Thieves within our companies

Burt Boldebuck has seen just about everything in 17 years of providing video systems to Capital Region businesses.

The overt and covert cameras his Madison security company, Boldtronics Incorporated, installs have captured many thefts at employees' hands, some serious, others bizarre.

Once cameras caught an employee ruffling through co-workers' lunch bags in the break room refrigerator.

Another case involved $250,000 of missing merchandise at an office supply distributor. Video caught an employee carrying out boxes and concealing small items like LCD projectors and computer memory sticks under his coat, everything destined for eBay.

"Small things turn into big things," Boldebuck said. "If they take a dollar here or there from the honesty box, if they're dealing with ink cartridges, maybe they'll take those too."

Small companies hit

Employee theft doesn't affect just large retailers. The 2006 report of the Association of Certified Fraud Examiners showed companies big and small in industries just as diverse lose on average more than $100,000 a year from in-house theft and fraud. That theft -- which accounts for a larger loss than shoplifting -- can range from a pack of Post-It notes to fraudulent checks worth thousands of dollars.

As recently as August, a Sheboygan man, a 16-year employee of Dinesen's Leather Only, was charged with selling the company's domain name for $200,000 and financing international trips with a stripper. He also used a corporate credit card.

And it's the smallest businesses -- with fewer than 100 employees -- that are losing the most to thieving employees.

It's something many local companies are loathe to admit, but that doesn't mean employee theft isn't happening, said Julie Vike, marketing business development manager at Applied Tech Solutions in Madison. Now with 14 employees, the information technology provider has tightened inventory controls as it has grown.

"People will do what they can get away with," Vike said. "Realistically, I'm sure someone has walked off with a piece of software.

"Have we had employee theft? Yes. Can we prove it? No."

Like Applied Tech Solutions, several local companies are taking steps to protect themselves and their bottom lines against employee theft and fraud. The best place to start, most agree, is simple and in most cases, inexpensive: by screening employment candidates and controlling cash and inventory better.

Three years ago, Applied Tech Solutions was only auditing inventory once a year. That year, Vike said, they realized their inventory -- computer components including hard drives, cables and software -- was off upward of $8,000.

It was time to make a change in the way they tracked inventory.

Employees sent out to job sites now carry change order sheets to record the extra parts that weren't included in the original order.

Any discrepancies fall more squarely on the shoulders of employees, Vike said. The company has also decreased the amount of inventory it keeps on hand.

To be fair, Vike said, most of those early losses can be attributed to employees forgetting to update orders on site and subsequently not charging the client.

Even so, the company now proactively educates employees on the cost of theft, because employee theft hurts everyone, not just those taking home the biggest paychecks.

Thefts affect paychecks

"It doesn't just (hurt) the business owner," Vike said. "It affects their paychecks and bonuses or their ability to get a new office chair, too."

The company is clear in not tolerating theft. Vike said they've never had to fire anyone over theft issues; it would take more than a stolen stapler.

Still, a no-tolerance policy encourages employees to think twice, Vike said - " 'Do I really want to jeopardize my own financial growth so I can have that printer in my house?' "

Be aware of inventory

JBM Patrol & Protection, a Madison security company with 150 employees, knows the value of preventing theft both for customers and themselves. They offer security guards, surveillance, private investigation and other services to businesses.

Decisions like the one Applied Tech made to tighten inventory control are smart, President James Mankowski said.

"If you have a warehouse full of goods and you don't pay attention to what your inventory is, that could kill you," he said.

Large retailers are more experienced when it comes to preventing employee theft, Boldebuck said, mostly because they have been forced to. That's why they lose less per year.

According to the AFCE, average fraud losses for businesses with more than 1,000 employees but fewer than 10,000 are $120,000, $70,000 less than those with fewer than 100 employees.

Blain's Supply Inc. in Janesville, which provides wholesale distribution, purchasing and administrative services to Blain's Farm & Fleet stores, takes employee theft seriously. Being vigilant helps the retailer offer low prices to customers, said Gary Hilt, vice president for loss prevention and risk management.

"We have to watch our costs very carefully," he said. "If left unchecked, employee theft can become a huge operating expense that greatly affects our ability to pass on value to the customer. We have to do all we can to eliminate employee theft to keep operating costs down."

'Sweetheart' cashiering

Theft, in the company's opinion, can manifest itself in more ways than merchandise or money. It could also be diversion of work to an employee's side business, customer identity theft or 'sweetheart' cashiering - when employees selectively scan merchandise for friends and family.

Farm & Fleet stores employ a myriad of defenses, including electronic article surveillance and overt and covert closed circuit television systems.

The company is also installing point-of-sale exception reporting, which will show cashiering anomalies such as excessive no sales, voids or returns.

An anonymous alert line allows employees to call in tips on theft and other misconduct. In-house corporate investigators that report to Hilt are trained to evaluate tips and conduct interviews before involving the police.

"Generally when there's been a theft, we're able to turn a case over to police that's ready for prosecution," he said.

Farm & Fleet actively pursues civil and criminal charges in theft cases, Hilt said, because "the burden of payment for dishonesty is best borne by those who create the need."

Background checks

The most effective theft prevention measure takes place before the hire, Hilt said, and it's something any business can do, even without a big corporate budget -- a thorough background check.

"It's often said that you hire your problems," Hilt said. "That's surely true when it comes to employee theft. Once an employee is hired, it's more difficult to inhibit theft at that stage. It's better to get it before it comes in."

Farm & Fleet does criminal record checks, drug screening and for management positions, credit checks. Each type of position is treated differently, Hilt said, because concerns are different, for example, for someone who interacts with the public than someone who works alone. Mankowski and Boldebuck agree.

"If you're hiring someone and entrusting them with business operations and the keys to your business, you need to know that they're not in serious financial trouble that might tempt them to take money from your business," Hilt said.

Taking theft seriously before and after the hire, Boldebuck said, is important to prevent a snowballing effect.

"Theft is anything you consider as theft," Mankowski said. "If you think its OK for your employees to take home office supplies, then it's not theft. It's all about managing your resources."

"But if John Doe steals from Company A," Mankowski said, "chances are he'll steal from Company B, too."

If anything, it's only fair to do everything possible to limit opportunities for honest people to be tempted, Hilt said.

"That's the person we know you are, the person we hired you for and we want to help keep you that way."

Emilie Rusch is a freelance writer.