How To Fight Organized Crime and Employee Theft

A Formula for Fighting Organized Retail Theft

A Texas task force successfully challenged a criminal enterprise of shoplifters and fences through teamwork and communication.

What started out as a small meeting in Houston to discuss the problem of infant formula theft led to arguably one of the most significant positive examples of teamwork between private sector loss prevention, law enforcement, and government officials in the fight against organized retail theft. The lessons from these collaborative efforts in the early 2000s are still applicable in today’s loss prevention industry.

In the fall of 2002, several grocery loss prevention representatives met with Joe Williams, then president of the Gulf Coast Retailers Association, to discuss the growing problem. The standard deterrence and apprehension techniques used in the industry were having little effect on slowing the theft of formula. CCTV, electronic article surveillance (EAS), and even undercover shoplift agents proved to be of little value in significantly slowing the losses. In many locations, retailers were locking up formula just to keep it in supply for their customers. While this helped to slow the theft, it also was an inconvenience for legitimate customers and was damaging sales.

The Scope of the Organized Retail Theft Problem

By comparing notes on the apprehensions made in their stores, the loss prevention representatives found that in many of the cases the suspects detained for the formula thefts were primarily from South and Central American countries, specifically El Salvador and Honduras.

USPS Employees Theft: Suspects Include Ex-Postal Union Head

USPS employee theft has led to charges against 33 post office workers in the Los Angeles area, including embezzlement and failure to deliver 50,000 pieces of mail. One of the suspects is the former president of the mail workers union.

According to the U.S. Attorney’s Office, the suspects were connected to 28 cases involving mail theft and/or possession of stolen mail. Other charges included conspiracy,  bank fraud, and making false statements.

“Arrest warrants were issued for six of the 33 defendants, who were recently charged as a result of investigations by the USPS’s Office of Inspector General,” said prosecutors. “Most of the defendants were charged in indictments that were returned by federal grand juries …”City News Service said one of those nabbed, Jarol Garcia, 33, is the former president of the local Mail Handlers Union. He was charged with conspiracy and possession of stolen mail. Garcia had worked at the Moreno Valley Delivery Distribution Center as a mail handler.

Forgery May Not Constitute “Theft” Under an Employee Dishonesty Coverage

Ruling in favor of the insurer on a motion for summary judgment, on July 29, 2016 the Fifth Circuit Court of Appeals held that under the terms of a commercial crime policy, proof of a forgery by the insured’s employee in extending $90 million of credit to a customer did not establish an unlawful taking as required by the policy terms. Tesoro Refining and Marketing Co, LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 2016 U.S. App. Lexis 13838 (5^th Cir. 2016).

Tesoro, a refiner and marketer of petroleum products sold fuel on credit to petroleum distributor Enmex. On several occasions the credit director for Tesoro, for unknown reasons, falsified and forged signatures on numerous letters of credit purportedly issued to Enmex. These acts enabled the Enmex debt to Tesoro to grow to $90 million before the forgery was detected. Once the forgery was discovered, Tesoro filed suit against Enmex for breach of contract and fraud, which lawsuit was settled. Tesoro also filed a claim with its insurer National Union under its crime policy. Tesoro claimed the loss fell under the “forgery and alteration” section of the policy (which section did not cover employee forgeries) and then amended its claim to proceed under the “employee theft” portion of the insuring agreement.  National Union denied coverage under both provisions. After suit was brought by Tesoro against National Union for breach of contract and bad faith, cross motions for summary judgment were filed. Ruling in favor of National Union, the federal district court in Western Texas reasoned that the employee theft coverage could include theft that was facilitated by a forgery, but that it did not cover forgery losses independent of a theft, which always required an unlawful taking in order to trigger coverage. Tesoro did not demonstrate that any unlawful taking had occurred and, therefore, the district court granted National Union’s motion for summary judgment. On appeal the Fifth Circuit agreed.