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Arresting employee theft
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November 13, 1997: 4:36 p.m. ET
Experts say workers often give off clues if they're stealing from you
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NEW YORK (CNNfn) -- Call Bruce Caulfield a skeptic, but the Manhattan restaurateur is suspicious of employees who work through their lunch breaks, seldom take a breather and never ask for time off.
Caulfield's put some of these workers under surveillance -- and fired them when he discovered an employee making quick work of short-changing the cash register.
Employees who steal from their bosses share a few traits, according to Caulfield, who's been in the restaurant business for 20 years.
Ironically, one suspect trait is overzealous work habits.
"Over time, you come to find out that someone who seems like a crackerjack worker is really just running a game with the register," Caulfield said.
Accountants and investigators say many of the embezzlement and cash-theft cases they handle feature the timeworn tricks of the short-change trade.
These scams particularly flourish in small businesses that don't practice good bookkeeping methods or have shoddy security procedures.
Bottom line: A business operating on an honor code is vulnerable to big losses at the hands of a skilled but crafty worker.
'Ticket tearing' and swizzle sticks
Under-ringing sales and tearing up order tickets are two longtime scams in the food and beverage industry.
Richard Kimball, now a Lexington, Mass. accountant with Stone & Co., says he learned more numbers games working in bars during college than he did from between the pages of his math books.
"It boggles the mind, what people do," Kimball said.
He recalls bartenders under-ringing sales, then placing markers in the register drawer to keep track of the difference.
"Say you sold someone a round of drinks for $17.50," Kimball said. "You'd ring in $7.50, put the $17.50 in (the register), and put a swizzle stick in the drawer as a reminder that the drawer is up by $10. At the end of the night, if you had eight swizzle sticks in there, you'd pocket $80 before closing out your register."
Since the cash in the register drawer would match the transactions listed on the register tape, everything would look clean to the bar's owner -- despite the employee's shenanigans.
Kimball said "ticket tearing" is another common trick in the restaurant business.
Here's how it works:
A waitress serves a full meal to a family in the restaurant, and the customer properly pays the check at the meal's end.
But instead of putting the money and a completed order ticket in the register, the waitress simply tears up the order ticket and pockets the cash. The restaurant owner has no record of having served that meal, let alone getting paid for it.
Fighting back
How can employers protect themselves from such scams?
Kimball said employers should outfit waitresses and others in similar positions with order pads with a sequential number on every ticket. Employers should then require workers to surrender all tickets, used or not, at the end of each shift.
That way, bosses can tell if any order tickets are missing.
Kimball also said employers shouldn't let workers close out their own cash registers at a shift's end.
He added that restaurant owners or other similar employers should keep tips in a place other than the cash register, lest "drink" money become "tip" money through cash-register high jinks.
"I worked one bar where all your tips were put in a lock box, and at the end of the night they would count your tips out for you," Kimball recalled.
The accountant explained that such methods allowed the bar's owner to see what a usual night's worth of tips totaled. If one employee's tips suddenly began skyrocketing, that would raise a red flag.
Kimball said businesses that deal with lots of coupons also need system to prevent scams.
He said coupons should be marked and locked up once redeemed, and order tickets should indicate if the customer used a coupon to help pay for an order.
Kimball said he knew of one pizza-delivery man who "used to cut a whole bunch of extra coupons out of the newspaper and the telephone book."
The person turned in the coupons, usually for $1 or $2 off of a pizza, with the night's receipts and simply pocketed the extra money.
To catch a thief
How do you spot a worker who's stealing from the till?
For restaurateur Caulfield, a combination of instinct and investigation alerts him to theft suspects. "There's a feeling you get that a person gives out on being dishonest -- not looking you in the eye when you're talking to them, that sort of thing," he said. "Also, when an employee starts asking you for advances or starts bugging you for raises, that should raise suspicion."
Experts say you should keep a particular eye on your bookkeeper.
"The person who signs the checks should always be somebody different than the person who writes the checks," accountant Kimball said.
Additionally, experts advise you to beware of the worker who never wants a vacation -- especially if the person is your bookkeeper.
"Having one person doing all your books all the time is not a good deal," said Sgt. Mike McCallum of the Cedar Falls, Iowa, Police Division.
McCallum handled one case where no one ever checked a manufacturing firm's books except one woman -- who, it turned out, had repeatedly taken money from the company's employee-insurance fund.
The embezzlement took place over a period of years, and McCallum said the woman only confessed to colleagues in an emotional breakdown after learning the company planned to eliminate her job.
"She knew that once she left, they'd audit the books and she'd be found out," McCallum said. "Up until then, nobody ever had access to those books, and they never did an audit. If they hadn't let her go, they never would have found out."
McCallum said another local business suffered big losses at the hands of its lone support staff member. "They put all the accounting and everything on one secretary ... and she was stealing them blind."
Since no one but the suspect had familiarity with the company's records, the business couldn't even easily determine just how much the woman had stolen.
"They (the company) knew they'd lost something like 40 or 50 grand, but they could only prove $11,000," McCallum said.
A 'fraud audit' can help
Experts say audits could prevent or uncover some such losses.
"If you suspect fraud, you might want to specifically request a 'fraud audit,' because a general audit may not necessarily discover fraud," said Katharine Doran, a certified public accountant with the Albany, N.Y., accounting firm Teal Becker and Chiaramonte.
Doran said businesses seeking a fraud audit can expect to pay at least $1,500, and probably more.
But "if an audit is done well, it should detect any stealing," accountant Kimball said. He cautioned, however, that accountants are not cops.
"Our job is to issue an opinion on the financial statements," he said. "What the business owners choose to do with that information is up to them."
Firing workers without getting burned
Some business owners prefer to handle the thefts without police involvement.
Caulfield said the demands of running three restaurants leave him no time for police paperwork and court dates. Instead, he prefers to police his eateries himself, firing workers he suspects of fraud.
But to back himself up in case of lawsuits or unemployment claims, Caulfield obtains statements from witnesses and documents all actions taken.
Experts warn that business owners who don't press charges need to exercise such care if they fire a worker for alleged scams.
Ex-bosses who give a bad reference to a dismissed employee are easy targets for lawsuits if they have no police reports to back their assertion of employee theft.
"You can (say a worker was stealing) if you can prove it," said Alan Zwiebel, an attorney in Kingston, N.Y. "The truth of the accusation is the defense to any response. But you have to be prepared to show that you had reasonable cause to believe this person was stealing."
To best protect yourself, Zwiebel recommends simply telling a suspect employee that you're firing them for incompetence. This puts the focus on how the worker performed, rather than on whether the employee stole anything.
"You don't have to hold (the worker) responsible for stealing," Zwiebel said. "You can hold them responsible for not keeping track of register receipts, for checks being missing, for making bad change at the register. You just tell them, 'Hey, you're not doing your job.'"
-- by Margaret Nowak for CNNfn Interactive
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