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Here's a hot tip: find out how one company has set up an effective tip line that helps its security department solve cases of theft and other crimes.

Ferguson Enterprises, Inc., a wholesale distributor of plumbing supplies, has more than 770 locations in 48 states, the District of Columbia, Puerto Rico, and Mexico. Locations include distribution hubs, showrooms, and other facilities. The company also has a fleet of about 3,000 vehicles. A work force of nearly 12,000 associates (Ferguson's term for employees) keeps these varied operations going. The security department's four-person staff (headed by the author) must be strategic thinkers to leverage limited resources sufficiently to protect this far-reaching enterprise.

One approach is to enlist the full work force in the security effort. This oft-stated objective among security chiefs is easier said than done--but it is possible. In our case, we found that an important tool in leveraging staff knowledge to security's advantage was a tip line.

I first began to wonder what could be done to enlist the eyes and ears of all associates in security's mission when I noticed a disturbing fact: After major investigations concluded, associates would come forward to admit that they either had known what was happening or strongly suspected it but told no one.

Whenever I asked these associates why they had not come forward earlier, they typically responded that they weren't sure how to report it, that they were afraid of the person involved, or that they didn't know whether management was involved. The company already had a hotline called the ethics line, but it was clearly not considered a trusted avenue for anonymous reporting--associates seldom used it to report thefts.

After being frustrated by this type of behavior for some time, I saw a metal sign at my bank asking people to call a toll-free tip line if they had information about criminal activity at the bank or in the community. The sign noted that the information could be given anonymously and that a reward would be offered upon conviction.

I contacted the company, WeTip, a nonprofit organization that had many years of experience providing tip lines for law enforcement, and I found that it had the solution I was looking for. (We have been pleased with their service, but there are many other providers to choose from if you decide to look for a turnkey system for your organization.) Before setting up a program, it helps to understand what makes a tip line successful.

What works best. We live in a business culture that does not like bad news or those who bring it. We are all taught from the earliest age not to tattle. This culture discourages people from reporting crimes or suspicious activity. Add to it that society is not known for honoring informants (in fact, their lives are often destroyed, despite laws intended to protect them). There are very few people like Cynthia Cooper of WorldCom, Coleen Rowley of the FBI, and Sherron Watkins of Enron--the Time magazine Persons of the Year (Time, December 30, 2002-January 6, 2003). These heroines ushered in the "Year of the Whistle-Blowers." But the average person does not always have the courage these workers exhibited. Therefore, the ability to offer a truly anonymous reporting system is key to the success of any tip program.

Unfortunately, some companies operate tip lines that are anonymous in name only. For example, I have seen an internal "anonymous" tip line where company investigators encourage callers to use their employee number as an easy-to-remember code number so that the investigator will know when the same person calls again in the future. As a result, the person's identity is revealed.

Even promises of confidentiality from police are not as good as anonymity. For example, an article in the Los Angeles Times ("Informers: Crime Tipsters Put at Peril," December 2, 1999) described how a worker who reported a coworker for stealing was murdered after police released information that identified him to the suspect.

In some cases, the way the hotline service is set up does not engender trust. For example, a tip line that goes to voicemail in the legal or human resource department may not be the best approach. Employees who won't come forward to their manager will probably be reluctant to leave a recording of their voice. Either option creates discomfort for the person with information to share.

Leaving a message creates a potential barrier. Therefore, a live operator who is not a company employee must be available every day around the clock for an immediate and private conversation.

Similarly, people who want to remain anonymous generally are suspicious of systems that have them call the company or the police, because there is always the potential for taping, tracing, or caller identification. They need to feel fully protected. Therefore, a third-party resource is best.

Rewards. Rewards are not imperative, but they can be an added inducement to a hesitant worker. We offer a reward. In many cases, however, callers tell the operator they are not interested in a reward; they just want the problem to stop. When rewards are paid, of course, the mechanism must ensure anonymity. Our tip line provider has the reward sent via the U.S. Post Office or Western Union. They handle the details, but rewards are paid in cash and are given anonymously with a password known only to the caller.

Uses. Thefts and drugs are not the only uses for the tip line. The line should be used for reports of questionable accounting and auditing practices, unsafe working conditions, violence in the workplace, harassment, discrimination, and workers' compensation fraud.

Sometimes, the program can have ancillary benefits for the community. On one occasion, a person was accidentally locked in a company facility and could not get out. The only phone number he could find to contact us was the hotline. He called it, and help was sent.

A tip line may be required in your company by the Sarbanes-Oxley Act of 2002. This act requires the Securities and Exchange Commission (SEC) to direct the stock exchanges to establish mandatory listing standards with respect to audit committees requiring procedures for receiving confidential, anonymous submissions by employees regarding questionable accounting or auditing matters. That provision is already in effect, but many companies may not yet have taken note of this mandate.

The tip line also provides a potential (persuasive) defense against legal liability. It clearly demonstrates the company's determination to prevent and detect misconduct, fraud situations, and corporate hazards. Additionally, it is a powerful deterrent to crime.

Misuse. At the beginning of the program, we had a concern about people using the tip line to make malicious reports against others. While the issue may arise, the risk can be mitigated by using proper investigative protocols.

It is important to remember that the tip is only the beginning of the investigation. We err on the side of fairness. On one occasion, we received a tip about drug use on the job. When we contacted the manager, he indicated that it was most likely an act of reprisal for something unrelated to drugs. Our investigation found a high probability of a malicious report, so no immediate action, like a drug test, was taken. The manager will monitor the situation going forward.

Awareness. If the tip line is to be used, people must know about it. At Ferguson, we have metal signs at our entrances, posters in the break rooms, wallet cards, and stickers for our trucks. We also send reminder notices to associates occasionally.

When we initiated the program, the company kicked it off with an amnesty program. During a set period of time, associates were informed about the program and offered the opportunity to avoid prosecution if they cleared up past losses and made restitution. We didn't get any takers, but the promotion helped to focus everyone's attention on the program.

Effectiveness. Ferguson Enterprises has grown 20 percent a year since 2000, while losses have dropped to 9 percent below fiscal year 2000 levels. At least part of the success in curtailing losses is attributable to the tip line program.

To appreciate the importance of encouraging these types of personal tips, consider the following experience my department had: A manager arrived for work on a Monday morning mad noticed the safe was missing. There were no alarms, so a group of people from the business across the street was asked if they saw anything while working over the weekend. All said they had seen nothing, but we handed out wallet cards with our tip line number.

Later that day, one of the people called and said he didn't want the others to know he was telling; then he proceeded to explain how he saw the safe being removed. Based on the tip, one of our associates was arrested, and the safe was recovered.

In another case, a manager called very frustrated that a large and expensive item had disappeared from his store on a Saturday morning; the store was understaffed on Saturday mornings, making it less likely that an employee would have seen anything. We put up a public notice asking for information and offering a $100 reward.

An hour later, a customer called with information; he had seen the item loaded onto a truck. Until the sign went up, he thought that the person removing the merchandise had bought it. After the other customer was identified and contacted, the product was returned. We gladly paid the reward.

Since our program began, we have received 30 reports; the largest case cleared was in excess of $120,000. And Ferguson's experience is not unique. There is general support to show that tip lines work more often than other methods of detection. According to the Association of Certified Fraud Examiners' 2002 Report to the Nation, "The most common method for detecting occupational fraud is by a tip from an employee, customer, vendor, or anonymous source."

As crime statistics rise and security budgets stay the same or shrink, a hotline can be an important part of a company's overall security program. It makes no sense to rely only on the security staff when you can enlist the company's entire work force in helping to catch criminals in the act.

Scott Hewitt, CPP CFE (certified fraud examiner), is director of security for Ferguson Enterprises, Inc., corporate offices in Newport News, Virginia. He is a member of ASIS International and serves on the Professional Certification Board.
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Title Annotation:Ferguson Enterprises Inc.
Author:Hewitt, Scott
Publication:Security Management
Geographic Code:1USA
Date:Aug 1, 2003
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