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Does Prosecution Make Good Business Sense?

by Shane Sturman and David E. Zulawski


When an employee takes company property, he should be punished. After all, he was given a job for which he received compensation in exchange for a fair day's work. However, this thief has stolen not only from his employer, but has affected the future of the company and coworkers. Many companies feel the dishonest employee should be prosecuted to deter other employees from theft, but, is prosecution really a deterrent?

Companies are finding that prosecution of a dishonest employee is not always the most cost effective path. Often, the employer's cost to prosecute exceeds the loss caused by the dishonest employee. Undoubtedly, there is a short term impact on employees who are close to the coworkers arrested by the police. However, the long term deterrent of prosecution is questionable.

Employees steal because they believe they "won't get caught" or rationalize that their actions are of little consequence. The "fear of detection" is the best deterrent. If an employee believes he will be detected, he is less likely to become involved in dishonest acts. Rarely, does the dishonest employee consider the consequences of his action before he acts. Many companies find that reducing the opportunities for dishonesty through operational controls, employee awareness programs, and visual deterrents are much more effective in reducing shrink than making an example of the dishonest employee after the fact.

There has been no evidence to support the belief that the prosecution of dishonest employees reduces shrink or prevents other employees from committing acts of dishonesty. There does not appear to be any difference in the shrink figures of companies who prosecute and those who do not. Due to its cost and potential liabilities, more and more companies are seeking restitution from dishonest employees, rather than prosecution. These companies are also focusing more of their resources up front to deter acts of dishonesty, rather than after the fact prosecution.

If the company's goal is to prosecute as often as possible and seek restitution through the court system, they often discover it, too, can be a difficult and time consuming process. When the case is won in court and the subject is ordered to pay restitution, the payments are generally minimal and spread over a long period of time. The employee may plead guilty, but contest the total dollar figure of the admission. The burden of proof to establish the loss then falls on the employer and must be proved independent of the employee's written statement. Providing independent proof may require substantial additional investigative time to research company records to substantiate the company's loss.

Some courts may require the employer and employee to work out an agreed upon payment plan. The company then acts as a collection agency attempting to recover restitution from the dishonest employee. If the employee defaults on a court ordered payment, the company can then turn it over to a collection agency or go back to court to get a judgment against the employee. The bottom line is that restitution collected in this manner can be difficult and costly to obtain.

Regardless of whether a company elects to prosecute or simply obtain restitution in lieu of the prosecution, the decision should not be based solely on punishment but rather the return on investment.

A return on investment may be tangible or intangible providing direct or indirect benefits to the organization. Regardless, the decision of whether to prosecute or obtain restitution should be made based on a clear assessment of the needs of the organization.

Shane Sturman is a consultant and David E. Zulawski is a partner in the investigative and training firm of Wicklander-Zulawski & Associates, Inc.




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