Employee Theft (Embezzlement)

When the crime of embezzlement or theft is discovered it is many times found that the alleged theft or embezzlement involves hundreds of thousands of taxpayer or employers’ dollars.

Private and public employers have been known to commit theft, and in one case in Iowa a city clerk reportedly burned down City Hall to conceal her embezzlement.

The above example is not common that an employee would go to that extent to hide their malfeasance.  The fact of the matter is that an employer may not ascertain that a crime occurred for several years after it had started. The most likely way that a crime of embezzlement or theft will be discovered is often during an official audit. Another way that a criminal act could come to light is if someone follows a hunch or notices an irregularity.

Financial Record Audits

In the case of the audit, if you have an employee that is adamant that the books are fine, or that they can perform the audit on the pretext that you can save money by doing it internally, it is time to investigate. The more that the employee insists on doing the audit, the more your focus should turn to protecting your assets.

Such incidents of theft included till tapping (e.g. taking cash from registers). Not ringing up a sale or only partially ringing up a sale.  Employees could also discount sales without authorization for friends and/or family.

Termination for Employee Theft

So let’s ask the question that many people are thinking, yet one that is not always the outcome upon discovering a theft.  Should the theft or embezzlement always result in a termination? Over the years I have been amazed at the responses that I have heard from employers with several being, no, we will not terminate because we do not want the negative press. Really? Remember, once the word gets out, and it will, no matter how much damage control your organization prepares for everyone will be watching.

In many cases other employees will figure it out very quickly that the punishment for theft or embezzlement is nothing more than a reprimand or suspension. What is often the case is that employers may allow the employee to resign in lieu of termination. The more appropriate way to handle such a case is with termination and prosecution.

However, the first thing that you need to do is to ensure that you have a plan in place that includes detailed policies. With those policies in place a comprehensive investigation needs to be conducted. If you do not have a qualified person on staff to conduct the investigation, it is probably time to call the police.

Best Practice Security Policies

Some employers might believe that they have no problem of internal theft or embezzlement so why would they need a policy to address it? If that is the case, when an alleged theft occurs, they will likely not recognize it or properly handle it.

What I often tell businesses is to learn from the mistakes or misfortunes of others. In other words, if another business is a victim of a serious crime learn from their actions, both good and bad, in the response, investigation, and follow-through of the incident.

If it is merchandise or inventory that is vulnerable to theft employers need to require that their employees to sign an acknowledgment that they recognize that any personal items that they bring into the work space, or any items that they take with them at the end of their shift, is subject to inspection and that they have no privacy rights in the workplace.

Policies also should state that employees’ participation in any investigation is compulsory and that any rejection or refusal to participate, or if false information is provided, it will result in termination.

It is time to get serious in these matters and protect your revenue stream and company assets.

Employee Theft Investigations

Just like the national news stories of famous people that are arrested for crimes such as murder, the person that is alleged to have committed the crime will retain a law firm to defend them. What is often the lawyers focus is to discredit the investigation, whether it was conducted in-house or by a law enforcement agency, and they can be very good at doing so.

For example, if you conduct an internal investigation using an employee that has little or no experience in conducting criminal investigations, your organization’s investigation will likely be the focus of the defense. Investigations for employee theft or embezzlement should always be undertaken with professionalism.

Law Enforcement Intervention in Employee Theft

So, you suspect that an employee is stealing from your company and you do not know what to do about it. So do you call the police? This is one of those areas that have the caveat “maybe”. The fact of the matter is that not all police agencies will have the resources to throw at your case, especially if it is a minor case, or you do not even know if a theft is occurring.

We cannot blame the police if we have not done our own internal investigation yet. Look at it this way, a patrol officer will respond to your call but in many cases all that they can do is document your complaint. If you are in the very early stages of your internal investigation the detective that reviews the patrol officer’s report may not act on it with any urgency at first. So before we make the initial call let’s look at what facts we have.

As a former security director and retired police officer my first words of advice is that if you think you have a strong case, yet you need additional time to conduct a thorough investigation, your organization should probably suspend the employee pending a comprehensive investigation. Not doing so may allow the employee time and access to destroy evidence.  You can also tell a lot about the credibility of the employee by their reaction to the suspension and investigation.

Security Records Retention

So your organization discovered a case of an alleged embezzlement or theft and a full and impartial investigation was conducted and you terminated an employee; now what should you do next? Also consider that your investigation may have found no wrong doing on the part of the employee, so now what?  Regardless of the outcome it would be wise to maintain all of your records and any other possible evidence.

Records could be an audit report, company books, payroll/bank statements and records, video recordings, witness statements and so on. How long you retain them is a matter of company policy, but keep in mind that if the case is prosecuted there may be years of appeals. If the matter was deemed unfounded we must keep in mind that an employee may file civil litigation. It would be my recommendation that your organization does not destroy any item for at least 10 years, and then only after conferring with your legal counsel.

So can we mitigate all risks of internal theft and/or embezzlement in the workplace? The short answer is no.  However, we can take numerous steps to reduce the risks.