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Who's stealing your business?

Fraud is on the rise as technology makes it easier for competitors and con artists to rip off your products, ideas, and cash. Learn from entrepreneurs who got wise the hard way.

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Past victims: Where are they now? Past victims: Where are they now? Past victims: Where are they now?
FSB checks back in with three businesses that suffered from patent infringement and IP theft.

(FORTUNE Small Business) -- As if you didn't have enough to worry about.

Fraud of all sorts - embezzlement, business identity theft, patent infringement, and product counterfeiting - is increasing. The median loss from embezzlement cost small companies $190,000 in 2006, up from $98,000 in 2004, according to the latest numbers from the Association of Certified Fraud Examiners.

The number of patent-infringement lawsuits rose 6% last year. New research has found that counterfeit goods account for an estimated 15% to 20% of all products manufactured in China, says Donald Manzullo, R-Illinois, former chairman of the House Committee on Small Business.

The advance of technology has made it easier than ever for the unscrupulous to victimize your business. Consider that hundreds of pages of sensitive financial information can be stored on a USB drive the size of a thumb - or that millions of dollars can disappear with the flick of a computer key.

In March the regional supermarket chain Hannaford Bros., headquartered in Portland, Maine, discovered that hackers had broken into its database and rerouted customers' credit card information to accounts overseas.

In another case, an accountant who had electronic access to the books of 15 small companies diverted $1 million meant to pay taxes to his own account. In another case, a thief set up a phony website that mirrored that of a small business, ordered thousands of dollars of supplies from Office Depot (ODP, Fortune 500), and then had the bills sent to the real business owner.

Given all the day-to-day challenges small-business owners face, most feel they don't have the time, patience, or money to protect themselves. This helps explain why small businesses are nearly twice as likely to be victims of fraud as are big corporations.

But experience is a good teacher. In the pages that follow, you can read about entrepreneurs who were victims but learned how to fight back. To top of page

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