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The legalities of dealing with dishonest employees.

Article Excerpt
Are your employees stealing from you? Or perhaps a better question: How much are your employees stealing from you?

Studies by the Department of Commerce and various trade associations estimate that employees steal over a billion dollars a week from their unknowing employers. The service center industry is no exception. Indeed, the nature of metals distribution makes it inherently vulnerable to theft. Metal commodities are highly generic, not readily identifiable, difficult to track and can easily be sold as scrap.

At a Copper and Brass Servicenter Association conference earlier this year, service center owners--some anonymously--related their experiences with dishonest employees and discussed how they handled the situation and changed their operations to prevent future theft or embezzlement.

Steve Buzash, president of Standard Metals, Hartford, Conn., described the personal anguish he felt upon learning that a long-time valued employee had been forging checks. "You've been betrayed, and it's a real deep kind of hurt. I was really angry [and distrustful of everyone]. It took me about six months before I could say I would not let this change my personality."

In some cases, the employee forged Buzash's signature. In others, the employee would squeeze in a couple extra digits, turning a $70 reimbursement for a pair of safety shoes into a $2,070 windfall.

Buzash says he learned the hard way that the owner of a small business must retain total control over manual checks.

Don't count on the banks to question the doctored checks, he emphasized. "The banks know these people because they see them every day. The tellers recognize them and figure whatever they want must be OK, because they work for Standard Metals."

Despite the fact that the bank had Buzash's signature on file, bank personnel never saw any reason to check it. "Nobody is going to check the quality of that signature. That is something I never knew."

Eventually, the trained eye of a bank auditor caught sight of the odd cramped writing on some of the checks and alerted Buzash. Working through the night with a special audit team from the bank, Buzash went through three years of cancelled checks and tallied his losses (which he prefers to keep confidential). The next morning, with the audit team and a lawyer, he confronted the stunned employee, who eventually...

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