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Tactics for combatting employee-related crime.

Tactics for Combatting Employee-Related Crime

The state of Ohio Bureau of Workers' Compensation reports that 110,601 medical and lost time claims were filed in 1988. The criminal investigation unit inherited 935 of these claims and of these claims, 174 were found to be involved in some type of fraud or forgery. Subsequently, 65 cases were turned over to the Office of the Attorney General for criminal prosecution.

Dean Harrison, supervisor of the criminal investigation division of the Ohio Industrial Commission indicates that the 174 fraudulent claims cost the state of Ohio $1,620,089 in 1988 alone. Those are only the numbers reported by the state and do not include the number of self-insured employers who handle their fraud cases privately. It is estimated that in the United States, nearly $40 billion is spent annually on legal costs alone for workers' compensation litigation, according to a Business Insurance report.

Substance abuse, which knows no class distinction, race, color, or age boundaries, is recognized by employers in both the public and private sectors as a strong deterrent to employee productivity. Rick Krizeris, prevention coordinator for the drug and alcohol abuse program for Columbus, Ohio, cited a city resolution adopted in November, 1987, which bespoke the problem facing not only Columbus, but the nation as a whole: "In Franklin County, Ohio, 78,000 persons misuse drugs and alcohol each year and an additional 390,000 persons are affected as a result of that misuse." Unfortunately, the numbers concerning alcoholism and drug abuse are far from accurate as they reflect only those cases reported.

Embezzlement, deception and substance abuse are but a few of the wide variety of "multi-color" collar crimes that cost employers millions of dollars each year. For the sake of this article the collars are divided into three categories: white collar crime, consisting of theft and embezzlement; blue collar crime, which usually involves workers' compensation fraud and theft, and striped collar crime, which is substance abuse and gambling.

The Difference Between the Collars

With white collar crime, the employee is usually an office worker on any level of management or a member of a support staff. These individuals often have access to monies or property of the corporation and have little supervision with regard to the distribution or use of such assets and property. Any actions which digress from the normal patterns previously established by an employee or his associates are referred to as `red flags.' Changes in spending habits, vacation patterns and a discontinuance of bookkeeping procedures are considered potential red flags. Often, employers are alerted to potential red flags by way of office gossip, especially in cases of personal dilemmas.

In cases of blue collar crime, the employee is usually an individual who is considering perpetrating an act of theft or filing a fraudulent workers' compensation claim. Here, red flags can come in the form of anonymous tips or letters, an impending strike, labor dispute, layoff, employee termination or grievance. Employers should also be aware of potential red flags including such personal problems as divorce or bankruptcy which can contribute to the employee's need for extra cash or time off from work.

A third category, known as striped collar crime, can involve any employee, regardless of race, age, sex, or position in the company. Warning signs for potential striped collar crime range from a decrease in the overall productivity of a group or individual to an increase in an employee's rate of absenteeism and work-related injuries to a level far exceeding the corporate average.

Motivational Techniques

There are a wide variety of motivational techniques used by employers to both increase productivity and keep workers interested in their jobs. Feeling appreciated for work done and having a sense of being a part of an organization ranked highest among employees when asked about the most important aspects of their jobs. Involving employees in safety training programs and the production of in-house newsletters are techniques for motivating employees as are scheduled and impromptu office parties. These outward signs of a company's appreciation of its employees are an essential part of a continuity program that can be organized fairly inexpensively. Firms that have used these and similar motivational techniques have found them effective and, as a result, have had fewer questionable claims filed by employees and have had little need for the use of outside investigative services.

Internally, a company has several resources at its disposal to curtail most corporate crime. The auditing of all records, both in-house and through third parties, will alert employers to most irregularities. Those individuals responsible for reviewing written and oral activity reports filed by management can keep track of daily activities in the workplace. Regular meetings between management and members of various supervisory committees help strengthen the relationship between the company and its employees. Also, a system of regular and periodic reviews of employee performance, with a cyclical rotation of the reviewers, lets the employees know the corporation is involved in operations on a personal level.

Companies lacking sufficient manpower for such intensive and time-consuming endeavors, many employee-related problems can be avoided in the hiring process. Uniform guidelines for hiring and firing will not only abate the potential for discrimination suits, but will also help develop an employee's respect for the fairness of management. Also, the simple practice of treating a valued hourly employee as you would a member of upper management will build a strong sense of loyalty to the company.

Prevention Programs

Before a company begins to explore the variety of effective and affordable prevention programs already on the market, it should first formulate and distribute a company-wide policy statement on substance abuse to all its employees. Specific procedures should meet each company's business profile and can include information on polygraphs, drug testing procedures, surveillance equipment, counseling and rehabilitative services.

Drug and alcohol treatment programs are becoming more popular to employers experiencing work-related injuries involving some type of substance abuse. The primary drawback to many of these programs is that their cost per employee can make them cost-prohibitive to smaller companies. In court cases involving workers' compensation, a number of states have established laws requiring employers to either privately rehabilitate the employee engaging in substance abuse or to place him in a state program, at the employer's expense, should the employee make such a request.

Unfortunately, motivational techniques and prevention programs will not completely eliminate the potential for employee-related crime. As a result, when employers have reason to believe that an employee or group of employees is attempting to defraud or steal from the company they will often employ the services of an outside investigative service. When choosing such a service it is important to make sure they are licensed, bonded and insured and have a credible history. The service should also have a strong background in corporate investigation which can vary from a specific are of specialization (such as surveillance work) to full-service. The price for an investigation will vary depending on its length and can range anywhere from several hundred to several thousand dollars. An investigative service should also act as a representative to the company retaining its services. While it can be lucrative for an investigative service to handle both defense and plaintiff work, it is in a company's best interest to use a service that handles only defense work.

Investigators have certain basic procedures to follow when handling cases involving possible employee deception. Checks are made on the employee's background and routine pattern of activities when there is suspicion of theft, embezzlement or workers' compensation fraud. Often, a superficial inquiry into an employee's finances and private life will uncover facts such as bankruptcy, divorce, accident records and similar information that may lend credence to the employer's suspicions. Most public records, while available to the general public, can be difficult and time-consuming for an individual company to attain. Court and hospital records, information from previous employers, driving records and credit checks can help establish a motive. These sources can also indentify activities not consistent with a claim, locate potential witnesses and give additional medical opinion or history.

Once opportunity and motive have been established and the groundwork completed, the employer must determine whether photographic evidence is required. In the case of theft or workers' compensation fraud, video and 35mm photographic surveillance are often a pre-requisite before scheduling a hearing. In cases of workers' compensation fraud, video can establish certain movement or abilities performed by the employee which are inconsistent with his medical documentation. Thirty-five millimeter photography is often used to establish the employee's identity as well as the location of stolen property. The effectiveness of photographic surveillance can never be guaranteed, however, since it is a matter of correctly calculating that the suspect will be in a certain place, doing something at a specific time.

Regardless of a company's present policy concerning employee theft, workers' compensation fraud or substance abuse, it is never too late to revise that policy. While many preventive measures contain some initial costs, it is important for a company to realize that the costs of investigation and litigation can easily exceed these costs making prevention a more attractive alternative.
COPYRIGHT 1989 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Reese, Julie
Publication:Risk Management
Date:Oct 1, 1989
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