Theft in the Fast Food Industry

[Curtis Baillie]

I thought this was an interesting article - nothing new here though:

http://www.selmatimesjournal.com/articles/2007/09/16/news/local/news%20786.txt

I'm really surprised about the 'black belt' comment.

[Bill Warnock]

I thought this was an interesting article - nothing new here though:

http://www.selmatimesjournal.com/articles/2007/09/16/news/local/news%20786.txt

I'm really surprised about the 'black belt' comment.

Curtis, the old security adage proves to be alive a well: "Customers steal your profits, employees steal your business."
The sum $40 billion loss doesn't surprise me. I'd be willing to wager that is a conservative number or low side. We'll probably never know the true amount of internal theft.
Enjoy the day,
Bill

[SecTrainer]

Can't remember whether it was the SBA or Dept of Commerce that put out an estimate that over one-third of small businesses that fail every year do so because of employee theft. It's a bit counterintuitive, but the ACFE reports that the per-incident loss to small businesses is much greater than the per-incident loss to large companies - probably because large companies have at least somewhat better controls. I can't remember exact numbers, but it's over $100,000 per incident on the small business side.

One or two incidents is all it would take to sink most small businesses. Yet the small business owner is usually the one who is most resistant to the need for controls (believing he "knows his employees") and least interested in learning or implementing methods to prevent and/or discover internal theft. He will not do even basic backgrounds on job applicants, and the economics of providing for segregation of duties in the accounting operation simply mystifies him. How can that possibly be "money well spent"??

Not only does the whole topic of security, internal theft etc. bore and/or annoy him ("I didn't go into business to become a security manager!"), he is sure he "doesn't need" better controls anyway. Maybe some other stupid business owner, but not him!

So...he has the one bookkeeper, who handles cash operations, the receivables and payables, and perhaps even payroll. This person literally has the combination to the safe, the keys to the company car and a company credit card...and yet he professes amazement when he learns that she was last seen at the airport with a one-way ticket to one of the numerous countries that won't extradite her. "Edna, embezzle? Why, I just can't believe it! Why, she's just like (or maybe even IS) family! She used to come to my daughter's bassoon recitals! She's as honest as the day is long!". The only thing that's honest about Edna is that she honestly can't believe you are so naive. You might as well have sent her an engraved invitation:

"Dear Edna: I am growing weary of being in business and coming to the office every day. Would you please hurry up and steal whatever you haven't already stolen so I can retire early? I've had the door to the safe removed so as to minimize any extra work this might cause you. John out on the dock will help you carry the heavy items if you slip him twenty bucks or so.

I apologize for any inconvenience my going out of business causes you. I trust that the half-million dollars you've squirreled away will tide you over until you find a new...ummm..."opportunity". I doubt it will take you long, though, because I will provide you with a good letter of reference and promise not to mention your sticky fingers to your next employer. Won't that be a laugh on him?!

Kind Regards...Mr. Tuddball."

Naturally, you find a business owner with a very different attitude once the near-inevitable happens, but you probably won't find him at his place of business. You'll find him at the auction house, anxiously awaiting to see how much his office furniture will bring in the bankruptcy sale.

...and here's the kicker. Embezzlers and grifters KNOW all of the above, and that is why they very often deliberately seek job opportunities in SMALL BUSINESSES.

[Curtis Baillie]

I recently was contacted by a small business on the West coast that discovered their "trusted - loved by all the family" office manager had embezzled $1,000,000 in the last ten years. This 'most trusted' manager had complete control of the check books and forged the owners name on monthly checks made to a major upscale department store chain to pay off her very upcale purchases. This had gone undetected for numerous reason, mostly due to the owners lack of basic controls......and the beat goes on......

[Bill Warnock]

I recently was contacted by a small business on the West coast that discovered their "trusted - loved by all the family" office manager had embezzled $1,000,000 in the last ten years. This 'most trusted' manager had complete control of the check books and forged the owners name on monthly checks made to a major upscale department store chain to pay off her very upcale purchases. This had gone undetected for numerous reason, mostly due to the owners lack of basic controls......and the beat goes on......

Curtis, that sounds like the stories printed in Gerd Hoffmann's "Detectives' Tips." Publication has been around since 1962 and business and industry can gain an insight into the "trusted" criminal mind.
Enjoy the day,
Bill

[NRM_Oz]

It happens everywhere

Working for a previous employeer, a tip off from an ex employee alerted me to the Payroll Manager paying phantom employees and placing the money into his bank account (dumb criminal #1). Investigated by his Group Manager, it went nowhere until I was asked to review the investigation conducted (it was my job).

Within 24 hours I had enough evidence to proceed further and to implicate the Group Manager for coverup (dumb criminal #2) who covered it up. Both resigned immediately and I brought in some temp staff to help me out and after 1000 manhours we had a over $600k US for 5 years of theft. As the CEO perused my I. file, he told me that this idiot had been employee of the year 12 months ago and I smiled and said well it won't be for this year will it ?

[Curtis Baillie]

Curtis, that sounds like the stories printed in Gerd Hoffmann's "Detectives' Tips." Publication has been around since 1962 and business and industry can gain an insight into the "trusted" criminal mind.
Enjoy the day,
Bill

Bill - They didn't hire me as my 'free' advice to them was to file charges against the office manager. They didn't want to do that as 'she doesn't have any money, filed bankruptcy, and she's a 30 year friend'. Their plan was to go after the retailer for accepting 3rd party checks. My advice didn't fit their plan. There may of been responsibility on the part of the retailer, but without filing charges against their thief - they don't stand a chance of collecting from the retailer.

[SecTrainer]

Bill - They didn't hire me as my 'free' advice to them was to file charges against the office manager. They didn't want to do that as 'she doesn't have any money, filed bankruptcy, and she's a 30 year friend'. Their plan was to go after the retailer for accepting 3rd party checks. My advice didn't fit their plan. There may of been responsibility on the part of the retailer, but without filing charges against their thief - they don't stand a chance of collecting from the retailer.

Wonder if they had a fidelity rider on their liability insurance? This is often "thrown in" (being cheap, because it typically has a high deductible) with liability policies, and many business owners don't even know they have the coverage. It's not worth messing with in smaller cases (anything less than the deductible, obviously), but it would have been in a case like this. Of course, they would have had to file a police report, but that's not the same thing as prosecuting.

Even for losses that are large enough to meet the prosecutorial "threshold" (almost every prosecutor has a loss amount below which he won't take cases of business theft), and even when "friendship" isn't in play, prosecuting employees can be tricky and troublesome for the company. One big issue is that you immediately invoke a higher standard of proof (no longer "reason to believe" but "beyond a reasonable doubt") even for your own internal investigation because of the risk that an employee who is found not guilty of the criminal charges will then turn around and file wrongful termination and other negligence- or discrimination-related lawsuits against the employer. This will make the investigation more expensive, as a rule, than one that only needs to meet the lower standard in order to take an employment action.

Another issue is the disruption to the business with having a "police investigation" ongoing, which is not very likely to be handled as discreetly as your own investigation, nor with any particular concern for the impact on the business.

And, let's face it...not a few business owners don't relish the idea of opening up the can of worms known as "search warrants" for other reasons that may not be related to the theft at all.

Incidentally, this lady's bankruptcy cannot discharge a "debt" arising out of fraud, embezzlement, theft, or any other crime that I'm aware of, nor are the assets she was entitled to shield from creditors during the bankruptcy capable of being shielded from fraud recovery actions. I would have gone after everything she owned and every future dollar she made. I would have also found out who else in her circle might have received some of the proceeds and gone after them, too.

[Lynch Mob]

Bill - They didn't hire me as my 'free' advice to them was to file charges against the office manager. They didn't want to do that as 'she doesn't have any money, filed bankruptcy, and she's a 30 year friend'. Their plan was to go after the retailer for accepting 3rd party checks. My advice didn't fit their plan. There may of been responsibility on the part of the retailer, but without filing charges against their thief - they don't stand a chance of collecting from the retailer.

I would be willing to bet that the fact that this person didn't have any money and filed bankruptcy (I am sure all prior to being identified as the thief) never entered into their minds as signs of a potential thief.

We had a very recent case for a client. A store manager ran off with 3 days of sales that were never deposited. During the investigation, we discovered that the manager had a long time drug problem, had "borrowed" money from petty cash, had child custody issues, had financial problems that caused her to borrow money from employees, and had attendance issues. Despite all of that, the DM was "shocked" that this manager might had taken any money.

This is why I preach education. The more education you provide, the more likely people are to identify this type of incident before it ever happens. Education keeps the theft amounts much smaller, and allows for much earlier identification.

[Curtis Baillie]

[QUOTE=SecTrainer;41176]Wonder if they had a fidelity rider on their liability insurance? This is often "thrown in" (being cheap, because it typically has a high deductible) with liability policies, and many business owners don't even know they have the coverage. It's not worth messing with in smaller cases (anything less than the deductible, obviously), but it would have been in a case like this. Of course, they would have had to file a police report, but that's not the same thing as prosecuting.

Even for losses that are large enough to meet the prosecutorial "threshold" (almost every prosecutor has a loss amount below which he won't take cases of business theft), and even when "friendship" isn't in play, prosecuting employees can be tricky and troublesome for the company. One big issue is that you immediately invoke a higher standard of proof (no longer "reason to believe" but "beyond a reasonable doubt") even for your own internal investigation because of the risk that an employee who is found not guilty of the criminal charges will then turn around and file wrongful termination and other negligence- or discrimination-related lawsuits against the employer. This will make the investigation more expensive, as a rule, than one that only needs to meet the lower standard in order to take an employment action.

Another issue is the disruption to the business with having a "police investigation" ongoing, which is not very likely to be handled as discreetly as your own investigation, nor with any particular concern for the impact on the business.

And, let's face it...not a few business owners don't relish the idea of opening up the can of worms known as "search warrants" for other reasons that may not be related to the theft at all.

Incidentally, this lady's bankruptcy cannot discharge a "debt" arising out of fraud, embezzlement, theft, or any other crime that I'm aware of, nor are the assets she was entitled to shield from creditors during the bankruptcy capable of being shielded from fraud recovery actions. I would have gone after everything she owned and every future dollar she made. I would have also found out who else in her circle might have received some of the proceeds and gone after them, too.[/QUOTE]
I agree, and I'm sure they knew this, but they were just looking to get their money out of the deep pockets) retailer. If they try to proceed as they told me they wanted - they will get nowhere. I case see the question from the retailer's attorney. Let's see, you didn't file criminal charges from someone who stole one million dollars from you? and Your accounting procedures are so lacking you didn't discover this for 10 years?

[Bill Warnock]

I agree with LynchMob, education and situational awareness are key to forestall these events.
SecTrainer your posting is indeed troubling and enlightening. I be willing to bet somebody is playing "hide the salami." It seems nobody wants to do anything which brings to mind the PX scandal in Viet Nam. Those two NCOs had too much on too many high ranking civilians and military, so nothing was done. The lack of prosecution was deemed to be in the best interest of the government.
Enjoy the day,
Bill

[SecTrainer]

I agree with LynchMob, education and situational awareness are key to forestall these events.

Awareness for prevention, yes. Moreover, in the "new normal" business environment of Sarbanes-Oxley, etc., maintaining proactive (as opposed to "reactive") situational awareness is being mandated for more and more types of adverse incidents, so the issue is important both before AND after something happens. The old standby excuse that executives were once able to give was "We didn't know, so you can't hold us responsible". Well, that dog won't hunt anymore.

What gives power and life to these new "awareness" mandates is the Federal Sentencing Guidelines, whereby one of the big issues that will be addressed when YOU get hailed into court because your books were phonied up by an embezzler and you wound up making a fraudulent credit statement to a bank, etc. is not "what you knew", but "what should you have known, and what did you do to make sure you DID know?".

Moreover, the individual states are following this trend themselves of holding the ownership/directorship of companies responsible for all kinds of employee actions, so it won't matter much whether you end up in state or Federal court, or in a civil or a criminal proceeding. The question noted above will be asked...and you'd better have an answer.

Anonymous hotlines, and training middle-level/supervisory-level people on the red flags (that almost always can be seen in retrospect) for various kinds of malfeasance and misbehavior are two very powerful tools. Most internal crimes, in fact, are discovered through tips from employees, vendors and customers, and by alert supervisors. Contrary to popular belief, a small minority of crimes and other forms of malfeasance are discovered through auditing procedures or "controls".

[NRM_Oz]

Education / Prosecution = Improvements

Working in my final LPM, we had a few restaurants that were losing big $$$ expected) and it was discovered that 13 staff were enjoying free meals (most places allow this). Not $0.00 meals but $75.00 seafood platters or they would cook up meals to take home for dinner and were caught on CCTV after a complaint came to me. Code of Conduct clearly stated that you were not permitted to remove anything without payment or written permission and this was bloody theft as they were eating more than they got paid each day.

Suddenly the numbers began to change and the restaurants were improving and then we caught "cash-register boy" who always knew to take out $40.00 as one of my idiot LPO's had told him nothing under $50.00 is checked by the LPM. I changed it to be $10.00 due to constant shortages. He hit a register 12 minutes after starting and with only $33.00 in sales could not explain why he was filmed removing $50.00 in cash - oh yes he could - I was changing a $50.00 note (yet no $50.00 note was in the tray). From that point onwards, the restaurants were making a tiny profit for the first time in 2 years.

I attended a few staff meetings and let the 100 staff have both barrels since they want to pilfer, steal and so forth - they will be investigated, fired and handed over to the police.

[SecTrainer]

Working in my final LPM, we had a few restaurants that were losing big $$$ expected) and it was discovered that 13 staff were enjoying free meals (most places allow this). Not $0.00 meals but $75.00 seafood platters

Yeah - just one employee, $75 x 5 days a week x 50 weeks a year adds up to $18,750/year. Plus, such an employee is probably doing other things as well, like giving free drinks or desserts to friends, charging friends for lower-cost meals than they actually order, etc.

I attended a few staff meetings and let the 100 staff have both barrels....

Ah, if only we COULD let them have both barrels! There's something simple and attractive about the 75-cent solution...

[NRM_Oz]

1 girl who we caught had cooked her meal up - walked past 2 LP staff and myself in full view, purchased a picnic hamper with 2 x $50.00 notes and then told me she ............ wait for it "I FORGOT TO PAY FOR IT". A $75.00 meal = day's nett wages. At our little chat, she tells me she is hungry and wants to eat the meal until I remind her she did not pay for it so it belongs to the company is now evidence. She offers to roll on the others if she can eat the meal and I repeat the same thing again ......... either way she was gone !!

Attending a party, an old college mate tells me of his new restaurant that is losing $$$ and thinks the staff are stealing. I asked him to let me go in anc check it out if my now wife can work as well. Friday night we go and I spot orders not being rung up in the bar's register but the customers charged for the drinks and meals being ordered in the kitchen but entered into the main register. Then 1 of the girls says to my wife - I will get rid of him as we only like women to work with.

Saturday night a party of 25 VIP customers come in and I worked their table alone and after a massive bill (check) I am given a $120.00 tip (we don't tip in Australia so 5% is considered a big deal for us). 1 of the girls demands I split it 5 ways and I tell her to forget it since I got nothing from the Tips jar last night. She then tells my wife she is going to get me fired on a sexual harrassment set up tonight. At the end of the night Roger introduces me formally and fires all 4 girls before telling them they are not being paid for the whole week since they all took more than they were to be paid in 2 nights. I then pointed to my now wife and said "meet my fiance`". 2 months later he is fully booked out and running a 1 write POS system for all orders. He believes he lost $500 - $700 a night on weekends.