This past month, I closed out one of the biggest employee theft cases of my career thus far. While it was quite exciting and a huge win for my team, it left a lot of questions about our internal controls, that after this case, surely must evolve. Lots of people that I come into to contact with really misconstrue the facts regarding employee theft. You’ve heard the phrase before… “You have more internal theft than external theft.” Every time I hear this phrase, I find myself trying to educate the manager on this. While most people assume that 75% percent of their employees steal, realistically, only a very small percentage of employees engage in this behavior. Those that do though, create a substantial financial loss to the company.
As part of my investigative routine, I normally check online sale sites for possible stolen merchandise. Selling stolen product online is most likely to quickest and easiest way to get rid of goods in a hurry. As I was browsing through I noticed a pair of wireless headphones that had just hit our stores. Interesting enough, the item still had our company markings on it. From there I was able to quickly identify the geographical area and before long I was able to identify the owner of the page. That owner was a warehouse supervisor at one of my stores.
Well, it didn’t take long for me to find quite literally, hundreds and hundreds of items either that had previously been sold, or were up for sale on this website. Lots of these items were electronics such as cameras, headphones, accessories, phone cases and other large bulk product such as coolers and outdoor furniture. Looking at the store’s inventory I could tell that some of the product had in fact come from that location. Over the course of several weeks, I initiated several online purchases. Most were for electronic devices that had a serial number. Once received, I was able to determine that the items did in fact belong to that store and those particular items were not accounted for. I had made my case.
How was this associate getting this much product out the door without anyone noticing him? I still didn’t have that piece of the puzzle. Without enough ammunition for prosecution, I interviewed this supervisor to determine how he was obtaining this much product. I knew it was stolen, I just didn’t know by whom and in what manner. What I uncovered during this interview was one of the most sophisticated and organized theft operations I have seen in my career.
That particular store was also a hub warehouse. This means that online purchases made by customers in a certain geographical area would be sent to our store and warehouse to fulfill. This of course gets the item to the customer much faster than going through our centralized distribution center. Once the order was filled for a customer, it would be packed and set in a designated area and a private mail delivery service would pick up once a day.
The supervisor had gained access to the shipping account, so he was able to ship product out without anyone second guessing the boxes. At first, according to our records and his online account, he was shipping merchandise directly to his customer’s houses. He said that he thought that was a bit risky and ultimately began shipping massive quantities of merchandise to a vacant home close to his. Each day, he would pass by and take the packages from the porch. From there, he would run his online store. This had been going on for the past two years. This one employee, working alone had taken nearly $250K worth of merchandise over this time period.
With the dishonest employee out of our store, we focused on what went wrong. We began a program of inspecting all boxes and shipments prior to them being sealed and implemented a system that a number of shipping boxes each day could be verified. We also set up exception style reports that showed any time a delivery was sent to the same address more than 5 times a month. This was a costly lesson for us to learn and hopefully with better controls and more oversight, it will never happen again.
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