Within three months, a cashier at Farm Fresh in Chesapeake slid about $1,000 worth of groceries past her scanner and into the bags of friends and family members without ringing the sales.
When her mother came through her checkout line, the cashier gave her unauthorized discounts and meat for free. She would let her co-workers grab soda, chips or candy bars at no charge – and they would do the same for her.
Store investigators caught some of the stealing on videotape and examined electronic cash register journals, according to documents Farm Fresh filed in Chesapeake General District Court in 2004 to collect money from the cashier. A judge ordered her to pay back $2,000 to the supermarket chain, double the amount stolen, as allowed under state law.
Farm Fresh took similar civil court action against at least two other cashiers that year for the same practice, which retailers sometimes call “sweethearting.” It’s one of many ways that employees steal from stores where they work.
They stuff such things as steak or clothing in their jackets and bags and walk out with it. They swipe gift cards and hide iPods in trash bins in hopes that managers won’t notice.
Employees are responsible for the largest amount of money that retailers lose every year to “shrinkage,” or inventory shortfalls, the industry’s most oft-cited statistics show. In the end, retail experts said, consumers pay the cost in the form of higher-priced goods to make up for stores’ losses.
Nationwide, employee theft accounted for $17.6 billion in retail inventory in 2005, according to the National Retail Security Survey released annually by the University of Florida. The 156 retailers that participated in the survey, considered the industry’s standard for data on the subject, attributed 47 percent of their lost merchandise last year to employees.
That’s far more than the 33 percent of total shrinkage attributed to shoplifting. The proportion of losses from employee theft has stayed close to 50 percent in the survey for the past several years. The figures reflect only the theft of products – not cash, which would add an additional $234 million to retailers’ losses reported to the survey in 2005.
“In fact, there is no other form of larceny that annually costs American citizens more money than employee theft,” Richard C. Hollinger, director of the university’s Security Research Project, wrote in the survey.
Yet retailers tend to raise more public concern about shoplifters and lobby for more legislation to address shoplifting than they do employee theft. They simply don’t like to talk about that.
“No company wants to broadcast that it has employees who are stealing from them,” said Joseph J. LaRocca, vice president of loss prevention for the National Retail Federation. “They don’t want to spread the bad news.”
Tracking retail employee theft in Hampton Roads is difficult. Police usually write up these incidents as either larceny or embezzlement. Larceny includes shoplifting by outsiders, in addition to crimes perpetrated by workers.
Embezzlement charges typically involve employees taking cash, b ut several cases written up by local police as embezzlement in recent years resulted from employees who stole products.
Farm Fresh officials declined to comment on its methods for handling employee theft. The supermarket chain, a locally based division of Minnesota grocery distributor Supervalu Inc., has pursued employees for many kinds of theft, particularly if it amounts to significant dollars, said William Bischoff, a Virginia Beach lawyer. His firm handles Farm Fresh’s court actions to collect money from people – whether they bounce checks or steal from the company.
After a series of employee “sweethearting” cases in 2004, Farm Fresh officials noticed loopholes in Virginia law that had made it harder for the chain to recover its money from employees. In civil cases of employee theft, retailers previously could calculate the amount of goods stolen only on the wholesale cost, not on their retail value. The state also defined retail theft as the taking of goods for the thief’s personal use, which would eliminate “sweetheart” crimes, when employees steal for someone else.
At the urging of Farm Fresh, the General Assembly modified the law in 2005. Retailers now can recover damages based on the retail value of the goods, and theft at stores now covers merchandise stolen for that person’s “or another’s” use.
“This is not nickel-and-dime stuff,” Bischoff said. “We were dealing with thousands of dollars.”
In one of the region’s largest recent retail embezzlement cases, a Home Depot cashier in Virginia Beach faced felony charges in 2004 in the passing of almost $12,000 in free merchandise to friends and co-workers. The cashier was accused of practicing “free-bagging” – ringing up an item, then erasing it from the system as though the customer didn’t want it, though he or she would walk out with the item along with another lower-cost purchase.
Since 2004, employees charged with embezzlement at the Target store on Military Highway in Norfolk walked off with almost $620 in prepaid Verizon Wireless cards, a digital camera and DVD player worth $569.98 combined, and $200 in unspecified merchandise, according to Norfolk Police Department reports.
The Target store sees an average of 150 thefts a year, said Lonnie Altizer, who heads the store’s loss prevention team. This year so far, he said, he has handled 82 cases, and he expects that number to double during the fourth-quarter burst of winter holiday shopping traffic. He estimated that almost half of the theft cases are generated by employees.
Target has a “zero tolerance” policy for “team members” who steal, as well as for shoplifters, Altizer said. “If you are caught stealing at Target, we will prosecute you.”
Wal-Mart Stores Inc., by its sheer sales volume, weathers a proportionately huge amount of crime of all kinds. The retailer, based in Bentonville, Ark., declined to discuss employee theft, spokeswoman Sharon Weber said.
“We seldom talk about our security methods or what we do or talk about internal theft,” she said. “We just quietly go about and take care of our business.”
Wal-Mart recently changed its policy to no longer prosecute first-time perpetrators who steal merchandise worth less than $25 or who are younger than 18 or older than 65, The New York Times reported in July. The retailer told the newspaper, which had received internal company documents, that it made the change so it could concentrate more on employee theft and professional shoplifting rings, which together account for the bulk of its missing merchandise.
Per incident, employee theft costs retailers more than shoplifting, though a store may experience more individual shoplifting incidents each year.
The University of Florida survey found that each employee theft amounted to an average cost of $1,032, compared with an average of $803 for each shoplifting incident, though that gap has narrowed in the past three years.
Employees have the opportunity to take more merchandise of greater value. And that’s the key to retail theft: opportunity. Store workers have access to areas restricted to shoppers, know store layouts better than outsiders, can pinpoint the location of security cameras and recognize security guards.
Employees tend to use rather low-tech tactics to steal. They’ll ring up phantom refunds with no receipts and pocket the cash, the federation’s LaRocca said. They’ll wear stolen clothes out of the store. At one department store, Hollinger recalled, a woman who worked at the jewelry counter stole thousands of dollars of goods for years by placing them in the bottom of her not-quite-empty coffee thermos.
Retail workers also have learned to get around technology put in place to stop theft. Over the years, LaRocca said, they have shifted from taking cash straight out of the register because many retailers have put in place sophisticated counting and cash-intake monitoring systems.
“If they take $20, it sticks out like a red flag,” he said. By voiding a sale that actually goes through, they can keep the money handed to them. That explains why some retailers have required cashiers to call a manager to approve any void at the register, causing the occasional delay for customers.
Retailers have begun to adopt “smart video” monitoring systems. Rather than a bank of screens watching random activities, newer video systems will respond to certain behaviors. If a cashier hits the void button, for example, a camera would turn on at that register. An alarm might sound when a key is left too long in the lock of a security case holding high-cost electronics.
Technology isn’t foolproof. For “sweethearting,” cashiers can deactivate the security tag on an item without needing to scan it. In many stores, those two systems aren’t related, though some security companies have developed technology that requires that an item scan as a sale before the cashier can deactivate it.
Target considers crimes such as “sweethearting” a Level 3 or Level 4 theft case, which involves a shoplifter working in conjunction with an employee, Altizer said. It has become a common practice – and more sophisticated.
Farm Fresh has seen “sweetheart” rings, with one family member working in the store and moving $3,000 to $4,000 worth of groceries to relatives, Bischoff said. Employee theft has expanded beyond the worker who simply decides one day to swipe some pork chops for dinner, he said.
“It’s a tremendous problem,” he said.
Reach Carolyn Shapiro at (757) 446-2270 or carolyn.shapiro@pilotonline.com
By Carolyn Shapiro
The Virginian-Pilot