Sundahl & Associates, Inc.
By Shaun E. Sundahl, Licensed Private Investigator Date: September 20, 2011 In 2010, the Association of Certified Fraud Examiners (ACFE) published the Global Fraud Study, a document highlighting current occupational fraud trends. The results are alarming: 1. American businesses lose 5% of yearly revenue due to fraud. 2. The average fraudster “works” his/her employer 18 months without detection. Fortunately, the ACFE provided promising results to assist the private investigator to “classify” a possible suspect employee as 76% of employees investigated had some form of financial issue. 1. 43% were reported to live beyond their means. 2. 36% were having financial difficulties. 1. 47% of fraud cases were detected by the employer using a 2. 34 % of fraud cases were detected by tips 3. 67% of fraud cases were detected by an anonymous tip line. How much of a financial impact does employee theft have on our businesses? To understand the shocking truth let’s consider how much an S-Corporation specializing in sales earns on average. According to IRS figures, for every $1.5 million of sales, $100,000 of income per year is generated (pre-recession). A more accurate reflection of the American business model is the sole proprietorship, earning about $50,000 of revenue a year. If the ACFE is correct, the average S-Corporation lost $750,000 a year in revenue while the average sole proprietorship lost $2,500 of revenue a year (based on $58,256/yr). The amount of $2,500 may not appear significant; however the pre-recession net income a year was $11,696. As the aforementioned statistics from the ACFE show, America has an obvious issue of employee fraud. Why is employee fraud occurring at an alarming rate? Let’s classify a thief. The thief in the workplace shares certain values associates with like-minded individuals:
Employee Theft Basics for Employers, Part I
The majority of employees in the workforce understand what
it means to do the right thing.
tip line.
generated without the tip line.
1. Instant gratification.
Ex: “I need that money now. I don’t have the time to wait until
I get paid this week.”
2. Entitlement
Ex: “My employer only pays me $8.00/hr. It’s been two years
since I’ve worked here and still, no raise for my hard work.”
3. Justification/Rationalization
Ex: “My employer_____________(adjective +pronoun+ adjective
+ time); therefore I deserve this________(noun).”
Ex: “My employer worked me so hard yesterday; therefore
I deserve this money.”
The rational thief justifies his/her behavior by internally translating certain words as they see fit. The word “steal” means the same to the thief as the words borrow, copy, kickback, etc…
Ex: I’ll just “borrow” this laptop.
Another form of a thievery process justifying the thief to commit fraud is blaming the victim (employer).
Ex: “My employer forgot to ask me for the company-issued cell phone; therefore I won’t turn it in unless she asks for it.”
Ex: “My employer just fired me; therefore they deserve not to get their property back.”