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Employee Theft is Rampant Than Most Companies Believe

David Smith had it figured out — or so he thought. When he worked at Quest Diagnostics in Florida as a facilities manager, he was also siphoning funds from the company.

From 2001 to 2008, Smith began submitting expense reports to Quest with fake invoices from fake shell companies he also created. He also forged the signatures of his two supervisors. This way, the diagnostics laboratory could see that these payment requests were approved and that he deserved the reimbursement.

Eventually, Quest found out about the forgery. Fortunately, it decided to conduct a more in-depth investigation into the submitted reports. By 2008—or seven years since he began committing fraud — he had already stolen over $1.3 million.

Smith was smart to admit his crimes and, interestingly, received a much lesser penalty than over a hundred years of imprisonment. Still, some experts couldn’t help but also blame Quest.

Some said that the laboratory failed to assign upper management that could double-check the report besides the supervisors. Others, meanwhile, cited what seemed to be the lack of proper auditing in the business.

Nevertheless, if one can sum up these allegations against Quest, it seemed the blame falls on its failure to hire the right people.

If only it considered hiring employment verification service providers, for example, its HR team could have determined properly if Smith’s actions already had a precedent — that is, did it try to steal from his previous employment?

Second, it could have hired qualified supervisors, managers, and yes, auditors, who are diligent to do the work, prudent in their output, and proactive in suggesting policies that protect the business.

On the other hand, it’s equally wise to know the answer to the all-important question in this story: why do some employees steal from their company anyway?

Why Employees Steal

The available data about workplace theft is staggering and probably even surprising for many companies. In a report by Gurudain Singh Khalsa, this crime is responsible for:

  • At least $50 billion losses a year
  • Over 40 percent of retail shrinkage annually
  • A whopping 80 percent of bank losses
  • Around 33 percent of bankruptcies

In fact, stealing in the workplace is so pervasive that companies are likely to lose more from this than from shoplifting, whose possible attributable loss is $30 billion a year. Even worse, inside jobs cases have been increasing annually by 15 percent.

Now, as to why employees end up stealing from the coffers of the businesses that feed them, the reasons can actually vary. In one of the surveys shared by Fast Company, almost 70 percent of the 1,000 respondents confessed to having stolen something from the workplace.

About 24 percent said that they thought the company wouldn’t notice anything missing. Think, for instance, employees who “accidentally” brought home office supplies like pens and papers. These are so small an item that companies don’t perform any inventory on them.

However, imagine the pen costs $1, and at least 50 employees steal it, say, every week. That is still equal to $2,400 losses for the business in one year alone.

person working

Meanwhile, over 20 percent of the respondents claimed they weren’t paid enough. It might then suggest that any amount or object they had stolen was merely to bring their compensation to the level they think they deserve.

Lastly, fewer than 15 percent shared that they stole because they couldn’t afford an item while 13 percent blamed it on a rude boss.

Let’s highlight the last result because although the percentage is small, payback is actually one of the common reasons for stealing in the workplace. Fraud makes everything even.

When It’s Really Personal

In his report, Khalsa also pointed out another potential reason for workplace theft: vices such as drugs and gambling. A 2016 study seemed to corroborate it.

The research published in International Gambling Studies looked into different sources to determine how compulsive gamblers can end up becoming embezzlers. The team interviewed at least 18 informants, including therapists who specialize in gambling and support societies. They also referred to various newspaper articles.

Their analysis showed that employees who excessively gamble will find themselves in a gradual downward spiral, although there are two major reasons they steal: finance their habits or pay off their debts.

Usually, these employees will start their vices using their income. When that won’t be enough, they dip into the family’s savings and, later, into other assets they can sell.

When they need more money, these people may borrow from friends and co-workers. Eventually, they will show signs of fraud, including writing bad checks or filling out expense reports or invoices with incorrect amounts.

Overall, employee theft is already ingrained in most businesses that they’re less likely to avoid it. But they can send a stern message to those who might be thinking of doing it through clear policies and penalties.

Moreover, HR may need to do more than rely on every hire’s résumé. They may have to delve deeper into their work history through professional background checks, especially if these employees will have access to money.

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