Getting to the Meat of the Problem
January 10, 2006
By Romolo Cotta
Bill Smith, Regional Manager of XY & Z Meats arrived at work on a recent Monday morning, logged onto his computer and read an E-mail from his Operations Manager with dispiriting news.
The numbers at the bottom of the bi-monthly cycle count have been confirmed; select meats and seafood items have disappeared, by the pallet load, ". . . for no explicable reason." The E-mail concludes, "Due to these chronic shortages, vendors are considering other food distributors, because the premium items we had on hand are being scratched off the invoices and substituted with inferior brands. The best product off our shelves is apparently being stolen."
The Controller discovered the total loss was between $53,000 and $68,000 dollars in the last month, alone, and came straight to the point, "Bill, this is a staggering loss. So, now what?"
Is Bill's situation familiar to you?
It dawned on him that he had no idea whom he could trust within the ranks of his own associates.
He began to mull over some of the choices he and the Company President had made in the past.
Several of their colleagues, including the Operations Manager, had, on many occasions, provided "red flags." They reported mysterious "repeat orders" of the same expensive brands and types of food merchandise over the last several months, when receivers claimed they did not find these products on the pallet delivered to them - - - a loss to the company of thousands of dollars each month. Someone mentioned that the Night Supervisor was living well above his means, supporting lots of children and a girlfriend, driving a new, expensive truck, and bragging about trips to Las Vegas to gamble. Another employee came forward and said he was forced to fill orders without proper paperwork while working the night shift; they'd given his Supervisor the benefit of the doubt.
Now, with the losses mounting every month and an inventory showing huge holes, he knew he had to do something.
Bringing in an outside Private Investigation Company, Bill thought, might shake up people, unnecessarily. What if the numbers are wrong, that it's just a paperwork mistake? Will my people feel falsely implicated if they find out we put a PI on the case? How much will all this cost? These questions bothered Bill, but he figured doing nothing would be a lot more expensive than hiring experts.
Bill called a friend, a professional manager in a similar company, and was promptly referred to us, because we'd helped his friends solve a theft problem several years earlier.
We met with Bill the next day and developed an investigative plan involvingbackground investigations of the employees, outside surveillance of the shipping docks, implementation of an Operative to work inside the warehouse during the night shift, as an order puller, and an upgrade of the surveillance camera system.
The background investigations turned up interesting facts; the night warehouse supervisor was a convicted criminal with charges currently pending for an assault case. The same supervisor had civil cases which revealed he was paying child support for seven children to three mothers, and that he was buying a new car for a young lady who worked in the Company's accounting department. This was financially impossible, given his $14.50 per hour wage. Other employees had criminal convictions for theft,violent acts and drug trafficking.
The outside surveillance people watched a late model Chevrolet arrive at the docks in the middle of the night and noticed it was loaded with heavy cargo. Our research showed it was rented by a former employee who was fired for theft more than a year earlier. We followed the car to a house in a nearby city and videotaped as the driver delivered boxes of suspected stolenmerchandise to yet another former employee.
Our Undercover Operative was intimidated and threatened by the Night Supervisor when the Operative questioned whether he should fill "pull orders" hand-written by the Supervisor rather than printed legitimately by the day-shift Sales Department. The UC also saw proxy-punching of time cards and the unauthorized absence of people, including the Night Supervisor, while still on Company time. The UC provided daily reports which quickly gave us criteria to interview several employees for serious violations of Company policy.
Five weeks after we first met with Bill, our Interview Team arrived and began interviewing employees; some were witness interviews to gain additional knowledge and some were confrontational interviews to solicit confessions from those involved in wrongdoing. All the interviews were successful.
Today, a few weeks after the interviews were completed, several people are facing criminal charges for grand theft, including the ex-employees and the Night Supervisor. The Police handcuffed and arrested several on the spot after the interviews. Those others who were implicated were eventually subject to search warrants and questioned by Detectives. This led to additional arrests.
Things have changed at X Y & Z Meats. Newly hired employees are screened for criminal history. The dock area is watched carefully with new digital cameras.
Bill has recently been flooded by positive input from the honest employees, glad he finally did something about the oppressive Night Supervisor others who had helped themselves to the Company merchandise for more than a year.
Inventory records and sales indicate the theft is stopped and clients are satisfied with product deliveries.
Instead of continuing to nurse his wounds and add up the losses month by month, Bill is now operating a profitable business.
Of course, the names were all changed to maintain confidentiality of our clients, but the above story is based on the actual case of a Los Angeles area food supplier who is now very glad he called.
About the Author:
Romolo Cotta is a corporate investigator with the firm of Diversified Risk Management Inc., Los Angeles, a full-service investigation firm specializing in labor and employment related investigations.
Diversified Risk Management, Inc. provides a broad range of specialized risk management and investigation services which control losses and minimize exposure of litigation and liability to employers. The nationwide firm assists corporations, non-profit organizations and law firms in recognizing and responding to risks through a comprehensive and integrated suite of professional services. You can learn more about the firm by visiting www.DiversifiedRiskManagement.com, calling 800.810.9508, or by email . (CA. PI licenses PI-17240 and PI-23294)