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Brushing up on security.

Monday, any paint store. A squad car is at the curb. An officer is writing a report. The glass service is replacing the rear door. "I found the back door pried open and three new spray rigs missing, " said the paint store manager on the phone to his company's security specialist. "Were your security chains in place and the rigs padlocked to a fixed object?" the security specialist asked. The question was followed by a long pause. "What about that alarm I recommended?" he continued. A second long pause. Then the manager replied, "I never thought they would burglarize a paint store. " The equipment was not recovered. Direct loss: $4,237. Sales and rental fees lost: amount unknown. Tuesday, another paint store. "But he's my best employee. He's always on time. Willing to work long hours. Going to college. He's terrific with the customers," explained the store manager. The security specialist handed the manager a copy of his "best" employee's written confession admitting to more than $3,000 in thefts of paint, wallpaper, and cash during the past two years. " Yeah, he has to be the best employee to gain the freedom to steal. He's waiting in your office to be fired, " continued the security specialist. "I think he wants to apologize." Direct loss: $4,114. Paint sales lost due to illegal competition: amount unknown. Wednesday, another paint store. "I first noticed the problems with my refunds about a week ago. One of them was written to my former high school English teacher, whose funeral I attended last year. I confronted Bob yesterday with a second refund that looked strange. He admitted falsifying refunds totaling more than $1,600. He said he either made up the names or got them from the phone directory. I can't believe a young part-time employee would ruin his life by stealing. " Money: recovered. Case filed. Image to buying public: tarnished.

The paint and decorating store industry is highly competitive and operates with low profit margins. The incidents described, though seemingly small in total dollar loss, have great impact on a paint store's profitability. Paint and decorating stores must record volume sales with increasing gallonage to return customers. When employees or outsiders steal products or equipment, the store cannot fulfill all its customers' needs. And since the paint store is usually the final stop before work begins, customers will go to a store that can fulfill their needs.

The major losses in the paint store industry are spray equipment theft, internal theft of merchandise, cash and accounts manipulation, and false cash refunds. Most direct theft of spray equipment occurs through burglary. Most of these burglaries are committed by unethical, nonprofessional painters. Pumps, air hoses, and parts are stores' most valuable assets and are the toughest items to protect. Commercial spray painting rigs, costing upwards of $6,000, are lightweight and easily movable. They are engineered for quick and simple repair, which makes it easy to steal parts. Spray tips, costing up to 100, can be concealed in a person's hand, a thousand dollars' worth or more in a person's pocket. Spray equipment rigs are identified with the manufacturer's model and serial numbers. Parts, spray guns, and hoses do not have identifying characteristics. After one use, stolen equipment can't be distinguished from that legitimately purchased.

Spray equipment is also stolen through false rental. The industry demands that rigs be available to commercial painters daily. Many painters do not want to buy or maintain these expensive machines. A fraudulent or gypsy painter will come to the store, buy paint for cash, and place a deposit for one or two days' rental of the equipment. The person's identification is usually false, the address phony, and the telephone number nonexistent.

Simple controls, such as requiring higher rental deposits, may deter losses, but the occasional loss due to new employees or smooth-talking painters is upwards of $2,000. Recovery, even through the existing network of spray equipment service centers, is improbable. Police say that officers rarely check spray equipment ID numbers at construction sites.

While paint stores do not operate with large amounts of cash, they do manage wholesale painter credit accounts. Cash register theft then gives way to rolling-manipulating checks or accounts to cover losses from theft by overlapping payments from one account to another.

An unethical employee in control of accounts can cause the loss of money, sales, and usually customers. Such theft has an immeasurable impact on a neighborhood paint store. Professional painters won't conduct business with this store because they rely on high levels of trust sealed with a handshake. Even casual observers will see the domino effect of inappropriate management of their accounts.

However, rolling does not preclude those tried-and-true methods of "no rings," "underrings," and "gifts" to friends. The volumes of business generated by painters control stores' price scheduling. Inappropriate discounting can happen if a painter and unfaithful employee become friends. The store loses profits, and the unfaithful employee adds cash to his or her pocket.

It is also easy for employees to steal merchandise. Paint cans, brushes, and rolls of wallpaper do not have ID numbers assigned solely to a unit. Paint is identified by batches and wallpaper by runs. Remove a gallon of paint, "face up" the gondola, and everything looks the same. Take a brush from a dump bin, place it in your pocket, and you're in business.

Paint store managers do not maintain a daily inventory of paint units in stock. When inventory shrink is discovered, it's usually too late. Managerial overview and supervised shipping and warehousing can reduce but not prevent merchandise loss.

False refunds, a form of internal theft, require special attention. Legitimate returns happen because of mismatched color, product failure, or over-purchase of goods. When a legitimate return occurs, except for product failure, the merchandise is returned to active inventory. Legitimate returns and nonexistent phony returns are not discernable from each other.

The false cash refunder, an unfaithful employee, plies his or her trade when the staff is short, he or she is alone, the manager is away, or others are on vacation or sick. The refund theft items most used are white or base paints (most stocked items) and promotional items. Volume traffic and high inventories in these products provide a shield for such theft. Refund theft incidents usually parallel the active painting seasons and promotional advertising. The incidence can be reduced by actively reviewing refunds and segregating returned items.

A theft unique to the industry is intentional mistinting. The dishonest employee receives an order from his or her personal customer. During the preparation of a color for a legitimate customer, the employee intentionally mistints the batch, sets it aside, and prepares another. Later, the employee takes the color for his or her private customer and receives the cash. Batch mistinting for large jobs can bring the thief large rewards.

Vulnerability to unethical loss in paint stores is heightened by limited store staffs. The likelihood of staffs becoming larger is improbable since stores operate with such a small profit margin. The potential thief can be left alone to commit his or her acts with little fear of being discovered.

To maintain adequate service levels, small staffs are supplemented by seasonal or part-time employees, adding another facet of risk. Paint store operators depend on ethical employees and are at the mercy of dishonest staff. The first line of defense is good personnel selection procedures. This means conducting complete background investigations, including credit checks. Then, communication must be constant and open between managers and staff. About the Author . . . William L. Herndon is director of operations for the Sherwin-Williams Company in Tucker, GA. He is a member of ASIS.
COPYRIGHT 1990 American Society for Industrial Security
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Title Annotation:preventing crime in the paint store industry
Author:Herndon, William L.
Publication:Security Management
Date:Dec 1, 1990
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