Understanding Employee Theft
By Robert "Jerry" DeFatta, CFE, CRT
DeFatta & Associates Investigative Services
About twelve years ago, I was attending an executive protection training school and found myself reading a lot of books on terrorists and the terrorist philosophy. Of course, some of the books dealt with the structure and organization of a terrorist unit and it was obvious why I would want to know this information. However, I also found myself reading books that attempted to sell me on the authorıs ideas and win me over to the terrorist side. I guess even early in my career I understood the importance of knowing all I could about what motivated my enemies. Throughout my career I have maintained this attitude and made an effort to learn all that I could about what makes my ³enemies² tick. About ten years ago I began working in the casino industry and found myself investigating thefts committed by both employees and customers. I can tell you that over the past ten years I have seen more than my share of thefts committed by employees.
Whenever I meet someone new and they learn what I do for a living, they always seem surprised to hear that employees still commit thefts despite knowing that all of the cameras are around. I have to admit that I have asked myself on several occasions, why a good employee would risk everything for a few extra dollars. Several years ago I began reading and studying criminology and trying to figure out the answer to that question. I found that the reasons and causes that I had experienced in a lot of the cases I have investigated are essentially the same as those documented in studies conducted as early as the 1950ıs. In one of the most well-known of these studies, Dr. Donald R. Cressey conducted research on about 200 incarcerated embezzlers, who he called ³trust violators.² As a result of his research Dr. Cressey developed a hypothesis that is commonly known as the ³fraud triangle.² In 1973 Dr. Cressey published his research in Other Peopleıs Money: A Study in the Social Psychology of Embezzlement.1 The basics of his ³fraud triangle² theory was that there were three factors that were present in all of the cases he studied --- a non-sharable problem, a means of rationalizing their actions, and the opportunity to steal.2
The first of these factors, a non-sharable problem, has also become known as a pressure. This pressure could be real or perceived, such as an overdue bill or feeling obligated to provide the latest fashions for oneıs children. Throughout my career, when I conduct interviews with employees who have confessed to thefts, I have been amazed at the wide range of pressures employees associate with the reason they commit thefts. I have seen employees give in to peer pressure and throw away years of hard work just to impress a friend with an unauthorized discount or free meal. I will never understand why some employees will work two and three jobs just to provide for their families and others will fall to the slightest temptation or pressure.
The second factor is a rationalization, or a means of justifying the crime. The rationalization aspect of the triangle is the one in which I have seen the most change. In years past, when I interviewed theft suspects, I found that most of the rationalizations I heard were real and understandable. In recent years I see more and more that it takes a lot less effort on the part of an employee to rationalize their crimes. It is not uncommon for an employee who has stolen from the company to blame the company for making it too easy. Others I have interviewed essentially tell me that they didnıt really need the money; they just felt like the company needed it less.
This brings us to the last factor needed for a theft to occur --- opportunity. The opportunity to commit a theft is the only factor that I see a business owner having control over. By eliminating the opportunity, I feel the business owner can greatly reduce the losses suffered as a result of employee theft. One reason for this is that a large majority of the employees I have caught stealing, I would classify as ³opportune² thieves. It has been my experience that most employee thefts are committed by one of two types of thieves, an ³opportune² thief or what some have called a ³predatory² employee. The ³predatory² employee is just what it sounds like-- an employee who comes to a business to steal and prey upon the business. These are often the easiest to spot once they start to steal. Often these predators will have committed similar crimes already and may even have a criminal record. On the other hand, an ³opportune² thief is often perceived as one of the companyıs best employees. They are usually hard working and otherwise good employees who find themselves faced with an opportunity to steal. Sometimes this opportunity is unexpected and sudden. On other occasions I find that the employee happened upon a weakness in the companyıs internal controls and did not report it to management. Often this weakness was discovered by accident or through a careless mistake. But, once the weakness is discovered by the employee and not by the company, all that is needed is a pressure and a means of rationalizing the theft. This can best be illustrated with the following example:
Letıs say that Joe works as a front desk clerk for a local hotel. Several months after he was hired, he was asked to train a new employee. While training the new employee he also learned her employee login code and password. A few months later, the new hire decides that she doesnıt like working there and leaves the company. The hotelıs policies and controls state that after an employee completes his/her training period and when an employee is terminated, his/her codes and password are deleted or changed. However, the front desk supervisor rarely has time to update the computer and did not get around to deleting or changing the new-hireıs codes. One night while Joe is working late, he accidentally enters the wrong code and logs in under the terminated employees name and number. As a result the transaction that he completed is not recorded in his daily activity and this goes unnoticed. A few weeks later, on his way to work, Joe stops and picks up his mail. In the mail that day is a late notice for his credit card threatening to cancel the card if payment is not made immediately. That night at work, while trying to figure out how he is going to make this payment, he remembers the accidental login. Just then, a guest arrives and pays a cash deposit of $100.00. As Joe goes to enter his login, he enters the old employeeıs information. He then posts the transaction under that employeeıs name and no record of the deposit appears on his activity log at the end of his night. All that is left is to pocket the $100.00 and a good employee becomes an ³opportune² thief.
Although I find that Cresseyıs theory and model fit nicely with most of the cases I have investigated, I have started seeing a new trend as well. I mentioned earlier that I have seen it become easier for employees to rationalize their crimes. I have also seen a similar trend with regards to the pressure required for an employee to steal. I now find that employees are very quick to fall to temptation. I have heard it said that some employees simply lack the moral character to overcome temptation. I think this certainly describes what I am seeing in my business. I also find that once an employee takes this temptation and commits that first theft, it rarely is his/her last.
I find no reason to believe that suddenly employees will stop stealing from their employers. Therefore, as investigators we must work to better understand what causes some employees to steal while others can pass up the strongest of temptations. By educating ourselves and our clients, we can help prevent opportunities and other conditions that lead to a good employee becoming a good thief.
Robert "Jerry" DeFatta, CFE, CRT
DeFatta & Associates Investigative Services
1. Dr. Donald R. Cressey, Other Peopleıs Money: A Study in the Social Psychology of Embezzlement, Monticlair; 1973
2. Joseph T Wells, Occupational Fraud and Abuse, Obsidian; 1997