Nordstrom Hires Firm To Fight Employee Theft

DOWNTOWN

It can happen with the flip of a wrist.

The boss briefly leaves the room. Suddenly, that $5 bill - or a $50 or $100 - disappears.

In that moment, another store has become a victim of a little-understood business problem - employee theft.

But for Loss Prevention Resources, another opportunity may have just opened up.

The Kirkland firm, started a year ago by an ex-police officer from Coeur d'Alene, Idaho, specializes in helping retailers stop workers from stealing. It also helps them recognize and deal with employee theft when it occurs.

Although it still calls itself a startup company, Loss Prevention has already lined up 41 clients, including Seattle-based Nordstrom. The company has also advised Bellevue-based Lamonts and Paccar, Lynnwood-based Pacific Linen and Hinshaw's Honda of Auburn.

Stealing by workers "is a very significant problem. And, with the recession, it's growing," says Linda James, Loss Prevention's 41-year-old president.

The firm seems to have touched a raw nerve, perhaps due to the extent of the problem. While estimates vary widely on total damage by internal theft, experts generally agree the value of stolen goods and cash amounts to billions of dollars nationally.

Part of the problem is that statistics on losses from worker theft are often combined with shoplifting and other types of inventory losses under a single accounting category known as "shrinkage."

But Peter Berlin, New Jersey-based publisher of "Peter Berlin's Shrinkage Report," estimates the annual total among retailers, excluding sales of gasoline, cars and large equipment, is $4.5 billion.

The impact can be particularly severe among small businesses. Doug Shadel, an attorney with the state Attorney General's office who specializes in local business crime, says, "30 percent of all small business failures are due to internal theft."

One local expert, Bellevue Police Det. Al Ward, who specializes in crimes against business, says about two-thirds of thefts against all businesses are committed by workers.

Yet state programs to combat the problem are virtually nonexistent. Shadel says the attorney general's office, the bureau closest to the problem, has no program to battle employee theft. Publication of a brochure covering the subject has been stymied by the state budget crisis.

A task force of Eastside police agencies is trying to organize a continuing program that would allow businesses to respond quickly to crimes. Now, its efforts in this area are largely just information-sharing sessions.

"One of the hardest things to do in Bellevue is to make (businesses) believe there's enough crime to worry about," Ward says.

Through a wide range of programs, including seminars and videos, Loss Prevention tries to help employers find a solution for employee theft.

The company also offers computerized searches of credit reports, court records and drivers' records from many states.

It also can provide access to a confidential computer file, kept by an industry nonprofit group called the Employers Mutual Association Northwest Inc., that keeps records on employees who have confessed theft to their employers and managed to keep their cases out of court.

James' background is in both law enforcement and loss prevention. Before joining Coeur d'Alene's police department two decades ago, she worked as a security guard in a local supermarket to pay her way through college.

"I was going through law enforcement courses while I was picking up shoplifters," she says. "I would usually get one an hour."

James started Loss Prevention last year. She has invested about $20,000 in the business, much of it for computer equipment.

With 30 employees, she says, "we are marginally profitable." Most workers are former police or security officers.

James says the current economy has aggravated employee-theft problems.

"During this recession, I think we have a different work force than in the past," she says. "Work ethics have gone down and people are able to easily rationalize theft from their employer," she says.

"Today, thieves often see themselves as a good employee and the company as the bad guy. They feel they are entitled to take whatever it is they steal."