Casino Surveillance News

Complacency Part III:

Company Loyalty and the Employee Hot Line

by Jim Goding

Though I have mentioned complacency in connection with Surveillance and Security in particular, complacency and apathy does not stop there.  These attitudes can invade every part of an organization.

Regular employees in all areas of the casino become complacent as well, and this definitely does not contribute to the viability of the organization. In fact, it adds to its problems in major ways, not the least of which is justification for internal theft and fraud.

When a person sees others in his department–or in other areas–getting away with things that are forbidden by law or company policy, it creates problems. It is even worse when one employee gets disciplined for things that he knows others are getting away with. Such a person becomes a “disgruntled employee,” and he or she may eventually use the facts of (1) having been disciplined for something, and (2) knowing others have consistently gotten away with similar or worse behavior, to justify fraud and theft.

A few employees and management staff will end up, eventually, using this as a justification for fraud and theft.

The truly honest ones leave the company and go somewhere they think honesty might have a higher value. Or they go somewhere the middle or upper management is not obviously on the take, where thieves are not protected, and where an honest person has a chance.

You will find, over a long period of time, that the greatest majority of your employees are loyal, at least as far as the performance of their duties, to the company that provides their income. They resent it when someone steals from their employer, and they resent it even more when their workload is increased by thieves, and even more yet when a company is in difficulty and they know there is internal theft and fraud occurring, and their jobs and paychecks and annual bonuses and increases are at risk.

Example: a staff member clocks in, turns around and leaves, and then returns at the end of the shift to clock out, having spent the time with his family, his girlfriend, on another job or in a local bar.  In a large organization, this is relatively easy to get away with. The rush to get going at the beginning of  a new shift masks the fact that the person is not there, and the manager of the department who does the actual approval of payroll records may not know that three of the thirty people on his graveyard shift are clocking in five days a week but only working two or three. Or that the person who clocked in routinely works for an hour at the beginning of the shift and then sleeps the rest of the shift in a fire stairwell, because he or she is working one or two other jobs.

But I guarantee you that someone at lower levels has seen this activity and deeply resents it, because it adds to his or her workload. He has to work harder, for the same pay as the person who works not at all. After a while the witness will begin to resent the management for not handling the problem.

Yet most are either afraid to report it for fear of being labeled a troublemaker, for fear of retaliation, for fear that the payroll thieves are being protected by the managers, or simply out of apathy, feeling that nothing will ever be done about it.

This is especially true of lower-level employees who witness fraud and theft by their managers, or who know or suspect that managers are protecting certain staff for personal or personal financial reasons. I have even seen a situation in which a blatant thief was protected by a manager because the lower-level thief knew how the manager was violating other company policies. It’s called blackmail.

Justification is necessary in most cultures for a person to start stealing from the employer. The feeling that others are getting away with it, that management is doing nothing to correct it, or that supervisors and managers themselves are involved in fraud or theft or other violations–these are very, very powerful justifications.

The Solution

So how do we solve this problem of apathy, complacency and fear on the part of the employees?

According to the Association of Certified Fraud Examiners (ACFE), nearly half of all cases of internal theft and fraud are discovered because of tips (information) from employees or customers. This is far in advance of all other methods: The next in line is “discovered by accident,” almost a quarter of frauds and theft detected.

You reinforce things that work. In this case, that means making it SAFE for employees and customers to tell management that something is wrong, or just out of whack.

In two different companies where I have worked and several where I have consulted, employee tips and customer complaints have resulted in discovery of

* Cashier theft

* Dealer theft and cheating activity

* Security Chiefs or their direct juniors  theft and corruption

* Bartender theft of cash and merchandise

* Players’  major and minor cheating

* Managers and supervisors being apprehended for corrupt activity

* Both internal and external theft and cheating in Slots

* Theft in Count Rooms

* Payroll theft (as described above, as well as other methods)

* Tip theft

* Other forms of fraud, theft and corruption

The greatest majority of these tips came from employees who resented the fact that dishonest people were getting away with fraud and theft, adding to their workload, and making far more money off the job than the informants were getting paid.

Needless to say, when you start putting all this stuff together, it really does hurt the bottom line of a casino-resort operation. It also can create a lot of disgruntled employees who can then justify theft on their own.

Customers observing crooked activity get the feeling that the entire casino is corrupt, and they don’t come back–and they tell others about it. Sometimes they even report it to regulatory agencies.

Needless to say, it is much better to discover and handle illicit activity on your own than it is to have the state come in and find it for you. This places your license at risk, and can often involve heavy fines or other penalties from regulatory agencies. Even the fact that it is possible to bypass internal controls can result in sanctions from state or other regulators.

So you MAKE IT SAFE for employees or customers to report discrepancies they have observed.  This is required of publicly traded companies under section 302 of Sarbanes-Oxley, which requires publicly traded companies to have a method of receiving information from people who wish to remain anonymous regarding accounting and other financial matters that may be suspicious.

That doesn’t mean that privately owned companies should not also have such a mechanism in place, as well as means of ensuring that management (at any level) cannot retaliate against people who report potential illegal activity. This should be in place for any casino operation.

Often your best source of information is your honest employees. As I will cover later, even a deliberate false report on such lines will often uncover illicit activity, when properly investigated.

One of the other aspects of the most recent report from ACFE is that smaller, private corporations are hit much more often than larger public corporations, and also hit much harder. Meaning, a $100,000 theft hits a small company much harder than it does a giant corporation.

So you MAKE IT SAFE. Make it possible to report anonymously. Engage a third-party company to receive “hotline” calls. Put up a box in an area where a person can leave a written note, where they have a chance of not being seen by their own boss or other supervisors, or security, or, really, anyone else. Put a lock on the box, with the only key to it being kept by the corporation president, owner, or an outside agency such as tribal gaming regulation.

I’ve seen a couple of real “flubs”  on this one, by the way. One had the box placed in the reception area of the executive suite, under the direct eye of the executive assistant.  Another had it placed outside the employee dining room, with a camera apparently pointed right at it. How safe does this make an employee feel about reporting possible fraud on the part of managers and executives? Was this a flub, or a means of guaranteeing that no one would ever report the illicit activities of the management?

So MAKE IT SAFE. Make it possible to report anonymously. Make it IMPOSSIBLE to retaliate against any employee who provides information regarding illicit activity on the part of anyone in the company. Again, this is required of publicly traded companies, but it will very much enhance the ability of Surveillance or Security or corporate counsel, internal audits or any other part of the management to prevent or detect internal theft and fraud.

Even more important, YOU INVESTIGATE ALL SUCH REPORTS, no matter who may be involved. This is part of the reason that, in Nevada and in many other jurisdictions, Casino Surveillance is separated from all other chains of command in the casino and reports only to the executive branch. In some jurisdictions, Surveillance reports first to the local or state gaming regulatory agency, and only then to the executive. This allows Surveillance to operate free of “influence” to ignore tips, ignore discrepancies and so on.

But regardless of who does the investigations–whether Surveillance, Security Internal Investigations, Internal Audits, external auditing company, private investigators, local gaming regulation, or whatever–all reports are investigated.

Very occasionally you will find that a person has used this reporting mechanism for other reasons– to get another person in trouble, to misdirect surveillance attention in order to divert attention from his own dishonest activities (references: “Politics,” “False Reports”). This is the price you pay for accepting information from honest people who are outraged that other employees are getting away with theft or corruption.

You can even use this to find the real thief. If you have established by direct observation that the person reported on is in fact honest, you widen the investigation. Do a full departmental audit. Watch the entire department for a week and follow up on all observed procedural violations. Then, if you still have not found dishonest activity, pick up the next most closely associated department, and start over.

What you NEVER do is attempt to find the identity of the person who made an anonymous false report using an established anonymous-reporting line. This can be construed as retaliation, because it is so difficult to prove that the false report was in fact deliberate.  You simply widen the investigation, or shift the focus, until you find dishonest activity.

Summary:

Value your honest employees.

Give them the chance to help you straighten out the organization.

Copyright 2010 by Jim Goding. All Rights Reserved under US and international law. Unauthorized duplication or distribution is a violation of copyrights law and of the proprietary rights of the author.