QUARTERLY In This Issue Shoplifting Problem Grows.....Page 2 In this article Jack discusses the increase in shoplifting; gives us his perception of the problem; and some recommendations as to what stores should do. Personal Accountability .........Page 3 Who is responsible for dishonesty? Is it determined more by the situation and environment, or by a personality trait? Dr. Cherrington reviews findings from studies on the subject and also gives his perception. Testing For Success.................Page 3 Take this short quiz to find out if your anti-shoplifting strategies are effective. Theft Survey Results................Page 4 Review the results of our 25th Annual Retail Theft Survey reporting on over 1.1 million shoplifter and dishonest employee apprehensions. On the Horizon..........................Page 5 Read some of the results from the recently released 2012 Marquet Report on Embezzlement (United States cases). Some of the findings may surprise you! You Be The Judge.....................Page 6 Read key facts from an actual court case and then conclude how you would have decided. The Bulletin Board...................Page 8 See examples on how organized theft cases increased 111% in just four months. SUMMER 2013 VOL. 28, NO. 3 Mark R. Doyle Talks - - - A New Life, and the Survey Says . . . First, regarding the new picture, I am a proud and happy grandfather for the first time! Our daughter Taryn gave birth to Hunter Ellis Whitman on May 29th; he was 8lbs 2oz and 22 inches. He is truly a blessing from God, as a new chapter in our lives begin. In this newsletter, we report increases in both apprehensions (shoplifting and dishonest employees) and recovery dollars in our 25th Annual Retail Theft Survey - results can be found on pages 4 and 5 of this newsletter. A sincere “Thank You” from us and the industry to the 23 large retailers who participated in this annual survey! You will also find articles where Jack gives his perceptions of the growing shoplifting problem; and Dr. Cherrington discusses who or what is responsible for dishonesty. I hope you enjoy this issue of the newsletter. Also, don’t forget to follow us on the Web, LinkedIn, Facebook and Twitter! $ Apprehensions & Recovery $s Up - - - 25th Annual Retail Theft Survey By Mark R. Doyle We just completed our 25th Annual Retail Theft Survey, and the results reflect a much greater problem than many people realize. These thieves (shoplifters and dishonest employees) are stealing profits from retailers thus resulting in higher retail prices for consumers, and even putting some stores out of business. The number of apprehensions and dollars recovered from those apprehensions increased for both shoplifting and employee theft in 2012. This year’s survey respondents reported an increase in retail theft apprehensions (employee and shoplifter) of 7.3%, and an increase in the dollars recovered from those apprehensions of 18.1%! It should be noted that these participating companies actively practice the concept of true loss prevention. The apprehension of retail thieves is a secondary step in their inventory shrinkage control/prevention programs. $ HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION "Mind Boggling" Statistics - - - Did You Know Shoplifting Problem Grows By Jack L. Hayes A worldwide gang of criminals stole $45 million in a matter of hours by hacking a database of prepaid debit cards and draining cash machines around the globe. Retail News You Can Use Transportation incidents result in 1,857 work-related deaths annually. Injury Fact 2013 Edition Based on an analysis of more than 3.4 million urine and 340,000 oral drug tests, job applicants taking a pre-employment drug screen tested positive for illegal drugs at a 5.7% higher rate during the first half of 2012 than all of 2011. Quest Diagnostics Drug Test Index Retailers’ revenue lost to online fraud has increased over the past two years and reached an estimated $3.5 billion in 2012, up 3% from 2011 and up 30% from 2010. 2013 Online Fraud Report Larceny occurs most often: • From vehicles •Shoplifting • From buildings • Purse snatching • Pick pockets US Census Bureau A study found that inspected workplaces saved an average of $355,000 on injury claims and losttime compensation without harming profits. Science (Vol 336, No 6083) Page 2 This year’s survey statistics are certainly ones that every retailer should give special attention. Shoplifter apprehensions are up over seven percent (7.4%), and dollar recoveries from those apprehensions up over twenty-two percent (22.7%). A sure sign that the shoplifter problem is not only getting worse, these thieves are stealing more! Of particular concern is the fact that the greater majority of our participating companies truly practice theft preventative strategies and utilize state-of-the-art technology. Yet, shoplifters just keep coming! Sure, we all know that organized rings are a most serious problem, such as that group of eight who were recently apprehended in Florida and charged with stealing and reselling nearly $100,000 in merchandise taken from drug stores and supermarkets. We also can’t ignore amateurs such as those three teenagers who were recently caught using a 12 day-old baby to help conceal goods in a car seat under the infant. Nor can we overlook others like the mother and daughter caught shoplifting in a department store, or the justice of the peace caught on camera. Then there are those who make national news, such as reports of shoplifting allegations against the mother of those two alleged Boston bombing suspects— this list could go on and on. Bottomline, there simply is no profile to help you identify your potential shoplifter! Keep in mind, that those shoplifters in our survey, and those reported by the media are the ones that were actually caught. How many shoplifters are actually identified? Could the answer be one in 10, 24, 50, or even higher? No one knows the answer to this difficult question. However, my decades of experience teaches me that using a twenty-to-one ratio is a conservative estimate. If you think shoplifting is not a problem in your store – think again! These thieves are everywhere, and come from every background imaginable. Here’s my perception of the problem: > Decline in Honesty: Today, it’s difficult to listen to a news report, or pick up a newspaper without being made aware of some act of dishonesty being discovered in government, business, sports, or religious organizations. Today, our culture is getting more and more permissive—those disgraceful acts mentioned above, as well as such “trivial” crimes as shoplifting are no longer viewed as a humiliating or embarrassing situation. > Poor Economy: Staff cutbacks in retail stores have all but destroyed one of the retailer’s most effective deterrents—customer service. > Drug Problems: Shoplifting is a favorite way for addicts to support their habit. > Smarter Hardcore Thieves: Groups of brazen thieves simply ignore, or go to great extents to defeat state-of-theart anti-theft equipment. > Legal factors are also playing a role in the elevation of this crime. For example, it is well known that the lack of serious consequences in the justice system does little to discourage Continued on Page 7 THE HAYES REPORT HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION Personality Trait or Situation - - - Personal Accountability for Dishonesty By Dr. David J. Cherrington Last week I listened to a research report from one of my colleagues in information technology who conducted a fascinating study about theft in the restaurant industry. This study identified five common methods that servers use to steal from customers, such as double charging for drinks. However, advances in information technology make it possible to detect patterns of dishonesty, and when they are detected employees can be observed more closely and confronted with their dishonesty. After employees learned that their dishonesty could be detected, incidents of stealing declined by about seventy percent. This study concluded that employee theft represents a pathology of the organization rather than a pathology of the employees since companies could install internal control systems that are highly effective in detecting dishonesty. In short, inadequate control systems are more responsible for theft than dishonest employees. The idea that dishonesty is determined more by the situation than by a personality trait has been around for a long time. In a series of studies on honesty from 1924 to 1928, Hugh Hartshorne and Mark May examined the behavior of 7000 children from 816 years of age. The children participated in about a dozen games that allowed observers to test their honesty. For example, in the planteddime test each child was given a box containing various contents, including a dime which was supposed to be used in one of the puzzles. After the boxes SUMMER 2013 were returned, the researchers checked to see if the dime had been stolen. Hartshorne and May concluded that honesty is not a stable personal attribute; rather, it is determined by the situation—being honest in one situation was no indication that the same child would be honest in another situation. Their conclusion had a huge impact on subsequent thinking about personal accountability for one’s behavior. Shoplifting, embezzlement, and violence were attributed to dysfunctional environments such as poverty, broken homes, and bad neighborhoods. Later research that examined Hartshorne and May’s data in greater depth found that their conclusions were not universally true; a small percent of the children demonstrated a general trait of honesty. These children generally came from homes where honesty had been taught as a general standard and where it had been consistently demonstrated and rewarded. In the field of psychology, B. F. Skinner is recognized as one of the leading scholars to espouse the concept of environmental determinism. This concept claims that behavior is determined not by personality traits or free will but by environmental factors, especially the rewards and punishments associated with the behavior. Skinner illustrated the power of his ideas in a novel, Walden Two, which explained how a community could structure its social rewards to create a utopian Continued on Page 6 Testing For Success As the results of our 25th Annual Retail Theft Survey reflect, shoplifting continues to plague the retail industry. Take our short quiz to find out if your antishoplifting strategies are effective. 1. Are your anti-shoplifting safeguards equal to or greater than your competitions? Yes No 2. Are all store associates taught that effective customer service is the #1 deterrent to shoplifting? Yes No 3. Have all store associates been adequately trained in preventing shoplifting, AND is this training being followed? Yes No 4. Do you have good sight lines on the sales floor to easily view high value and highly popular items (no blind spots)? Yes No 5. Are high value/highly pilferable items displayed on the sales floor adequately protected? Yes No 6. If you use EAS, are required items consistently tagged at or above the 98% level? (Check 200 pcs) Yes No 7. If you have fitting rooms, are they kept locked or being consistently monitored? Yes No If you answered “NO” to one or more of the above seven questions, your store may be an “easy mark” for shoplifters. Act now to correct your vulnerabilities! $ Page 3 HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION Believe It or Not SURVEY PARTICIPANTS • 23 Large Retail Companies • 18,900 Stores (representing an excellent cross-section of the U.S.) • $596,396,845,808 in Annual Retail Sales (2012) I guess thieves will steal about anything when they are hungry or thirsty! The following food and beverage thefts have been recently reported in the press: - Thin Mints: A truck driver in South Carolina stole $19,000 worth of Girl Scout Thin Mint cookies from a warehouse. - Maple Syrup: Four men swiped 16 million barrels of maple syrup in Quebec, worth approximately $18 million. TOTAL RETAIL THEFT APPREHENSIONS Difference 2011 2012 #/$ Pct. Apprehensions 1,067,514 Recoveries 1,145,688 78,174 7.32% $160,585,722 $189,601,438 $29,015,716 Avg. Case Value $150.43 $165.49 $15.06 18.07% 10.01% Retail Theft Apprehensions Breakdown SHOPLIFTING 2011 2012 #/$ 1,074,593 74,442 - Soup: A Florida man stolen a tractor trailer containing $75,000 worth of Campbell’s soup. Apprehensions 1,000,151 - Nutella: Thieves stolen 5.5 tons of jarred Nutella valued at $20,710 from a parked trailer in a lot. Avg. Case Value $113.05 $129.12 Hours Per Appreh.* 62.39 51.84 Recoveries Difference Pct. 7.44% $113,066,629 $138,751,524 $25,684,895 $16.07 22.72% 14.22% -16.91% (*10 companies reporting) - Red Bull: An undetermined amount of Red Bull was stolen from a trailer in a parking lot. Recoveries $37,389,343 $46,811,021 - Coffee: $40,00 worth of coffee was stolen from a trailer in a parking lot. 25.20% DISHONEST EMPLOYEES 2011 - Raw Beef: Florida thieves stole a full truck of raw beef from a parking lot with a value of $250,000. Apprehensions 67,363 - Chicken Wings: Two Georgia men were arrested for stealing $65,000 in chicken wings. $ Avg. Case Value $705.42 Page 4 $9,421,678 (No Apprehension Made) Recoveries $47,519,093 Difference Pct. 2012 #/$ 71,095 3,732 5.54% $50,849,914 $3,330,821 7.01% $715.24 $9.82 1.39% THE HAYES REPORT HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION HIGHLIGHTS FROM JACK L. HAYES INTERNATIONAL’S 25TH ANNUAL RETAIL THEFT SURVEY TOTAL RETAIL THEFT Survey participants apprehended a total of 1,145,688 dishonest individuals (shoplifters and employees) in 2012, an increase of 7.3% from the prior year. In addition, dollars recovered from those apprehensions totaled over $189 million, which was an 18.1% increase from 2011. For every $1.00 recovered by our surveyed companies, $25.00 was lost to retail theft. Therefore, only 4.0% of total retail theft losses resulted in a recovery. SHOPLIFTING Apprehensions: Survey participants apprehended 1,074,593 shoplifters in 2012, an increase of 7.4% from the prior year. Recoveries: Dollars recovered from shoplifting apprehensions totaled over $138 million in 2012, a substantial 22.7% increase from 2011. Case Value: The average shoplifting case value in 2012 was $129.12, which was an increase of 14.2% from 2011’s average case. For the 16th consecutive year, dollars recovered from shoplifters where no apprehension was made (over $46 million) increased. In 2012, this increase was an amazing 25.2%. On The Horizon Results from the recently released 2012 Marquet Report on Embezzlement reveals the highest rate of employee theft in five years. This annual study reports on 528 major embezzlement cases in the U.S. in 2012, all with reported losses in excess of $100,000. Some of the highlighted findings include: - Major embezzlements increased 11% over 2011. - Average loss was approximately $1.4 million. - Major embezzlement schemes on average span nearly a 5 year period. - 58% of all incidents in 2012 involved female perpetrators. - Less than 5% of major embezzlers have a prior criminal record. - Most common embezzlement scheme is the forgery of unauthorized issuance of company checks. - Financial institutions followed by non-profits had the highest frequency of embezzlements. * * * * * * * Upcoming Conference • The National Food Service Security EMPLOYEE THEFT Apprehensions: Survey participants apprehended 71,095 dishonest employees in 2012, an increase of 5.5% from the prior year. Recoveries: Dollars recovered from dishonest employee apprehensions totaled over $50 million in 2012, a 7.0% increase from 2010. Case Value: The average dishonest employee case value in 2012 was $715.24, a 1.4% increase from 2011’s average case value. One out of every 40.0 employees was apprehended for theft from their employer in 2012. (Based on comparison data of over 2.8 million employees.) SUMMER 2013 Council’s 34th Annual Conference will be held August 4-7, 2013 at the M Resort Spa and Casino in Las Vegas, NV. For additional information visit: www.nfssc.com • ASIS International’s 59th Annual Seminar and Exhibits is blowing into Chicago on Sept 24-27, 2013 at McCormick Place. For additional information visit: www.asis2013.org • “Leading Safety into the Future” is the theme of this year’s 2013 National Safety Council Congress & Expo taking place at McCormick Place in Chicago, IL from Sept 28 thru Oct 4, 2013. For additional information visit: www.congress.nsc.org Page 5 HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION Continued from Page 3 Personal Accountability for Dishonesty You Be The Judge Here are key facts from an actual court case. How would you have decided? A loss prevention officer working for a grocery chain observed a man pick-up several bottles of shampoo and place them into a reusable shopping bag. The officer thought this was a bit strange because the man was bald and the shampoo was rather expensive. He then watched the man take other articles and place them into his bag. Upon exiting the store with the reusable bag, the officer stopped the man. The man was cooperative, reentered the store with the officer and proceeded to admit to taking the goods to trade them for drugs. The police arrived, read the man his Miranda rights and the man agreed to discuss the situation with the police. He admitted to the thefts and was taken to the police department. After a two-day trial, the man was found guilty of shoplifting with an “artifice, instrument, container, device or other article”, and for organized retail theft. He received two 10 year sentences and was ordered to pay restitution to the store. The man appealed his conviction and sentence on multiple grounds including: Lack of producing the actual items stolen; Lack of preliminary hearing; Using prior convictions to determine sentencing; and violations of his constitutional rights. What’s your verdict? You will find the court’s decision on the back page. Page 6 planned society. These ideas have been developed by therapists and teachers and form the foundation of a change intervention called applied behavioral analysis. The idea that the situation surrounding us will have an enormous influence on how we behave has become increasingly recognized throughout the behavioral sciences. Many studies have demonstrated that personality traits, such as honesty, altruism, and kindness, have a much smaller influence on how we act than the forces in the particular situation. Indeed, numerous studies have found that the maximum correlation is about .30 between a measured personality trait and manifestations of that behavior in a given setting. In social psychology, this is called the predictability ceiling. The enormous influence of the environment on our behavior is not quite so surprising when we think more carefully about it. For example, even people who are kind and patient will eventually push back if they are continually mistreated and pushed enough. Likewise, the fraud model suggests that even extremely honest people will eventually succumb to fraud if they leave themselves in situations where they face intense situational pressures and have convenient opportunities to steal. The crucial question is how our concept of personal accountability squares with research showing the impact of the environment. Is the concept of moral agency still a viable concept? If the situation has such an enormous influence on our behavior, are we still responsible for our actions? Our focus on situational influences seems to be eroding the idea that people are moral agents who are liable for what they do. The concept of personal accountability declares that people are responsible for what they do. It does not deny the possibility that situational forces surround us and entice us to behave contrary to what we think we should do. Indeed, the presence of competing interests is essential for the concept of moral agency to be a meaningful concept. Our legal system holds people accountable for their actions; when thieves are caught stealing, they are convicted and punished for their crimes regardless of the environments from which they come. As a general rule, we do not punish a criminal’s family, friends, teachers, or ministers for failing to create a healthy environment. In only very limited cases have judges imposed punishments on parents when their children have committed serious crimes. When I am faced with a moral choice between right and wrong, am I really free to choose what is right regardless of the social or economic consequences of my choice? My answer is yes. If my family, friends, and society are encouraging me to do what I know is wrong, am I still free to choose what is right? Again, my response is yes. And is it possible for me to reform my life and follow a different path even if I have a history of making bad choices because of previous moral weaknesses that have formed addictive behaviors? It may be extremely difficult, but again, the answer is yes. Ultimately, I am free to decide and I am accountable for my actions. $ THE HAYES REPORT HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION Continued from Page 2 Shoplifting Problem Grows THE HAYES REPORT shoplifting—most shoplifters do not go to jail. Repeat shoplifters are given probation, or a “slap-on-the-wrist”, which is due to lenient state laws, and/ or jail overcrowdings. More and more states are issuing citations to misdemeanor shoplifters, further minimizing the severity of this crime in the offender’s eyes. Last, but certainly not least, various states have raised their felony theft thresholds (i.e. to as much as $2,000) before the suspect can be charged with a felony. Hardcore thieves know which states have severe laws and they mostly prey on those that do not. (These thieves also target stores known not to prosecute.) So, what is one to do? Again, my perception: 1. Shoplifters, be they professional, hardcore, or amateur, want and need privacy to commit their act. Customer service is STILL the most effective deterrent to shoplifting. 2. Keep your staff alert to the severity of this crime, and provide brief antitheft pointers at each meeting—better yet, a daily brief reminder can do no wrong. If theft prevention is a priority to you, it will also be a priority to your staff. 3. Talk with local police and find out what type of problems are happening in close proximity to your store. See what tips or assistance the police will provide. For example, Rochester New Hampshire police have in place a website that enables retailers to share information on shoplifting incidents at their establishments. For information, contact Tracy Hayes (no relation) at Tracy.Hayes@rochesterh.net 4. If your location is equipped with anti-theft equipment, make sure it is working properly, merchandise tagged that should be protected, and your staff is well versed in what action they are to take when a security system sends an alert. $ Shoplifter Goes to Jail and Gets Arrested! Two women were observed shoplifting in several stores in a Connecticut outlet center. The police were called and after reviewing video from one of the stores they arrested two women and charged them both with two counts of sixth-degree larceny. Bond was set at $1,500 each. When a woman came to the Police Department to bond out her two shoplifting friends, the police also recognized her from the store video they had viewed and proceeded to arrest and charge her with one count of sixth-degree larceny. $ SUMMER 2013 ADVISORY BOARD Jack L. Hayes Internationally recognized expert on Asset Protection who has consulted for some of the finest retail companies world-wide over his 40 years in the industry. Producers of several award winning LP training programs and author of the book, “Business Fraud: From Trust to Betrayal”. David J. Cherrington Professor of Organizational Leadership and Strategy at BYU; certified SPHR, and recognized authority on employee dishonesty and white collar crime. Edmund Di Marco Retail career extends over the course of 30 years in Asset Management, and currently operates a Risk Management consulting firm. The Hayes Report is published quarterly by Jack L. Hayes International, Inc., 27520 Water Ash Drive-Suite 100, Wesley Chapel, FL 33544. Telephone (813) 991-5628 Copyright 2013. All rights reserved, including the right to reproduce in whole or in part. Publication's intent is to provide general information with regard to subject matter. Accuracy is not guaranteed, and no further representation is made. Design and layout by Cathy A. Doyle. Single Subscriptions: $50 per year. Multiple Subscriptions: Start at just 10 subscriptions mailed to the same address for just $100 per year. Canadian Subscribers: Add $3 per subscription, per year. Overseas Subscribers: Add $8 per subscription, per year. Payable in U.S. Funds drawn on U.S. Banks. Page 7 HAYES REPORT * LOSS PREVENTION * HAYES REPORT * LOSS PREVENTION The Bulletin Board Jack L. Hayes International is recognized as the foremost loss prevention/inventory shrinkage control and safety consulting firm in the world. They offer a variety of related services and products utilized by hundreds of the finest retail, manufacturing and industrial organizations throughout the world. Consulting Services & Products: Shrink Control Analyses and Assessments Safety & OSHA Compliance Analyses and Assessments 3rd Party Store & Warehouse/ DC LP and Safety Audits. Custom Designed and Implemented LP & Safety Programs and Audits Risk Management Services Safety Committee Formation & Consultation “The Hayes Report” on Loss Prevention Newsletter (quarterly) Pre-employment Screening For additional information on Jack L. Hayes International's loss prevention/ shrinkage control and safety services, including consulting and 3rd party audits, visit our redesigned website at: http://www.hayesinternational.com You can e-mail Mark R. Doyle at: mrd@hayesinternational.com Publicly reported Organized Retail Theft cases increase 111% in first 4 months of 2013 vs 2012. Here are a Few Examples: San Francisco police bust a big shoplifting ring dealing in everyday items which could be easily sold (ie. shampoo, conditioner, razor blades, batteries and the like). Total value in the $300,000 to $400,000 range. Polk County Florida sheriffs arrest 16 and seek two others in a large-scale retail theft ring involving mostly apparel/clothing. Items were sold or returned for gift cards and then the gift cards sold. Total value is estimated in the $6 to $7 million range. Man accused of stealing more than $600,000 from mass merchant in the Carolinas and Georgia. The man returned counterfeit DVDs and software, mis-priced sporting goods and used pre-paid gift cards and doctored receipts in his fraudulent returns. Two men facing federal charges for retail fraud operation in home centers in 13 states. The men are accused of switching UPC codes on expensive items with UPC codes from much cheaper items, using self-checkouts whenever possible. The items were then returned for store credit for the much higher amount. Total value is estimated at over $300,000. Share your favorite ‘Bulletin Board’ items. Submissions for “The Bulletin Board” should be addressed to: The Hayes Report 27520 Water Ash Drive - Suite 100 Wesley Chapel, FL 33544 or emailed to: operations@hayesinternational.com _______________________________________________________________________ Verdict......... Or visit us on the Social Media http://www.facebook.com/ JackLHayesInternational http://www.linkedin.com/ company/2591308?trk=tyah https://twitter.com/ #!/JackLHayesInter Page 8 After careful review of the record, the court found no meritorious grounds for reversal of the conviction or modification of the sentences imposed. The court noted that the evidence supported the verdict, the sentence imposed was within sentencing limits, and the man was appropriately represented at all stages of the proceedings. $ CA-CR 11-0290-1 THE HAYES REPORT