Introduction
Employee theft and fraud represent formidable challenges for businesses and casinos worldwide, causing significant financial losses and eroding trust within organizations. According to the Association of Certified Fraud Examiners (ACFE) 2024 Report to the Nation, these illicit activities continue to plague various industries, with the United States witnessing a spectrum of theft types ranging from asset misappropriation to corruption schemes.
Over the past 30 years or so, I have conducted thousands of investigations into internal fraud and theft. While working as an investigator for a large casino corporation, I gained valuable experience working fraud and theft cases in all areas of the casino. One of the things I realized early on in my career was that the more I learned and understood the motives, methods, and rationalizations used by those who committed fraud, the better I could be at investigating the cases. This was, and still is, especially true when it comes to conducting interviews and obtaining confessions.
Many people are surprised to hear that casino employees commit theft, despite knowing that all of the cameras are around. I have asked myself the same question on several occasions: why would a good employee risk everything for a few extra dollars? To answer that question, I began reading and studying criminology. I learned that the reasons and causes that I have seen in my cases are essentially the same as those documented in studies conducted as early as the 1950s. In one of the most well-known of these studies, Dr. Donald R. Cressey conducted research on about 200 incarcerated embezzlers, whom he called “trust violators.” As a result of his research, Dr. Cressey developed a hypothesis that is commonly known as the “fraud triangle,” and published his research in 1973 in Other People’s Money: A Study in the Social Psychology of Embezzlement.1 His fraud triangle theory held that there were three factors present in all of the cases he studied: 1) a non-sharable problem, 2) a means of rationalizing their actions, and 3) the opportunity to steal.2
Why Do Some Employees Steal
The first of these factors, a non-sharable problem, has also become known as a “pressure.” This pressure could be real or perceived, such as an overdue bill or feeling obligated to provide the latest fashions for one’s children. When I conduct interviews with employees who have confessed to thefts, I am amazed at the wide range of pressures suspects associate with the reason they commit thefts. I have seen employees give in to peer pressure and throw away years of hard work, just to impress a friend with an unauthorized discount or free meal. Some employees will work two or three jobs just to provide for their families, while others will fall to the slightest temptation or pressure. In today’s world, I also find some employees simply lack the moral code and conscience needed not to take advantage of an opportunity.
The second factor is rationalization, or a means of justifying the crime. The rationalization aspect of the triangle is the one in which I have seen the most change. Years ago, when I interviewed theft suspects, most of the rationalizations were real and understandable. In more recent years, I have seen a lot less effort by employees to rationalize their crimes. It is not uncommon for an employee to blame the company or the victim for making it too easy to steal. Others I have interviewed essentially tell me that they didn’t really need the money; they just felt the company needed it less. Some employees almost feel entitled to the extra income and don’t understand why others don’t feel the same way.
This brings us to the last factor needed for a theft to occur - opportunity. The opportunity to commit a theft is the only factor a business has control over. By eliminating the opportunity, management can greatly reduce losses suffered as a result of employee theft. A large majority of the employees I have caught stealing are opportune thieves who took advantage of an unexpected opportunity. Most employee thefts are committed by two types of individuals: the opportune thief or what I refer to as the predatory employee. The predatory employee is just what it sounds like - an employee who comes to a business to steal and prey on the company. These thieves are often the easiest to spot once they start to steal. Oftentimes, these predators will have committed similar crimes elsewhere and may even have a criminal record. On the other hand, an opportune thief is often perceived as one of the company’s best employees. They are usually hard-working and otherwise good employees who find themselves faced with an opportunity to steal. Sometimes this opportunity is unexpected and sudden. On other occasions, the employee happened upon a weakness in the company’s internal controls and did not report it to management. This weakness may have been discovered by accident or through a careless mistake. Once the weakness is discovered by the employee, all that is needed is pressure and a means of rationalizing the theft.
Conclusion
Although Cressey’s theory and model fit nicely with most of the cases I have investigated, I have seen a new trend emerge, similar to the one I mentioned about employees finding it easier to rationalize their crimes. I now find that employees are very quick to take advantage of the slightest opportunity. Others have said these employees simply lack the moral character to overcome temptation. Once an employee falls to this easy temptation and commits that first theft, it is rarely is the last.
Adopting a multi-faceted approach to fraud prevention can significantly reduce vulnerabilities within organizations and increase the odds of identifying the problem before it grows. I have found that one of the best ways to discourage internal theft is by incorporating preventive investigations into the overall loss prevention strategy. I am convinced that employees will continue stealing in the workplace, and experience has shown that the quicker we can identify the problem employees, the lower the loss. Detecting and investigating employee theft requires a proactive stance from organizations. Implementing strong internal controls and establishing a culture of accountability are crucial steps in mitigating the risk of theft and fraud. Additionally, conducting regular audits and incorporating preventive investigative techniques like investigative shopping and integrity testing can uncover theft and misconduct before they escalate. By being proactive, the organization reduces the opportunity for employees to steal without being caught and can quickly identify procedural weaknesses and predatory thieves.
Endnotes:
1. Dr. Donald R. Cressey, Other People’s Money: A Study in the Social Psychology of Embezzlement, Monticlair; 1975
2. Joseph T Wells, Occupational Fraud and Abuse, Obsidian; 1997
Author:
Robert “Jerry” DeFatta, CFE, BAI, CRT, is the owner of DeFatta & Associates LLC, a private investigative and consulting firm that specializes in casino and business-related investigations. Visit the website www.DeFattaPI.com to learn more about the services offered and find out how they can help protect your business from fraud.