Investigating Workplace Theft


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INVESTIGATING WORKPLACE THEFT:
SHERLOCK HOLMES MEETS MISS MANNERS

Of all the frustrating, aggravating and distressing situations that occur in a workplace, none is as likely to simultaneously trigger all these emotions more consistently than an incident of workplace fraud, theft or embezzlement. Certain occupational "watchdogs" report that these acts of workplace wrongdoing are so rampant among employees, that they account for the majority of ordinary business losses suffered by companies and financial institutions, today. Employees who engage in behaviors like faking compensable on-the-job injuries, stealing from employer accounts and engaging in elaborate schemes to embezzle funds or misappropriate trade secrets cost employers millions of dollars every year. In the banking industry, despite security measures, incidents of employee theft and embezzlement are relatively common, regardless of the size or sophistication of the particular banking institution.

One of the difficulties employers face when confronted with evidence of workplace theft or embezzlement is that their right and ability to investigate the facts and circumstances surrounding the incident are intertwined with the myriad of rights and protections conferred upon employees by federal and state laws. The employer's use of polygraph tests, honesty tests, drug tests, outside investigators, credit checks, video cameras and monitoring devises is expressly conditioned upon the employer following one or more federal or state laws such as The Employee Polygraph Protection Act, the Fair Credit Reporting Act, the Americans with Disabilities Act, state Workplace Drug and Alcohol Testing Acts, etc. No matter how serious the incident may be, and no matter how much the employer may desire to play "Sherlock Holmes," federal and state laws and regulations obligate the employer to play "Miss Manners" when it comes to investigating employees in the workplace.

If you interview a seasoned law enforcement officer or state or federal investigator, you will learn that there are a few steps that every employer may take to further the employer's ability to ascertain whether one or more of its employees was personally involved in a particular incident of workplace fraud, theft or embezzlement. None of these measures either impact, or are hampered by, the myriad of federal and state laws that protect employees' rights, so long as they are consistently undertaken without regard to any employee's legally protected status.

First: Quickly "Shore up" Confidentiality. The first step an employer should take when an economic loss is discovered is to counsel with those members of management impacted by the loss or involved in the investigation and reinforce in them the necessity of privacy and confidentiality in the investigatory process. No investigation is facilitated by the premature disclosure of information to the wrong party. This is especially true of workplace investigations-as the following discussion will reveal.

Second: Identify those Employees (At EVERY LEVEL of the Organization) who had Both Access and Opportunity Commit the Act Causing the Loss. The process of identifying which employees had both access and opportunity to commit the act of theft, embezzlement or fraud is crucial to the success of the investigation. Identifying these employees permits the employer to focus its attention on obtaining statements regarding the pertinent events from as small a group of employees as possible with as little disclosure as possible. Starting with a narrow investigation, and broadening inquiry as necessary, helps maintain confidentiality in the process and permits the gathering of "stories" regarding the events before employees start talking to each other and comparing notes. When identifying employees to investigate, employers SHOULD NOT omit employees merely because they (1) have worked for employer for a long time, (2) are trusted and seem to be "good" people, (3) are members of a local church, synagogue or temple and seem to sincerely hold religious beliefs, or (4) hold a supervisory or management position with the employer. All employees with access and opportunity should be included in the investigation, regardless of these characteristics.

Third: Ask Identified Employees to Write a Statement About Events. Once employees with access and opportunity are identified, the employer should bring them into a private area (one-by-one) and ask them (nicely) to write out an account of their activities on the days, and at the times, relevant to the loss occurrence. With minimal disclosure, the employer should ask them to write their recollection of events pertaining to the loss occurrence, including their observations of other employees who had access and opportunity to cause the loss. Interviews and the gathering of written statements should take place in front of a witness-preferably a neutral and trusted member of management. Employees should sign their own statements.

Written statements, collected early in the investigation and before employees confer with one another, are an important tool. When an employee writes down his or her account of events, he or she "commits" to a story. The "committed story" may then be compared to the recounts of other employees, to other evidence, and to the employee's subsequent oral recounts of the story to reveal inconsistencies and inaccuracies.

Fourth: After all Written Statements are Taken: Orally Interview Employees Whose Written Statements Do Not Match Other Employee's Accounts or Other Physical Evidence. It is common for a guilty employee to confess to wrongdoing when his or her initial written account is demonstrated to be inconsistent in one or more material respects with other employees' personal observations, with more recent oral statements by the employee regarding the events, or with physical evidence, such as video tapes, electronic lock reports, etc. Much may be gleaned from the comparison of successive employee recounts of the events surrounding an incident of economic loss in the workplace.

Fifth: Terminate Those Employees Who Fail to Cooperate, Become Belligerent, or Who are Inconsistent in their Stories. There are three objectives an employer desires to achieve when investigating an incident of fraud, theft or embezzlement: first, to discover who was involved in the incident so that the involved employee may be removed from the workplace, second, to attempt to recover the money or property lost, and third, to prosecute the employee under applicable laws. An employer does not have to actually "solve" the question which employee caused an economic loss in order to accomplish the first and most important objective. Terminating those employees who change stories during the investigation, who fail to cooperate, or who become defensive and belligerent, usually accomplishes the employer's primary objective. At very least, with the suspected "guilty" employee or employees out of the workplace, the employer prevents another economic loss occurrence.

Sixth: Consider Other Options. When the employer's economic loss is substantial, the employer should consider relying upon a professional investigator and/or using a polygraph test to further the investigation. While there are forms that must be used and specified procedures that must be followed, the Fair Credit Reporting Act and the Employee Polygraph Protection Act permit outside investigators' interviews and polygraph test results to be used by an employer when investigating incidents of economic loss or injury to the employer's business. Many times, merely the process of going through the notice and disclosure procedures required by the Employee Polygraph Protection Act, coupled with mannerly confrontation on inconsistent story points by a professional investigator, will cause a "guilty" employee to confess to an act of wrongdoing-the best result for the employer.

It is often difficult for an employer to undertake an investigation and then follow through and terminate those employees who the investigation reveals to be "guilty" or negatively involved with a loss in some respect. However, in my professional experience, employees who commit theft, fraud or embezzlement do not stop with one act of wrongdoing. These employees usually do not alter their future behavior, no matter how contrite they may be when discovered and no matter how compelling the circumstances. To prevent future incidents of economic harm, mannerly, but firm discipline of these employees is always the best course of action.

First published on BankersOnline.com 1/15/01.
Copyright, 2001, The Compliance Company, LLC.

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