Fraud in Hard Times

The US Department of Commerce conducted a study on fraud. As many as a third of all business failures can be attributed to internal fraud, totalling almost $40 billion in losses every year nationwide.


The Commerce Department indicated that employee theft is on the rise due in part to recession. "In my experience, what we're seeing is an increase, partly because some employers are more aware," said Daniel Perez, head of Subrosa Investigations. "But it's also true that when some people feel in need, they will take what they believe they can." Hard times can have an impact on the frustration level of employees and it can stir up feelings of entitlement. Employees will "take what they can" and feel that "it's not really stealing."


"It's need plus opportunity plus rationalization," agreed Don Hesselbrock, president of Corporate Security Systems Inc. "People say, 'I worked hard and the company was bought out or merged; I got laid off anyway.' It gives some people a kind of cynicism and a 'get-what-you-can' attitude."


Owners who rely on gut feelings are particularly vulnerable to becoming victims of fraud. The failure to adequately check references or the criminal background of applicants can mean the difference between thousands. And in this day and age, that could mean the difference between being in business this month, and not being in business next.



Checking criminal history is often not enough, look into civil litigation patterns as well because those check for suits for fraud or collections. A lot of employers fall into a trap and don't check out the applicant's references. It is important to call each and every one of those. A surprising amount of people report false dates of employment or job titles. Crucial employment history may be missing and its important to understand that gaps in employment may mean there is something to hide.


Unfortunately, it looks like we're in for a good stretch of hard times. It's hard not to get desperate but as an employer, using tools that are readily available and good sense instead of instinct may prove beneficial.