Internal Theft Case Study: The Disappearing Discs - Preliminary Investigation
Internal Theft Case Study - The Disappearing Discs: Case Studies, Summit Loss Prevention Consulting, Inc., Indianapolis, Indiana (IN)
As part of the investigation in the case study
"The Disappearing Discs",
this preliminary report with an initial set of findings was submitted to
the client about six weeks into the investigation, with recommendations made to
improve employee theft prevention in the future.
For those interested in the complete details of the case, you can
also read the final
Internal Theft Investigation: Findings and Recommendations Report
submitted to the client.
(Note: All names and locations have been changed to protect the
privacy of those involved.)
Case Study: Internal Theft
M.W., Vice President of Human Resources for a major compact disc
manufacturer, contacted the firm to conduct an
investigation concerning internal theft from their facility in Central
Indiana. After preliminary research and fact-finding, investigators
began interviewing employees that worked on the night shift at the
facility. This report will detail the results of the investigation.
investigation, which was initiated on 5/18/01, the local PD arrested
three employees. One individual, an employee of a temporary labor
company, was arrested due to an outstanding warrant. The other two
employees were arrested for theft from the company.
On 5/18/01, investigators met with MW to gather initial information on the case.
On 6/4 our investigators began conducting interviews with the three
employees who had been arrested for theft. Two of the recently
arrested employees were cooperative with investigators and provided useful
information, however the third was not. In addition, interviews were
conducted with the Police Detective in charge of the case, as well as several other individuals
with possible knowledge of the issues or prior involvement in theft from
In addition, two former employees were located and approached
One of the former employees, B.K., was extremely helpful in providing
useful information. He was used as an informant by the Police
Department., and set up the purchase of stolen discs from the three
employees that led to their arrests. He agreed to be interviewed by
investigators and identified several employees as being involved in
theft. He also provided pertinent information on G.D., the other
Based on conversation
with the Police Detective, it was learned that G.D. was stopped by
police and that during the stop, police recovered 54 stolen discs from
his car. It was later learned that employee H.S. had stolen
the discs from company facilities and given them to G.D. G.D. was questioned
by police, and gave them information concerning theft activities of
company employee L.D., but he was not arrested in this incident.
G.D. was initially
uncooperative with investigators, however after several attempts to
interview him failed, he agreed to a discussion with investigators in
his house. During the interview, G.D. admitted to the theft of
approximately 500 Play Station I discs during his employment with the
company. He admitted to buying more than 500 Play Station II discs from
L.D., who had stolen them from the company. G.D. admitted to buying hundreds of
stolen discs from H.S. as well.
G.D. stated that he had sold
hundreds of these stolen discs on e-Bay over the past year. He
indicated he paid L.D. and H.S. $8.00 or $10.00 each for the games they
removed, and then sold them on e-Bay for $15.00 or $20.00 each.
stated he sold them to people all over the country and shipped them via
the U.S. Postal Service, FedEx and UPS.
During an interview conducted
with employee L.T., he stated that
G.D. informed him he deposited over $8000.00 from the sale of the
stolen discs during February 2001, and also claimed that he purchased an
ATV valued at $5000.00 with profits from stolen disc sales.
G.D. was asked to
submit a written statement summarizing his activities, but he declined.
He also initially agreed to a second meeting with investigators and W.M at the
company's facility, but later called and cancelled. The
investigators are working with the FBI in an effort to prosecute
G.D. for theft and interstate distribution of stolen goods. [Note: Read the complete summary of events surrounding
the attempts of our investigators to interview G.D.]
Prior to conducting additional
employee interviews, the investigators met with M.K. (HR
Director), F.S. (Packaging Manager), and S.K. (Packaging
Supervisor) to obtain pertinent information concerning the theft
S.K. produced several potential witnesses that were interviewed prior
to any of the suspects. On 6/15, the internal interviews were initiated
at the facility. Prior to each internal interview being conducted, a
Release Form was signed by the subject to be interviewed.
Several members of company
management were interviewed to determine the extent of their awareness
of internal theft and to apprise them of the investigation. Directors
F.S. and F.D. were interviewed to provide
an overview of the investigation and to obtain any information they had
concerning potential theft issues. F.D. did not have any new
information but was cooperative. F.S. was straightforward, offered
several suggestions, and apprised investigators of several items he had
been made aware of. He was very cooperative in making his managers and
supervisors available to be interviewed.
Managers J.R., M.K., and S.M were each
interviewed by investigators, who were able to detail
a couple of suspicions that had been passed to them by subordinates.
S.M. provided information concerning a six-month old allegation of
employee theft but it was later determined that he failed to inform the
investigators of a suspicion that female employee Y.B. had
relayed to him within the previous three weeks. Upon re-interviewing
S.M., he acknowledged his failure yet he was unable to explain his
lapse in communicating the pertinent information.
The majority of managers
and supervisors interviewed did not have any real sense of professional
responsibility as it relates to loss prevention or internal theft
deterrence. Their responses indicated that they did not feel security and
loss prevention were a part of their overall job duties. Most stated
they were frustrated because they, and their employees, knew that
internal theft was occurring; yet they felt somewhat powerless to do much about
Many were afraid to come forward with only a suspicion, fearful that
their information wouldn’t be handled properly and that they would end
up caught in the middle of an awkward situation with no resolution
either way. They repeatedly asked for training to educate them on how
to deter internal theft and/or respond properly when a subordinate makes
them aware of an incident.
During the in-house portion of the case to date,
the investigators conducted 49 investigative interviews, resulting
in 16 written admissions of theft. The employees who were interviewed
and later returned to work offered substantial information that led to
the admission statements of some of their co-workers. These employees
also expressed frustration and indicated that in many cases they had
already given their information to a supervisor or manager weeks or
months ago. Several of them stated that it wasn’t their job to watch
other employees and felt that if the company truly wanted to stop theft they
would be more pro-active about it.
One employee initially signed his Release Form, however he refused to answer
specific questions or generally cooperate with the investigation and
walked off the job. He was eventually terminated for his
failure to cooperate with investigators.
Two employees were suspended during the
investigation and later returned to work after administrative review.
Each employee who
admitted to theft also submitted a written resignation from the
Upon Further Investigation...
employee interviews were conducted after the investigators met with
managers M.K. (HR
Director), F.S. (Packaging Manager), and S.K. (Packaging
Supervisor) to obtain pertinent information concerning the theft
During these interviews,
S.K. produced several potential witnesses that were interviewed prior to
any of the suspects. Each employee that was interviewed signed a
Release Form prior to the interview being conducted. Based on the
information provided by these employees, further thefts were uncovered,
as well other incidents, such as employee drug use on company property,
that resulted in at least five additional terminations and/or criminal
charges being filed.
During the interviews conducted, several subjects
indicated that some of the finished product games that were stolen from
the company were returned to DorMart stores in the area for refunds or in-store
credits that were used to make purchases. Investigators met with
DorMart management and obtained refund and exchange records linking
employee E.M. with the returns of numerous PS II games to the store. Records were obtained that indicate
in-store credits on 4 occasions totaling approximately $209.00. It
appears that he returned the same game on more than one occasion to the
Additional research is being conducted at DorMart by their Loss
Prevention Manager to determine if the other suspects have been involved
in refund fraud as well. Investigators will follow-up with the
LP Manager on this information and forward it to the company and local
On 4/1/03, investigators traveled to the Central Indiana DorMart and
met with Loss Prevention Manager D.R., who took all
the relevant information provided by the investigators and indicated he
would run a full report on each individual to determine how many refunds
or exchanges they had made at all DorMart stores in the west-central
region. Investigators will follow-up with D.R. to verify his
Investigation Follow-up Activities
A preliminary Investigation Findings and
Recommendations Report (see Conclusion, below) was submitted to the company at that time. Additional findings and recommendations
were added to that report and
a final version submitted, at the conclusion of the active
investigation. As outlined in that report, there are numerous
action items that should be addressed to avoid a recurrence of the
issues identified during the investigation. [Note: Read the complete Findings and Recommendation Report.]
Conclusion - Initial Findings and Recommendations
The firm will continue working to assist the local Police Department in their criminal
prosecution efforts against the employees arrested for theft. In
addition, investigators will attempt to collect restitution from those
who agreed to pay the company back for the items they stole.
The firm also has recommendations concerning
internal findings related to loss prevention and security practices
within the facility. It was observed that many of the employees
determined to be involved in theft were stealing the discs in their
jackets and/or baggy, ‘cargo’ style pants with extra large pockets on
them. The coats and jackets are not procedurally allowed at the
workstations, however the regulation is not being enforced by
supervisors or security officers. These items, in addition to lunch
containers and purses, should always be controlled in employee lockers
and not allowed on the production floor.
In addition, security officers
should be given the authority to ‘pat’ a large pocket area on ‘cargo’
style pants as employees are departing the facility, and ‘pat’ or shake
coats and jackets as well. Employees should be discouraged from wearing
these ‘cargo’ pants, and advised that they may be subjected to
additional screening by security officers if they choose to wear that
style of clothing due to the security risk posed.
It was also determined that employees are not
subjected to the same type of search or screening when they leave for
lunch as when they leave at the end of their shift. The security
officers must remain vigilant and observant at break times and lunch
times as well as the end of a shift to deter theft at those times.
Training should be recurrent with officers to ensure they stay focused
on their responsibilities.
Additional reports will be made available as
these respective cases are processed through the criminal court system.
If there are any questions, please do not hesitate to contact Tony
Jarana at (317) 363-8312. Thank you.
How to Prevent Situations Like This
For information, call 317-363-8312, send email to
info@SummitLossPrevention.com. or submit the short form below: