A trusted employee of more than 10 years embezzled more than $50,000 by submitting fraudulent refunds and pocketing the money.
A retail clerk took outside orders for merchandise, then stole the goods to fill the orders.
A store manager stole more than $14,000 by ringing up phony credit-card sales and then removing the equivalent amount in cash.
These three people all ended up being caught in the same way: Suspicious fellow employees anonymously called Alertline, a toll-free, round-the-clock hot line termed by its founder, Jerome J. Frank, as a "Crime Stopper for businesses."
Some businesses, such as Bethlehem Steel, operate extensive security operations. At Sparrows Point, Bethlehem has its own fraud hot line, a drug-sniffing dog and a police force that takes anonymous reports from workers.
The Defense Department operates a fraud hot line for employees of defense contractors.
But despite Commerce Department estimates that fraud costs $200 billion a year, says James D. Ratley of the National Association of Certified Fraud Examiners, most companies do little to ferret it out.
"Most companies do not take a pro-active approach; most take a reactive approach," he says.
Statistics quoted by Ratley show that only 20 percent of fraud is found by auditors. A greater proportion -- 33 percent -- is discovered because of tips, often anonymous. But most is uncovered by accident or because the culprit turns himself in.
"The majority of fraud is detected because people keep on doing it until they're caught," he says.
Hot lines such as Alertline can be an effective tool if they are run well, he adds. "It depends on how you promote them and
what you do with the calls you get, if you keep it in front of people and if they know some action is taken. The whole thing is built on trust. Promote it properly and it's a great thing. . . . Anonymity is important because we're brought up to believe you shouldn't be a tattletale."
About 100 mostly large companies, among them Hechinger and Black & Decker, subscribe to Alertline. A team of trained specialists, headed by a 15-year veteran of British intelligence, fields about 800 calls a month from around the nation -- a volume that has increased during the recession. About 93 percent of the callers remain anonymous.
"Frank's company has been very successful," says A. Samuel Cook, a senior partner at the Baltimore law firm of Venable Baetjer & Howard and an adviser to companies on labor and employee relations. "They have some blue-chip Fortune 500 companies."
"I'm 100 percent for it," Cook adds. "It's an excellent security measure and it gives the worker protection from the fear of
blowing the whistle. . . . The average guy and girl in a large company is afraid to speak up."
It's that reluctance to speak up -- or the realization that much information reported to a first-line supervisor never gets passed on, Frank says -- that forms the basis for Alertline. What makes it work, he says, is a professional, trained staff, extensive promotion, and the delivery of the information to a high level at the subscribing company. And because companies are paying for the service, they act on the information it delivers, he says.
Aside from the obvious result of stopping crimes or unsafe conditions, a service such as Alertline can reduce companies' exposure to liability in certain cases, Cook says, as when an employee should be harmed by a co-worker who's on drugs or a worker deliberately makes faulty repairs. And, under new federal sentencing guidelines, companies with effective monitoring programs will get substantially lower fines for white-collar offenses, Cook says.
"We have three goals," Frank says. "One is loss prevention. Second is loss detection. Let's face it. . . . Many times they've [the callers] taken it to first-line supervisors and nothing ever seems to happen. Three is liability mitigation. If a company is faced with liability and a program is in place, it helps."
Frank, a former U.S. Treasury agent, incorporated Loss Management Inc. in 1980 and began marketing Alertline -- the first such hot line service in the nation, he thinks -- in 1983. Programs such as Crime Stoppers and Neighborhood Crime Watch already had made the concept of "self-help" community security programs familiar to millions of people. Frank reasoned that if it worked among the general public, why not with businesses?
The first group to sign on "in a big way" was new car dealers, Frank says. The program then spread to retail, distribution and construction and is now used by companies in a wide range of businesses.
L "We found the concept applied across the board," Frank says.
"It took a while for the big companies to come on," he acknowledges. "When it came to security, they thought cameras, guards, locks."