IN THE FIELD OF CRIMINOLOGY, the term employee crime, commonly referred to as occupational crime, is generally agreed to be a subtype of white collar crime. Beginning with the coining of the term white collar crime by Edwin H. Sutherland, the broader concept of white collar crime has been subject to numerous definitional revisions.
For example, it is well known that Sutherland’s definition of the term was a crime committed by a person of high status and respectability, in the course of his occupation. This definition immediately calls attention to the fact that the white collar offender is by nature, legitimately employed. Although it focuses on the characteristics of the individual offender, Sutherland’s most extensive study of white collar crime actually focused on sanctions against entire organizations, rather than separate individuals.
As a result, the distinction between corporate and occupational crime emerged: corporate crime was considered to be a crime that is committed on behalf of the employing organization, while occupational or employee crime was considered to be committed against the employing organization, to the benefit of the individual. Some debate about this distinction has emerged in the field, mainly in the concern over what types of occupations should be studied. This issue is related to Sutherland’s original concern with the status of high class, respectable individuals, particularly with regard to the fact that their characteristics often render them immune from legal action.
In spite of ongoing definitional disputes, the distinction between the two forms of white collar crime has generally been accepted. Researchers studying employee crime may focus on specific occupations, or choose to include a wider variety of offenses that may occur equally often in different occupational settings. Broader conceptualizations of employee crime tend to incorporate a large number of acts that share the characteristic of violating trust: the individual employee violates his or her employer’s trust by engaging in acts that directly or indirectly victimize the place of business.
TYPES OF CRIME
The Integrity Center, an organization that conducts risk-management assessments for employers, has identified several offenses that are consistent with employee crime. One such offense that may occur in a variety of settings is espionage, which is defined as: the theft or unauthorized acquisition of secret or restricted information. The purpose of industrial espionage is usually related to the acquisition of unique and profitable information belonging to a commercial enterprise. Another common form of employee crime is referred to as kickbacks. Kickbacks are various payments or favors that are given clandestinely to decision-makers in return for selecting the offender’s products or services. Examples of kickbacks may vary considerably based on the particular industry involved, but could include such common categories as money, gifts, or personal favors.
Fraud is also a general type of employee crime, and can take numerous forms. The Association of Certified Fraud Examiners (ACFE), a leading authority on the topic, has conducted extensive research on what they have termed occupational fraud. This offense is broken down further into three categories: asset misappropriation, corruption, and fraudulent statements. Each of these categories contains yet additional subcategories based on the strategies used to commit them and on the resulting gains (financial or non financial) for the individual offender.
For example, asset misappropriation, the most common type of occupational fraud, generally consists of one of two forms: cash or other assets. According to research conducted by the ACFE, cash is the asset most often targeted by employees. Misappropriation of cash may occur at all levels of an organization. Corruption, similar to kickbacks, involves collaboration between an inside employee and one or more outsiders in an attempt to defraud the employer in some way that benefits the individual offender. Fraudulent statements, which typically occur at higher levels of organizations, also tend to take one of two forms: the falsification of an organization’s financial statements (for example, overstatement of revenue) or, alternatively, falsification of other documents or records (for example, information in the employee’s human resource file). All of these forms of occupational fraud are violations of trust, and all victimize the employer.
Related types of occupational crime include embezzlement, pilferage, and theft of services. The common conceptualization of embezzlement is the taking of money or property by an employee who has been entrusted with its care, custody, or control, which is consistent with the ACFE’s description of asset misappropriation. In the field of criminology, one of the most detailed studies of this type of employee crime was conducted by Donald Cressey published in his popular 1953 book, Other People’s Money.
In this study, Cressey conducted extensive interviews of convicted embezzlers serving time in federal prison, and found that these former employees had many similarities. All of the offenders were trusted by their employers with money or property. Many of them also identified the fact that they were experiencing a non’shareable financial problem at the time of the embezzlement, such as debt due to gambling, blackmail, or womanizing. Many of the offenders also provided common rationalizations for their embezzlement, such as the idea that they were simply borrowing the money from their erriployer with the intent of eventually repaying it. As a result of this and similar rationalizations, embezzlers did not think of themselves as criminals.
Unlike embezzlement, the employee crime of pilferage generally does not involve the taking of money, but instead refers to smaller scale thefts of relatively inexpensive materials. For example, it may include tools, various office supplies, or other items owned by the employer. Although pilferage is typically viewed as a low level employee crime, over time the costs due to this offense can amount to considerable losses for the employer. A similar employee crime is referred to as theft of services. This particular offense consists of the unauthorized use of, or failure to pay for, various services obtained through the employer. Common examples may include making long distance phone calls or personal photocopying at the expense of the employer.
Other types of employee crimes may be grouped together based on the fact that they involve a similar type of employee: an individual who is bored, feels overworked, has an unresolved dispute with the employer, or is attempting to gain an unfair competitive advantage over her co-workers. Four such employee crimes discussed by the Integrity Center are sabotage, robbery, burglary, and larceny, all of which have a legal counterpart definition.
The broad definition of sabotage consists of a variety of actions, such as the deliberate destruction of property, that are intended to impede the employer’s operations in some way. Comparatively, the employee crime of robbery is distinct in that it tends to involve actual force or the threat of force against a victim. Employees may rob their fellow employees, outsiders, or could even give information to outsiders who may use it to rob employees or the organization. Burglary, a related employee crime, entails an employee entering a building or vehicle in an unauthorized manner, and either stealing something tangible or committing another serious crime while inside. Like robbery, burglary can be directly committed by an individual employee, or could also involve a situation whereby the employee provides information to an outsider, who then will physically commit the offense.
Larceny is generally defined as stealing something from a place where an individual has a legitimate right to be present. In the common definition, larceny may consist of a customer shoplifting from a business. Alternatively, and perhaps even more dangerous to employers, is theft by employees themselves. This type of employee crime is also referred to as shrink because it involves missing or unaccounted-for inventory. Like all previously described employee crimes, larceny victimizes the employer and can result in large losses, financial and otherwise, over time.
Finally, a newer type of employee crime is any offense that is related to technology, particularly computers. Crimes committed with the use of a computer may be related to or occur in combination with any of the previous forms of employee crime. Other employee crimes specifically involving the use of a computer include altering data as it is entered into a computer, removing data from a system, or releasing confidential data to unauthorized third parties.
FIGHTING EMPLOYEE CRIME
What can businesses do to protect themselves from being victims of employee crime? Several strategies have been proposed. Employers may be well served by defending themselves at the pre-employment stage. They can take a variety of steps in the hiring process. For example, one option is to conduct a criminal background check on potential employees. Such checks are relatively simple to perform, and may be conducted by the organization itself or through consultation with a reliable outside agency.
A criminal background check may determine whether a potential employee has any previous arrests or convictions for crimes that may be related to the workplace. For instance, a previous theft conviction may suggest that a potential employee is not an appropriate candidate for a position that involves the handling of money. Employers can use information from criminal background checks to develop general or specific hiring policies. They may decide to bar potential employees who have any prior criminal involvement (even offenses that do not appear to be related to the workplace), or enact a more specific policy that prevents employment of individuals with prior work related offenses. In conducting background investigations, however, employers should proceed with caution and not rely on a criminal check alone to make a hiring decision. Recent research on this topic has suggested that some individuals may have extensive histories of employee crimes, but this information will only be detected in a criminal background check if the individual’s prior employer took legal action against the offender.
All too often, employers may choose simply to dismiss the offender due to fear of negative publicity or to avoid the expenses of a criminal trial. When conducting background checks, employers should also carefully check prior references in an attempt to uncover any relevant information that may go undetected by a criminal check. When employers choose to severely punish offending employees, they can also ensure that future businesses will detect the behavior in subsequent criminal background checks.
To prevent crimes by existing employees, businesses have a number of potentially useful options. In the past decade, technological advances have made the prevention and detection of employee crimes easier to accomplish. One readily available technique is the installation and use of closed-circuit television monitors. Cameras can be installed at a variety of locations: randomly, throughout a business, or even directed specifically at a location where cash transactions take place, such as above a cash register or customer service counter. This type of preventative technique is common in retail settings, and also serves to detect crimes committed against the business by the general public (such as shoplifting). This option involves close monitoring by a trained security team, and immediate action when a crime is detected. The enactment and publication of strict security policies, such as an automatic report to local police and/or a 100-percent prosecution policy may go a long way in deterring the potential employee criminal from acting.
One of the problems with employee crimes is that may of them are not so easily detected through procedures like cameras that may regularly catch common shoplifters. For example, corruption and fraudulent statements, two forms of occupational fraud, may often involve transactions that are not obviously witnessed. Several options are still available to detect such offenses. One potentially beneficial strategy is the implementation of an anonymous reporting system so honest employees can tip off the employer about the criminal activities of other employees. An anonymous reporting system could consist of a 24-hour, toll-free hotline that employees could call when they are away from work, or it could also take the form of a suggestion box or random survey where no identifying information is required. Regardless of the format, anonymous reporting systems can encourage employees to report crimes without fear of retaliation by the offending employee.
In addition to background checks and anonymous reporting, research by the ACFE has revealed that two other practices may be useful in the detection of employee crimes. These mechanisms are internal audits and external audits. Both serve a similar function, which is a thorough assessment and reconciliation of a businessesfinancial accounts, documents, or related information. While both internal audits and external audits could benefit the organization, the internal audit may be ineffective if it is related to the source of the crime itself. An external audit by a non related, third party, especially if it is conducted unannounced, may be more useful for the discovery of employee crimes.
In the balance of severity and harm caused by white collar crime, employee crimes rank, for the most part, as almost innocuous compared to the staggering cost in lives and money of corporate crimes, those committed not necessarily by employees, but more likely, employers.