What Happened to Loss Prevention?

Has the white collar criminal disappeared?

I grew up with a father who as a management consultant, spent a great deal of his life inside of companies as a spy hired by the owner or CEO to find out why they were losing hundreds of thousands to millions of dollars each year.

Since this country was founded, successful companies would find they had a ‘thief in a white collar’. This term is probably obsolete now but it came from the consulting companies who were brought into the most successful firms in the country to find out why one of their own was stealing from them. The books were always in order but at the end of each fiscal year something was off.

White collar crimes are still some of the hardest to prove and even harder to convict with less that 5% ever brought to court and less than 1% ever convicted.

When you look at who is perpetrating these crimes you almost never think to look at management but that is the main reason for some of the nation’s largest swindles in history.

In over 80% of the white collar thefts, management devised a system within the current company’s handbook of management and oversight. Working in a system of canonical rules no one ever thought to adjust is what almost brought the company down or caused a shutdown of that division which could have cost hundreds of jobs and taxes to the community.

In the 1960’s through the 1980’s the garment and shoe industries suffered millions of dollars of losses because no one outside of the top manager in a warehouse or manufacturing plant needed to perform the checks and methods to keep losses from occurring. Whatever the plant manager and his immediate supervisory staff wrote down was canon.

Sure, in the 20% leftover, there are other thieves in white collars and a few blue ones like a famous story from my father’s boss Norman Jaspan, of Norman Jaspan Associates, who talked about a maintenance man at a wheelbarrow factory in the midwest who brought all his tools to and from his truck in a wheelbarrow. He did this every day of work for his entire 46 year tenure. This man, let’s call him Dick, came back from the war, went to work, and stayed put, but at some point in his last 20 years, he was made to feel less like a valued worker by denying him growth or promotion.

Disgruntled workers, managers, or both are main themes in these kinds of crimes.

Due to the treatment Dick received, he began using a new wheelbarrow each and every day. Now he had his original one he used to bring in his tools each day but every night he would walk out with one new steel bed, wheels and axles tucked under tools and wooden handles mixed into the reject piles anyone could take home for firewood. He did this most every workday for 20 years.

No one from the company ever suspected or knew anything about this crime, even to Dick’s last day before retirement. There was only one suspicious person. The guard in the evening knew the maintenance man well and had to waive him through nightly for just as long as the thief had been there. On the man’s last evening, the maintenance man and he exchanged goodbyes and the guard said, “I have been watching you for 46 years, old buddy,” They would occasionally get beers or watch a game together. “I know you are up to something. Last week, management came to me to look out for thieves. Tell me something, you are the only guy who could pull it off. What are you stealing? I promise not to say a thing since I am retiring tomorrow as well.”

The maintenance man put down the wheelbarrow, stood up, smiled wide, and said, “Wheelbarrows of course.”

When my dad’s boss was retained for services, he was able to see how finished wheelbarrows could be stolen. His team looked at the transactions in and out on paper and they would look at how the factory, it’s warehouse, doors, cameras, or lack of, and who had access.

This factory had slightly higher steel costs and slightly higher rejects. When an investigator filled a position in the warehouse for a month, no thief could be found. He then went through employees that had recently retired and found the maintenance man and the guard. Despite having the two men as suspects, the company was satisfied the thief was no longer at the firm and closed the case.

This didn’t stop the management consultant’s curiosity. About a month later he called on the maintenance man. Dick and the consultant agreed to meet for a beer in Dick’s favorite pub and told his story. Dick had collected a total of 4600 wheelbarrows and once retired sold his 20 year collection to a major retailer for half the wholesale cost and bought a home on a lake.

Do not ask me to prove Dick’s purchase or sale because that had to be speculated but the theft and the purpose is absolutely true. Dick felt entitled to his bonus and made it happen.

Like a single drop of water from a leaky faucet, each wheelbarrow was too menial to be found.

Nothing happened to Dick because the company only cared that the plug was leaked. They felt they would be made to look like idiots if it got out in public. The man would be looked at as a working class hero and more people would try it. Now anyone using similar items at the company for their day to day work are thoroughly checked before leaving, cameras were installed, and methods put into place for regular inventory checks.

See this maintenance man, in the scheme of these thefts, is a complete outlier to most of the thefts that occur. If he had worked at a nuclear power plant were every screw and cut pipe is measured three times and the scraps collected by people watching closely, he would have not been able to do this, but a manager or managers which is the case could have over ordered critical supplies, marked them used, validated their use in reports or on paper, contents transferred to plain containers, taken the expensive tools, cleaners, parts, and scrap and no one would be the wiser. Thankfully that doesn’t happen because of checks and balances created by loss prevention experts that know the weight of the materials and trucks going into the work areas and then weighed against the materials used to identify differences.

The most notorious of white collar crimes happened by a transit police force in a major metropolitan city in the 1980’s.

“Transit police officers are responsible for keeping the public safe on subways and other railroad property. They must be able to remove people in violation of the laws of these public transportation and freight carrying systems, including people who are stealing or trespassing on the property.”

~ https://www.careerexplorer.com/careers/transit-police-officer/

I do not know the city or the police force specifics because it was told to me by a management consultant with his own firm in 1982. The firm was Internal Audit and Inspection Services. He was a friend of my dads and a retired FBI investigator.

The tickets for this transit system were available only to the managers with keys to the locked closets at certain stations. The city printed so many tickets that these stock rooms were never empty and many times, boxes had to be moved out to unsecured areas like a closet down the hall.

These boxes were normally sent to a landfill but many times there was no one to do this so the excess kept building up and last years tickets were just as good because many times a father or mother would pre buy tickets before the price increased for themselves or their children, This manager in charge of physical tickets was disgruntled.

How?

He didn’t receive a promotion, recognition, or both but ultimately about money. He knew the T (short for transit system) had strikes all over the city from conductors, to garbage men, and the T police. Knowing he had senior conductors (managers in a sense of the juniors) he could entice, he told them about the tickets just laying around and created a scheme that no one suspected for a year. The conductors worked with T police officers they knew were having to work despite being disgruntled with their own grievances. It was a plan that came together at the right time in a place no one would suspect. The T police officers began selling the tickets to commuters and fleet managers who used the T all the time. They sold a certain amount of tickets per week for half the cost. Now the scheme grew and would have almost never been caught when the T police officers got greedy and started pulling stacks of tickets that were in open boxes in and out of unchecked kiosks. They were now selling and distributing tickets on their own as well. The whole thing grew but no one was talking no matter how much management threatened, they knew they would have already been arrested and not just being yelled at.

That is when Internal Audit and Inspection began working for the T’s version of Internal Affairs and put people around the station entrances who were peddlers of cheap jewelry mixed into the newsstands, beggars, and food vendors. My dad was one of them. He was so good that he wanted to trick me. He came home to NH and as I was walking outside my apartment building, he walked in and right past me. I had no clue. I mean I was 11 but he turned around and said, “Don’t you know your own dad?”

By having these auditors/investigators in place, he and the others saw and recorded with pictures on 35 mm film. It had to be plastic film so the courts took it seriously then. My dad used the same kind of film you would use to capture a running cheetah and had the motor where you pressed the button and enough pics to capture handoffs fired away until the roll was gone and changed.

In an investigation such as this, you have to find out with your eyes, what is happening, then you have to position cameras in such a way that are not obvious. The peddler like my dad may have had a cash box with a slide away side and tourists mixed into the crowd. This city has almost as many people at midnight as it did during the day using the subway, outside of rush hours. This went on for months until the number of T police involved were so many that a major indictment was on the way.

My dad was so good he would talk to the police officers most nights. They were curious about the new guy, checked his made up credentials from the city, but like any habit, if you see someone day after day with real goods like gold chains you bought by the foot and plying that trade all the time, you just accept that person as part of the woodwork. My dad was always a great talker and everyone loved to tell him stuff. It was why he was one of the most successful investigators in a private firm. He was charming and could talk you into divulging secrets.

On the day the district attorney filed suit and obtained the necessary warrants, the investigators were told to get out of the city for at least two weeks, paid, until all the arrests had been made. They had to run because of leaks at the courthouse.

In the end, the scheme was finished, almost 5% of the transit authority employees were charged and dismissed. Soon methods were put into place by management consultants and the T main office. They introduced new technology to print a ticket or tickets for the days needed. No more bearer type materials.

Why does no one receiving the stolen goods say anything?

Because they believe the company or government has more than enough money to cover for the loss. Everyone is receiving something and they keep their mouths shut.

So I ask again, what has happened to white collar crime?

Do you as a business owner think that it cannot happen to you?

Even the best technology in place falls to the background of human beings and systems unprepared for clever disgruntled people.

If you have a gut feeling that something is wrong don’t waste time. You will almost never recover what has been lost. Look for experts and get them onsite.

Thank you for reading!