Fort Knox? More workers stealing from employers as recession continues

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Maybe working around all that bling for so many years blinded her. But by the time one long-time worker at a Long Island City, NY, jewelry store was caught, she was being accused of stealing close to 500 pounds of gold.

How, you ask? Employee Teresa Tambunting allegedly waltzed out of the store time and again with pieces of gold and jewelry tucked away in the lining of her purse.

She patiently amassed her mountain of gold over a five-year period. But eventually, the store realized that there was $3 million to $12 million of inventory missing and began an investigation, prompting Tambunting to bring in a suitcase full of some of the stolen gold that was worth $868,000. Authorities also found about 447 pounds of stolen gold in her house. Tambunting, who worked at the store for 28 years, was charged with grand larceny and criminal possession of stolen property before being released on $100,000 bail.

It's a glittering example of a problem that's on the rise. Employers should beware: More workers are stealing right out from under their noses as they struggle to cope with the recession.

A survey by the Association of Certified Fraud Examiners (ACFE), a global provider of anti-fraud training and education, found that the level of fraud among workers has increased since the beginning of the economic crisis. About 55% of Certified Fraud Examiners said they have seen an increase in employee fraud during the past year. And 49% said they have seen an increase in the amount of money lost to fraud.

Other common acts of worker fraud involve cooking the books and using corporate credit cards to purchase items for resale in places such as eBay.

Oversight Systems, an Atlanta technology firm that uses software to help companies spot fraud, recently compiled a list of some of the the most outrageous examples of employee fraud it has encountered and dubbed it the "First Annual Fraudies Awards." The "Best Musical Score" went to the case where employees at a company had billed over $100,000 in iTunes purchases to their corporate credit cards. The "Best Romantic Comedy of Errors" involved an employee who spent over $4,000 of company money on Victoria's Secret purchases for his mistress. Not only did his company find out, but he also got busted by his wife.

The ACFE poll says the biggest reason for the uptick in employee fraud in the past year is increased financial pressure due to the troubled economy. As people face tough times and become saturated with bad financial news, some may find themselves dealing with increased feelings of helplessness, pessimism, and isolation, which can result in them rationalizing fraudulent acts.

According to the poll, employee embezzlement rose 48% and is the most common type of fraud to occur, as people have seen more incentives and opportunities to defraud their employers. More than a third of those polled also said fraud by unrelated third parties has increased over the past year. That includes identity theft, con schemes and securities fraud. In some cases, these schemes were due to mortgage fraud or crimes at financial institutions. Other schemes that have been on the rise include vendor fraud and financial statement fraud.

So what can employers do to spot employee fraud and stop it in its tracks? Patrick Taylor, founder and CEO of Oversight Systems, says there are some definite red flags that can alert employers to fraud by workers.

  1. Look for patterns of activity over time. "The time frame may end up being something that happened over a six, seven, or eight-month period...such as an employee regularly expensing charges from a department store," says Taylor. "What happens with the fraud is they end up repeating the activity. Once they find out they can get away with it they keep going after it."
  2. Look for things that are statistically unusual, such as charges that don't make sense relative to either the day they were charged or the location. For example, if the amount an employee paid for a hotel room in February seems out of line with room rates in that city at that time of year, there could be a problem.
  3. Look for things that are practically impossible. "You look for things that don't make sense just in terms of the numbers," Taylor says. For example, "you have a company vehicle and can fill up your car and you have your wife follow you to the gas station and fill up her car, too. The impossible thing is you can't put 47 gallons in that truck."

About 77% of those polled by ACFE expect employee theft to continue rising through this year -- and there's a good chance that at many companies the perpetrators may surprise employers. "You end up building trust...and sadly it often ends up being the employees you trust the most who end up being in the situation to exploit you," says Taylor.

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