Who is stealing your stuff? And more importantly, who is stealing your stuff bit by bit by bit that you may not even be aware of? In 2016, according to various national insurance carriers and national public resources on employee theft, the industry with the highest targeted sector for employee theft was the financial services sector at 18 percent. Real estate/construction sector came in at fourth place with 10 percent of total cases reported.

No industry is immune from employee theft. In fact, 55 percent of cases reported in 2016 were from companies with fewer than 100 employees. The average age of the perpetrators was 48 years old.

The construction industry trend sees that more theft cases are coming from management and supervisory levels. These folks are much more likely to steal than other employees. While check fraud and direct funds theft are the most common, check fraud was responsible for 3.5 times higher losses than funds theft.According to Hiscox Insurance, the median cost of an employee theft claim in 2016 for the construction industry was $353,805. This seems like a huge sum, but often these schemes are carried out for many years by someone who handles money and whom the employer feels is trustworthy. The most common remark from business owners is: “Why didn’t I see this sooner?” Who wants to suspect someone who’s worked with you for years and appears trustworthy and loyal? Nevertheless, owners and managers should pay attention to typical warning signs that include:

Intelligence and curiosity. They pick up things quickly and are eager to learn how everything works in the office. Once they know, they manipulate for their own gain.

• Extravagance. Watch for employees whose lifestyle appears out of proportion of their salary.
• Risk-takers. They are often rule breakers in and out of work life, such as excessive speeding tickets or overusing sick time.
• Diligence. They may come in early and leave late, and never take vacations, all done to appear dedicated to the company when the behavior is an effort to not be found out.
• Disgruntlement. An employee who feels he/she is being treated unfairly may be tempted to steal to get even.

Almost 30 percent of employee theft schemes persist for more than five years, and the most long-running schemes typically involve employees who are often left to work alone and don’t have someone watching over them on a consistent basis. These conditions create opportunity. As a precaution, do you have your financials audited by a third-party accountant every year? If not, you should. Do you keep careful records of your inventory? If not, you should.

Case study of plant theft
An employee of an interior plantscaping company had a scheme whereby he put holiday plants at a client’s location and later, sold some for personal gain. After the holiday period was over, when he was supposed to re-turn the plants to the company, he took a few plants here and there, sold them on eBay and pocketed the money. The number of missing plants was small enough that the company did not seem to take notice, but over time it added up to thousands of dollars of lost inventory. Maintain counts of your returned plants, returned holiday lights and returned equipment every day when crews come back from a job site. You should have multiple employees confirming the number of trees, 5-gallon containers and annuals that were delivered and planted on a job site. These items disappear and over time, the losses rob your bottom line.

Inside the building
The most common types of embezzlement in the office space include the following:

• Funds theft accounts for 35 percent of cases, and 56 percent of the perpetrators are women. They take cash or bank depos-its and transfer portions of the funds to accounts they control.
• Check fraud occurs predominantly with smaller companies. Checks are altered or forged to pay the perpetrator.
• Vendor invoice fraud and false billing cause significant losses. It happens when invoices for vendors are fabricated and vendor companies are invented by the perpetrator.
• Payroll fraud occurs when the perpetrator pays fictitious or terminated employees and diverts the funds into personal accounts.
• Other forms of inside theft include merchandise/property theft and expense fund fraud. 

Troy D. Sibelius, FASLA, CIC, CRM, is an executive vice president and client adviser at The Buckner Company. 

Acknowledgement: Special thanks to Doug Karppat Hiscox Insurance for providing much of this information in their 2017 Embezzlement Study.

This article originally appeared in the January/February 2019 issue of Colorado Green.