Jim Close, Managing Partner, Risk Management Services Loss Prevention
By Jim Close
Managing Partner
Risk Management Services Loss Prevention
In the previous article, we looked at some of the most common methods dishonest employees use to steal. The focus was primarily around fraudulent register transactions. In this article, we will examine an often-overlooked way employees and sometimes customers use to steal. In some cases, the employee and customer work together to commit fraud using customer charge accounts or house accounts. Of all the cases of employee theft I have investigated over the years, charge account fraud tended to have the highest dollar amounts.
There are a few different ways an employee will use to steal using a house account. The first is straightforward: The employee will pick a high-volume customer who is in the store frequently. When the that customer purchases items for a project, the store employee will add additional items to the order and steal the additional items. Once the additional items are out of the store, they can be re-sold online on places like eBay or Facebook Marketplace. If you have customers who have orders delivered to them by your employees, this type of fraud is even easier to accomplish and harder to detect. A customer who purchases $6,000 a month from you most likely will not miss a few hundred dollars in extra charges a month, particularly if those items are things like cleaning supplies, paint or other items that used in larger projects.
A variation of house account fraud involves a store employee, as well as an employee from a company on a house account. That house account employee will request additional items be added to an order without their company’s knowledge. The store employee will add the items to the order and then bill the customer’s account. In this case the house account’s employee will use the stolen items for side projects or sell them. In either case, the store employee is paid for providing the extra product.
The reason house charge fraud cases tend to have high dollar totals is because it is hard to detect. Most commercial accounts are given 30-day dating. A store may get an inquiry about what was ordered three to four weeks after the theft took place. Since most camera systems only store about 30 days’ worth of video, the chances of verifying what items were in the order or who may have signed for them is no longer available.
Further complicating things for the store owner is this type of theft creates a murky legal situation. Many owners I work with are surprised to find out that while they can terminate employment if an employee engages in this type of behavior, they cannot initiate prosecution because technically they are not the victim of a crime, their customer is.
While there are no statistics that specially track this type of theft (it gets lumped into general employee theft statistics), I can tell you from 24 years of investigating employee cases that I have never investigated one of these cases that resulted in losses of less than $10,000.
Meet Jim
Jim Close is a loss prevention professional with 24 years of experience working with independent home improvement retailers. Prior to working in loss prevention, Jim was an investigator with a major metropolitan law enforcement agency. He also teaches loss prevention in NHPA’s Retail Management Certification Program, and he helped develop NHPA’s Loss Prevention online training program.
Connect With Jim
Email: jim@rmslp.com
LinkedIn: Jim Close
