Limit Your Vulnerability to Employee Theft

employee theft

Are Your Employees Hiding Anything?

By Chuck Sujansky

Employers in every industry are increasingly becoming victimized by theft of goods and services from once-trusted employees. How widespread is the problem? Ninety-five percent of employers are believed to be victims of theft and 75 percent of employees who steal from employers do so repeatedly. The U.S. Chamber of Commerce estimates that theft by employees costs American companies $20 to $40 billion a year. To pay for it, every man and woman working in America today contributes more than $400 per year.

Dealerships not Immune to Employee Theft

These estimates don’t take into account losses from employee theft that may harder to measure. Acts of theft and fraud committed by employees can also rob a dealer of invaluable intangibles, such as lost time, damaged trust, ruined relationships and ruined reputations. While organizations of every size and in every industry may fall victim to employee theft, the damage can hit smaller employers the hardest. A report by the Association of Certified Fraud Examiners found that organizations with fewer than 100 employees lost an average of $147,000 through occupational fraud, compared to an average of $100,000 for companies with 1,000 to 10,000 employees.  1

Consider a few examples from within the automotive retail industry:

  • A dealership accountant issued checks made out to cash with her 17-digit credit card account number listed on the memo line of the checks. Instead of depositing the checks in the dealership’s account she used it to pay off gambling debts.
  • A dealer’s General Manager eventually pled guilty to fraud charges for altering lease documents to increase his commission by altering signed lease documents adding dealer-installed accessories that never existed.
  • An Assistant Parts Manager was fired after altering sales documentation by recording sales as a “quote only” then pocketing the cash. The losses were found when the parts department performed their annual inventory.
  • The parts manager at a Nissan dealer was convicted of scamming more than $165,000 from his dealership by submitting false warranty repair claims, as well as stealing inventory, voiding bills that had been paid by customers and using a debit machine to transfer money into his own accounts.
  • An employee at a Honda dealership in Arkansas was caught skimming $25,000 from sales of parts on eBay. 2

Can You Afford to Gamble When Hiring New Employees?

What if you knew in advance that hiring the wrong job candidate could cost your organization thousands of wasted and lost dollars? Would you change your hiring processes? Would you invest in better screening methods? Most employers don’t realize that:

  • 30% of job applications contain false information.
  • 20% of workplace death is linked to alcohol or drug use.
  • Negligent hiring cases against employers have resulted in verdicts of up to $40 million.
  • The average settlement of a negligent hiring lawsuit is nearly $1 million. 3

Dealing with Workers with Substance Problems

One of the biggest challenges facing most employers today is dealing with workers that struggle over drug and alcohol problems. These employees are the most likely to lie, steal, cause accidents and create innumerable other problems for employers. According to the 2014 National Household Survey on Drug Abuse (NHSDA)

  • 27.0 million Americans age 12 or older admit to illicit drug use in the last 30 days.
  • 16.3 million Americans age 12 and older and 12.4 million adults admit to “heavy” drinking (5 or more drinks on at least 5 or more occasions in the past month). 4

These workers are involved in 55% more workplace accidents and sustain 85% more on-the-job injuries than other workers.  In addition the National Safety Council reports that 80% of those injured in “serious” drug-related accidents at work are not the drug abusing employees but non-using co-workers and others. Finally, the US Navy estimates that each drug user costs his or her employer an average of $6,600 more than non-substance abusing co-workers each year. 5

Fortunately there are instruments available to help employers make the right hiring decision the first time. These tools represent a small investment that can pay big dividends to employers that wish to avoid problems with employee theft, substance abuse, criminal record, performance problems, and related issues:

Background Checks

Comprehensive and timely criminal background check services provide employers with the information necessary to make an informed decision when hiring an applicant

Pre-employment screening refers to the process of investigating the backgrounds of potential employees and is commonly used to verify the accuracy of an applicant’s claims as well as to discover any possible criminal history, workers compensation claims, sex offender list, aliases, address history, governmental watch lists, motor vehicle records, and legal working status.  Background checks cost about $20 to $50 depending on how extensive the research is.

Drug Testing

Standard urine drug testing panels range from five to 10 drugs. Specimen validity testing is available to detect adulterants or specimen substitution resulting from a donor’s attempts to mask drug use. The use of an independent Medical Review Officer (MRO) to review all non-negative test results is recommended. Drug testing costs range from a low of $28 per drug test to a high of $42 per applicant.  77% of surveyed employers said that since implementing drug testing they were receiving a much better caliber of job applicants simply by telling applicants they require drug screenings.

The Step One Survey

The pre-employment Step One survey is used as a screening tool early in the candidate selection process. The survey, which can be completed by employees online, assesses work-related values such as employee background, employment history, integrity, personal reliability, and work ethic.

Don’t Miss The Signals

Most employers, whether inside the automotive industry or outside of it, probably tend to trust that their employees are for the most part honest and trustworthy. They don’t anticipate employee fraud and often miss the signals that all may not be as it seems when it comes to employee honesty and trustfulness. But within the Automotive Industry the ramifications for employee theft and fraud are enormous. As a 2015 National Automobile Dealers Association report explained:

  • More than 1.05 million people were employed at U.S. new-car dealerships in 2014, which is higher than any other auto-related industry.
  • New-car dealers, on average, employed 64 people per dealership.
  • Wages at new-car dealerships have increased an average of 3.3 percent since 2011, with employees, on average, earning more than $55,000 a year.
  • Annual payroll at new-car dealerships was more than $58.1 billion in 2014, an average of $3.5 million per dealership.
  • Total dealership revenue, which included new-car and used-car sales (as well as parts and service sales) reached an all-time high of $806 billion in 2014, an increase of 8.6 percent from 2013. 6

When auto dealerships and related businesses bring new workers aboard their managers don’t have access to a “crystal ball” that can help identify which employees might be prone to steal, lie or commit fraud sometime in the future.  But, by following the strategies and recommendations above employers should be able to reduce the potential for employee problems and avoid unnecessary expenses.


1. “Association of Certified Fraud Examiners – 2012 Report to the Nations – Key Findings and Highlights.” Association of Certified Fraud Examiners – 2012 Report to the Nations – Key Findings and Highlights. Association of Certified Fraud Examiners, 2013. Web. 15 Mar. 2016. <>.

2.  “Stories of Employee Theft and Lies –” Stories of Employee Theft and Lies –, 1 Apr. 2008. Web. 15 Mar. 2016.

3. “Experience the Employee Background Checks.” Experience the Employee Background Checks. Profiles International, 2015. Web. 15 Mar. 2016.

4.  Hedden, Sarra L., Joel Kennet, Rachel Lipari, Grace Medley, Peter Tice, Elizabeth A. P. Copello, and Larry A. Kroutil. “Behavioral Health Trends in the United States: Results from the 2014 National Survey on Drug Use and Health.”  Substance Abuse and Mental Health Services Administration, Sept. 2015. Web. 15 Mar. 2016. <>.

5.  “Marijuana Fact Sheet: What Is The Truth?” National Drug Free Workplace Alliance. Web. < Fact Sheet 111913.pdf>. Web. 15 Mar. 2016.

6.  “NADA Data 2015 Report.” NADA Data. National Auto Dealers Association. Web. 15 Mar. 2016.


Practical Tips For Preventing Employee Theft and Fraud

Personnel Management and Training

  • Conduct thoroughgoing interviews of all applicants and conduct detailed background checks, with pre-employment screening and drug testing.
  • Ensure that all new employees understand their job duties and responsibilities, especially with regards to safety and security.
  • Conduct regular security reviews and training sessions to bring all employees up-to-date as well as to review ongoing operations and procedures.

Systems and Procedures     

  • Make sure that all procedures in place for all departments – sales, service, parts, finance and accounting – are airtight and meticulously followed by all employees.
  • Conduct frequent audits, refresher training, and procedure reviews for all employees.

Security Technology

  • Install surveillance cameras and enhanced lighting in all areas of the dealership, especially covering blind spots
  • Conduct regular reviews of surveillance footage to ensure nothing suspicious is taking place.      
  • Invest in state-of-the-art locks and access control in areas where theft of valuables (cash, credit cards, checks, merchandise, parts, etc.) are most likely to occur.
  • Install alarms as necessary and conduct regular tests to assure they are functioning.