Even More Real-Life Experiences in Combating Retail Refund Fraud

Last month's column (click here to find it) presented case studies of internal theft and provided solutions and advice for other retailers to avoid being victimized in the same way. Because internal theft is the most pervasive loss problem in the retail industry, this month's column takes a continuing look at the schemes employees concoct to defraud stores of money and/or merchandise.

In the previous column, we also presented "The Case of the Missing Earrings" as an opportunity for readers to help solve the case. We received tons of responses, and as promised, we are sharing the best ones in this column.

If you didn't get a chance to write in last month, please see "The Case of the Gang Members' Girlfriends" below. We're looking for the best solutions to this case of internal theft via e-mail, so please send in your thoughts to Liz via email. As an added bonus, the person who submits the best idea will receive a complimentary copy of the book "The Retail Manager's Guide to Crime and Loss Prevention: Protecting Your Business from Theft, Fraud and Violence" (2004, Looseleaf Law) by Liz Martinez. (If your solution is published, we can use your name, or you can remain anonymous. It's your choice.)


The story: At a jewelry concession in the middle of a large shopping mall, an entire display case filled with $1,800 worth of gold earrings recently walked away. The employees, who were all high school and college age, were rumored to pass merchandise to their friends constantly. But because the concession is freestanding, with no video surveillance, no one has been able to prove how or when the workers stole the case and/or how they passed it to confederates.

Solution No. 1: First of all, you have to conduct background checks on your employees. Then, if an incident does occur, notify the local police. If it's kids who are stealing, they'll probably give it up at the first sign of a uniformed officer. Another strategy to prevent thefts is to shift up the schedules on the kids so that they don't know too far in advance when they're working. That way, they can't plan thefts with their friends in advance. -- Greg Henricks, security manager, Mall of America, Bloomington, MN

Solution No. 2: Who has a key? When was the last time the lock was re-keyed? You have to ask these questions to narrow down the thief. Also, you need to have a camera at the point of sale, recording what's happening at the register to deter fraud. I'd advise this kiosk owner or manager to conduct more inventories during the day and to count what's in the cabinets. Whoever is working is accountable for what's there and for what's missing. And of course, better background checks are needed. Don't do any quick hires, regardless of how desperate you might be to have someone start working. -- Bob Harrison, security director, Allied Security for Mall of Louisiana

Solution No. 3: You have to pin down the time of the loss by reviewing the video. If it's been rumored that thefts have been occurring for a while, I'd have to ask: What has the owner or manager done about them? Inventory control from one shift to the next would be one way to stop the problem. But it sounds like nobody's watching this store. Keep in mind, the owner or manager is paying the employees to work, so look at the patterns of each employee's sales and refunds, then figure out the value of their continued employment. -- Sgt. Jeff Schwiesow, Bloomington (MN) Police Dept., Mall of America Unit


The story: It's Saturday night at a large shopping mall, and a group of young men are hanging out on the benches outside a hat store. One by one, or in pairs, they enter the hat store and speak to the same employee. The employee is a young, new part-timer. The store manager has already forbidden this worker to ring on the register because somehow, the drawer is always a bit short when he finishes a shift.

The solution: A bit stumped as to what's going on? So was the manager. The friends of the lad working in the hat store were waiting for their opportunity to get free merchandise, courtesy of the part-timer. The only thing that stopped them on this occasion was the fact that they were under obvious surveillance by a uniformed police officer. The manager had already taken a step toward eliminating the shortage problems in the store by keeping that particular worker away from the cash. However, he needs to confront the employee about who his visitors are.

The advice: Any employee whose register consistently comes up short needs to be reassigned to another job because he's obviously not making any sales for the store. Alternatively, management might decide that his services aren't needed any longer. In any event, a zero-tolerance policy must be implemented.


The story: A national sunglass chain store moves into a large shopping mall. The store has an open-display policy, meaning that the sunwear is not kept locked up, nor is it EAS-tagged. In addition, the store is initially set up camera-free. Within a week, the store is visited by members of an organized theft ring, who pull a daylight version of smash-and-grabs: Three to five of them enter the store, grab $2,000 worth of merchandise at a pop, and skedaddle before the employees can react. This scenario is repeated time and again.

The solution: This company must decide whether the repeated losses are an acceptable cost of doing business. If they're not, then they have to take steps to ensure that the gangs can't steal from them so easily. The manager in this store resisted incorporating video surveillance and refused to change the store layout. When some gang members were caught, they ratted out the manager as being in on the scam.

The advice: Optical goods have a shrinkage rate of over three times the average, or about 7 percent. Sunglasses and eyeglass frames are especially tricky to secure to because customers need to be able to try them on in order to decide to make a purchase. In addition, many popular sunglass styles feature thick plastic temples, and they're hard to tag. Both Sensormatic and Checkpoint Systems offer EAS tags that are especially suitable for eyeglass frames, including benefit-denial tags from Sensormatic. If the store's philosophy is that open displays lead to more sales, then a sufficient number of staff members must be on hand to provide customer service in order to both make sales and to thwart groups of thieves. Surveillance cameras are also necessary so that thieves can be identified once they're caught. And environmental design is important, too, especially keeping registers close to the exits. Of course, performing background checks of all personnel should go without saying.

THE CASE OF THE GANG MEMBERS' GIRLFRIENDS -- help us solve the case!

The story:

Gang members have been known to encourage their girlfriends to obtain legitimate employment in retail stores in order to have access to customers' credit cards. In some cases, the girls "forget" to give the cards back to the shoppers (in other words, they steal the credit cards). In other cases, the women are recording the card information for later use. The gang members use the data or the cards to make purchases that they either fraudulently return so that their girlfriends can process cash refunds, or they keep the merchandise. Observers are pretty sure that the money being used to further gang activities, but it's difficult to prove the link and almost impossible to stop the thefts.

The solution?

If you have a solution or advice about how stores can prove the link to the gangs, or ideas about how they can avoid repeat credit card thefts, please let us know by e-mailing your ideas to Liz@RetailManagersGuide.com. We'll publish the best solutions in an upcoming SecurityInfoWatch.com Retail Security column -- and you can remain anonymous if you wish. The best solution receives a free copy of "The Retail Manager's Guide to Crime and Loss Prevention: Protecting Your Business from Theft, Fraud and Violence."