THE CROOKS in your company have never been so tempted. The spread of technology that makes office work easier can make white-collar crimes almost laughably simple. Laser printers can forge documents with breathtaking fidelity, and color copiers can reproduce them. Imagine a dishonest executive boarding a plane and carrying a laptop computer with a modem. Using the on- board telephone, he hooks up to the mainframe at headquarters and transfers $50 million to his Swiss bank account -- as he jets toward Rio. Such new opportunities, plus the spirit of an age that encourages rather than represses the natural lust for wealth, are greatly intensifying the allure of ripping off one's employer. The amounts being stolen from companies appear to be growing dramatically. In the past several weeks a former General Electric Capital manager, allegedly in cahoots with a bank vice president, was charged with taking $30,000 in kickbacks as part of a scheme that resulted in $4.5 million of fraudulent loans. A Continental Illinois vice president went on trial charged with approving $1 billion of bad loans in exchange for $585,000 in kickbacks, loans that allegedly cost the Chicago bank $800 million and helped trigger its 1984 collapse. FDIC investigators say internal fraud was the major cause of one-third of all bank failures over the past two years. To some extent the victims have themselves to blame. A company with shoddy financial controls or badly trained internal auditors practically begs employees to steal. Take the case of Albert Miano, a $35,000-a-year middle manager at Reader's Digest, who from 1982 to 1987 embezzled $1 million. The Digest's controls, claims Miano, were woefully lacking. ''I even told them they needed better internal controls,'' he says, ''and they didn't listen.'' Reader's Digest contends its controls, which have since been tightened, weren't all that bad. One day, on a lark, Miano decided to see if he could get a fake invoice through the system. His job was to process the bills from the painters and carpenters who kept the Digest's Pleasantville, New York, headquarters sparkling. He forged the signature of a superior on an invoice for painting that was never done, submitted it to accounts payable, and then told them not to mail the check but to give it to him because the painter needed it in a hurry. Miano then forged the painter's endorsement on the check and deposited it in his own account. So easy was the scam that Miano continued for five years, buying a $416,000 contemporary house in Connecticut, five cars, and an $18,000 motorboat. IT'S HARD to feel sorry for Miano -- ''greed was the biggest motivator,'' he confesses. But when corporations leave themselves open to crime, everybody gets hurt. Though the Digest was insured, it suffered public humiliation. Miano, who was caught on a fluke when a Digest employee noticed that the signature on an invoice had been faked, is serving two to six years in prison. He is going through a divorce, and his wife and three young children are afraid to drive into town because of the looks people give them. Philosophizing from prison, Miano says, ''For a nickel or for $5 million, it doesn't pay. You enjoy the money for a while, but you lose your pride and self-respect. It ends up hurting your family, and no money can ever change that.'' Culprits never think that way before the crime, so the fight to stop them has been escalating. The accounting profession recently issued new, tougher guidelines to help auditors spot corporate crime. The latest Justice Department statistics show that 10,733 white-collar criminals were convicted of federal offenses in 1985, up 18% from five years before. Says Jeffrey J. Jamar, chief of the FBI's white-collar crime section: ''We're devoting more resources to white-collar crime than ever before in our history.'' No one can be certain exactly how bad the problem is, since surely some corporate criminals -- most, think the experts -- are never caught. The U.S. Chamber of Commerce figures dishonesty costs U.S. business at least $40 billion annually. A rule of thumb is that a company can lose 1% to 2% of its sales to crime, mostly committed by insiders. In a company the size of IBM, that amounts to at least $500 million a year. Inventive and ambitious criminals have inspired the good guys to develop new anticrime techniques. IBM, Merrill Lynch, Boise Cascade, and others are clamping down hard on embezzlement, kickbacks, and computer crime with innovative screening techniques, training programs, and policies for dealing with crooks in the company. Other corporations are turning to the latest in high tech to catch criminals. The fight against crime has three parts: keeping criminals or potential criminals out of the company; preventing and detecting crime among employees; and handling a criminal once he is caught.
Keeping crooks out Some precautions are obvious: Beware of the job candidate who wants a dramatic increase in salary; he might desperately need money. Check references thoroughly -- but watch out. As Richard Collister, a human resources vice president at Chase Manhattan, recalls about one applicant, ''The references were too perfect. The guy walked on water. It turned out everybody wanted to get rid of him because he was a crook.'' Even the best screening techniques won't always net a malefactor. Take the case of Antonio Gebauer, the flashy Venezuelan banker who is said to have once taken the Concorde from New York to London to buy riding boots. In 1985 Drexel Burnham Lambert hired Gebauer, then a senior vice president at Morgan Guaranty, to help develop a secondary market for Third World loans. Drexel checked Gebauer's references carefully and hired a detective to look into his South American contacts. Gebauer came up clean. But after several months on the job, it turned out that while at Morgan he had made about $4 million of improper withdrawals from the accounts of a half-dozen of his Brazilian clients. He is serving a two-year prison sentence. Gebauer's lifestyle screamed trouble. He made only $150,000 a year at Morgan yet lived like an emperor, throwing outrageous parties at his lavish Park Avenue apartment and at his house in the Hamptons. He cruised Manhattan in a chauffeured Cadillac limo. Such a gap between salary and conduct usually suggests chicanery, but Gebauer came from a wealthy South American family, and Drexel figured that explained the high living. Could Morgan have warned Drexel? Morgan did not discover Gebauer's malfeasance until a few months after Drexel hired him. But white-collar crime experts say a company usually won't tell you even if it does know (that's Morgan's policy). A new survey by Ward Howell International, a New York headhunting firm, found that only 55% of human resources executives say they would always provide accurate references to a prospective employer. Afraid of being sued by employees who claim they were denied jobs because of bad references, many companies simply clam up, and the vicious circle continues.
More from Fortune

100 Best Companies to Work For
Bank investors better get used to low returns
Apple textbook domination? Not so fast.

FORTUNE 500
Current Issue
Subscribe to Fortune

Prevention and detection The best deterrent -- no eye rolling, please -- is still for the company's top guns to set a good example. Says Steve Albrecht, a Brigham Young University professor specializing in white-collar crime: ''You have to have a climate of moral integrity. If you don't, crime becomes a disease. It spreads fast.'' If a worker hears whispers in the hall about the junket the CEO took on the corporate jet, or the vice president who expenses dinners and theater tickets for jaunts with his mistress, don't be surprised if he begins thinking it's all right to play fast and loose with the corporate treasure-trove. The companies most successful in battling white-collar crime have added serious educational programs aimed at convincing the troops that the company lives and dies on ethics. Boise Cascade security and audit director Jerry Wernz says, ''We tell employees how crime actually affects them, how it might make their division less profitable and therefore their jobs less stable.'' Wernz believes that employees can be the most effective weapon in battling crime. The company trains workers to spot white-collar crime and then tells them what to do about it. Says Wernz: ''Teach your employee to confront his peer and tell him, 'As a friend I hate to see you get in trouble.' '' The company also makes it clear that whistle blowers will not be punished. For the wary do-gooder, Boise provides an 800 number that takes anonymous tips. Wernz says half the crooks nabbed at the company are turned in by informers. Spotting a criminal without such help is usually difficult; experts generally start with a few rules of thumb. Look for suspicious spending like Miano's and Gebauer's. Albrecht of Brigham Young advises watching for strange behavior on the job. ''After the crime the crook really changes,'' he says. ''He feels guilty and may start showing signs of stress like smoking or drinking more, and he may even start failing at work.'' Corporate crime sleuth Michael Comer, a London and Memphis investigator who lectures on the topic for the American Management Association, has a unique system. ''Look for the silk Gucci socks,'' he says. Comer explains that in his 25 years in the business, almost every male white-collar criminal he has nabbed has had a foot fetish. Says Comer: ''He's the guy wearing shoes too fancy for his job.'' In most cases the white-collar criminal has some heavy debt to pay off, with gambling, drugs, or alimony usually to blame. Chase Manhattan, Security Pacific, and other major companies offer psychological, drug, alcohol, and financial counseling that can help an employee before he is driven to steal. Some companies even provide loans to workers in sticky situations. COMPANIES with ironclad reputations for being tough on internal crime -- such as Merrill Lynch and Mobil -- think financial controls are key. How do you know where controls need to be tightened? Ask your employees how the company got ripped off in the past. And always follow the golden rule of financial controls: Never allow the same person to both authorize and pay for a service or supply. Kickbacks may be hard to detect. John Quan, formerly a regional manager for General Electric Capital, allegedly facilitated $4.5 million in loans to a company with ties to a con artist named Irwin ''Fat Man'' Schiff in exchange for $15,000 cash and $15,000 in renovations to his suburban New Jersey house. Quan, who was charged in February, allegedly okayed phony invoices and bills of sale to convince his superiors at GE that large generators and construction equipment collateralized the loans. Quan denies all the charges. Questions arose when loan payments stopped after the Fat Man was gunned down in a New York restaurant, apparently on orders from other irate business associates. How could GE have prevented this? Errol M. Cook, a partner at the Arthur Young accounting firm, recommends in general that a company try rotating its loan officers or, in the case of a retail or industrial firm, its buyers. A new loan officer will trip over the bogus loan and report it. Another strategy is to enforce vacations. If a crook takes a vacation, someone has to take his place, and that person may uncover the fraud. LAND FLIPS, a type of fraud popular in banking, are responsible for much of the red ink flowing out of Texas S&Ls. In a typical land flip, a bank officer receives a kickback for authorizing loans to a customer who falsely inflates the value of the land he offers as collateral. The customer buys a plot for, say, $1,000 an acre, sells it to a dummy corporation for $10,000 an acre, shows a $9,000 profit on the books, and uses the paper profit to collateralize a loan. In a recent case, a chunk of desert outside Fort Worth was allegedly flipped five times in two years; the paper value shot from $8,000 to $41,000 an acre. Four Texas S&Ls -- all now bankrupt -- ended up holding $64 million of worthless loans secured by the land. Joseph Wells, an Austin private investigator and a CPA, claims he discovered that managers at a Texas S&L involved in a different land flip bought 17 Rolls-Royces with their ill-gotten gains. Computer crime is old hat by now, but still especially worrisome because most managers have no idea how to spot it -- and dishonest employees keep devising clever new ways to commit it. Someone at a large bank -- almost certainly an employee -- programmed its computer to deduct 12 to 25 cents from various checking accounts periodically and then transfer the loot to a bogus account. In a year the crook stole tens of thousands of dollars. By the time the bank caught on to the scheme, the thief had stopped and was never caught. Certain preventive steps are obvious but often overlooked. James Fleming, associate director of corporate auditing at Merrill Lynch, advises that programming codes be available only to employees who absolutely need them. Says Fleming: ''I've seen people get hold of the codes, wire themselves $1 million, and they're gone.'' With the growing use of desktop publishing systems and fine-quality laser printers, creating fake invoices with a computer has become remarkably simple. Corporate crime consultant Michael Comer says you can often spot a fake bill by looking for invoice numbers that don't fit the sequence or for missing telephone numbers and company logos. Real invoices have usually been folded to fit in envelopes for mailing; even the smartest crooks, working on the inside, sometimes forget to fold their fakes to make them look as if they had come through the mail. Lockheed Datacom is using a new electronic fingerprint identification system made by Fingermatrix of North White Plains, New York, to protect sensitive information in its computer center. An employee puts his fingers in a white box, and a computer scans the prints. If they match those on file, the door to the safe room clicks open.
Handling a caught crook What to do with the guilty party has always been a tough problem, and it's getting tougher. But first make sure you have the right man. If you want to fire the guy or hand him over to the authorities without getting sued, you must be reasonably certain of his guilt. Some companies like to rush the suspected thief to the lie detector, but that can be dangerous and may soon be illegal. A few years ago a lie detector fingered a bank employee in the Southwest as an embezzler, and he was fired. Two years later the bank accidentally discovered the real crook, possibly opening itself to a juicy lawsuit by the wronged party. Both houses of Congress passed bills in recent months banning the use of lie detectors for hiring. The bills are heading for conference; if the House version prevails, the ban will extend to the use of lie detectors on suspected criminals inside the company. Once you are convinced you have your man, call him in and confront him, with security people present. Chances are he will deny guilt at first, but the experts say he is likely soon to break down and confess; most white-collar types are not hardened criminals. William P. Callahan, a former federal prosecutor and now president of New York's Unitel detective agency, advises, ''Get a truthful accounting of all the money. If he claims he squandered it on the horses, make him prove it.'' To get the money back without long and costly litigation, Callahan tells clients to have the crook sign a statement admitting guilt the day he confesses. If you wait, he might get a lawyer and refuse to sign. Most companies will sweep the crime under the carpet and quietly fire the crook, reasoning that if news leaked out, the ensuing publicity could hurt more than the crime itself. Paul Friedman, a white-collar crime lawyer in the Washington office of White & Case, a New York firm, says, ''Treat the guy nicely when you get rid of him. He could turn around and make some nasty allegations to a prosecutor and falsely implicate you.'' Others vigorously disagree. ''The greatest disgrace,'' says the FBI's Jamar, ''is when a manager discovers a cheat and doesn't hand him over to authorities.'' Yes, the bad publicity hurts, but the price a company ultimately pays by not prosecuting may be even higher. Other employees who see that Joe got away with $100,000 and a slap on the wrist may decide that stealing is worth a try. An effective manager must walk a fine line between Gestapo chief and Keystone Kop. As the late white-collar crime author and professor Donald Cressey wrote, ''If strict controls were imposed on all corporation personnel, then embezzlement, management fraud, and other trust violations would greatly be reduced, but very little business would be done.'' The best advice may be for every manager to reserve a corner of his or her mind to ask how each technological advance, reorganization, or ingenious new practice might be used by the rare employee who is desperate for money -- and looking for the easiest way to get it.