " According to this theory, there are three factors -- each a leg of a triangle -- that, when combined, lead people to commit fraud. Cressey defined the first leg as opportunity. A cashier that has access to cash everyday creates an opportunity. Furthermore, if they do not feel that cash is tightly controlled, their perception of opportunity increases. The second leg is incentive. For the cashier, the incentive could be that he is out of gas or does not have money for lunch. It could also come from a third party, say a friend applies pressure to take money or merchandise. The final leg is rationalization. Rationalization deals with the perception and emotions of the employee. It is why they choose to steal or not. Here, they balance the threat of getting caught versus the reward. Realizing that the largest threats are the employees that comprise the eighty percent. Because, they are the majority of our team and they are faced with real challenges every day. In their 2004 Report to the Nation on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (CFE) reports that small businesses suffered a median loss of $100,000. This is higher than the losses experienced by all other sized businesses except for the largest organizations. It is estimated that it takes employers an average of eighteen months for an employee to be caught. Typically, another employee tips the employer off or it is discovered by accident. So what can be done to prevent those employees residing in the eighty percent group from going down the wrong path in your business? Well, depending on your situation, installing a door intercom video system may help isolate your most vulnerable areas. First, have a good screening process. Never hire anyone without an application that includes an authorization for a complete background check, including credit and criminal. As a business owner, one of the most important things you can do is check employment and personal references. There are weak points in every suit of armor, but taking these steps can go a long way towards prevention. I worked a case once where a store hired a woman that listed some good customer service experience, both handling financial transactions and providing service (phones, directions, etc.). She impressed the Human Resources Manager and the Store Manager so much in the interview and they were in such dire need that they put her right to work. She stole over $10,000 during her first weekend and disappeared. When I
Slide 2: arrived to investigate I immediately noticed several inconsistencies with her employment dates and locations. I called each of the employers that she listed. While the dates and compensation amounts were not accurate, they did know her and the first words out of their mouth were, “do not hire her, she will steal you blind.” Moral of the story, always check references. I cannot tell you how many investigations I have conducted where I found that most of the information provided on an application was false. I found this out by simply taking ten minutes to call the employers and references listed on the application. Second, have basic policies established that include checks and balances. Make them consistent processes that you do not deviate from.