THOMAS C. LAWSON : Screening Workplace’s Door : Investigative Agency’s Specialty Is Reducing Hiring Risks
Choosing a new employee or business partner poses the risk of hiring a criminal, especially in a place such as Orange County, which has earned a national reputation as a mecca for fraud.
Employees increasingly are filing lawsuits against their employers for negligent hiring when fellow workers jeopardize their safety.
Crime in the workplace--especially theft--is on the rise, security experts say, because the prevalence of illegal drug usage is placing greater pressure on employees to steal from their employers to support their habits.
And scam artists are taking a heavy toll on business partnerships.
In response to these concerns, investigative companies have sprouted up to help employers and individuals screen prospective employees and business partners.
Thomas C. Lawson, who founded Apscreen in 1980 to conduct background investigations of job applicants, said demand for such investigations has spread to a wide variety of industries.
The Newport Beach company has more than 2,100 clients worldwide, maintains a large library of public documents and has the ability to check litigation, driving, property, corporate, bankruptcy and credit records in a multitude of jurisdictions.
Lawson, 34, chairman of the Orange County chapter of the American Society of Industrial Security, recently described the impact of employee crime on the local business community in an interview with Times staff writer Leslie Berkman.
Q. Is employee screening a new business?
A. It is a very new service for most industries, although it long has been used by banks, defense contractors and insurance companies. There has been explosive growth in the business in the last 18 months in both the numbers of firms getting into the business and the popularity of the service.
Q. Why the new interest?
A. The reason is because of a new preponderance of employee negligent-hiring lawsuits. People are suing their employers for creating a negative environment in which to work by not properly screening the people they are hiring.
For example, if there is a rape that occurs on the premises, the person who commits the rape may have had a background showing he is a rapist. If the employer did not check it out, he has basically created an environment for another rape to occur.
Q. What kinds of background checks are necessary?
A. Of course, doing a reference check to see if a person has been truthful in the presentation of his education information or previous employment is critical. In 1980, Camden & Associates did a study that said four of five resumes contained fraudulent or embellished information. In 1987, another study done by a personnel consulting firm found that 90% of resumes are embellished. The problem isn’t getting better. The problem is getting worse.
Q. I understand it has become more difficult to get information from former employers about job applicants.
A. It is quite a bit more difficult than it used to be. But it depends on the industry. Former employers in the nuclear industry will talk to you for hours on end on the telephone about a candidate.
But most industries will not because of the potential liability of providing information that is opinionated and might influence the decision of prospective employers. So most employers say they will give nothing other than name, rank and serial number.
As a result, an employer recruiting employees has to look out for himself and will hire a firm like mine to help him by, for instance, doing a check to see if an applicant has a criminal record. Of course, there are some cases where you can’t find anything in the public record because previous employers sometimes just don’t prosecute an employee. They will just fire the culprit and turn him out on the streets.
Q. What are some industries that more recently have begun to screen applicants?
A. Our work in the hospital industry has grown tremendously in the last five years. Also, we have more airlines, computer manufacturers and security guard services as clients.
Q. What kinds of screening do you do for them?
A. Besides screening employment histories and criminal records, we check the driving records of prospective employees. Driving records are a very solid responsibility indicator. If you have failures to appear in court or excessive speeding tickets or traffic violations, psychological studies support the conclusion that you are probably not paying attention to small societal laws and you probably do not have a good attitude about taking care of what should be taken care of.
We also look at credit histories. If a person doesn’t pay his bills, there are two reasons for it: Either he is in a tight financial bind because of something that has happened, such as a divorce or other serious problem, or he just doesn’t take responsibility for paying his bills.
Q. Are employers concerned that if someone is in a difficult financial situation he might be tempted to steal?
A. That is exactly correct. You cannot deny employment based on a bad credit history. But you can sure ask the candidate questions about why he is having such credit problems, because credit problems can materially affect how a person performs his job.
If the person works all day long, then goes home and from 6:30 p.m. to 11 p.m. is getting calls from creditors and collection agencies, he is probably not getting a lot of sleep and won’t perform very well on the job.
Also, when a person has bad credit, usually he also has other problems, such as a bad driving record.
Q. Can a prospective employer deny employment because of an applicant’s past criminal record?
A. Only in the event that the criminal record is germane to the job. For instance, a bank teller who has a terrible credit history that includes defrauding creditors or serious collection problems can certainly be denied employment because of the fiduciary nature of the employment he is going to undertake.
Also, if an applicant has a history of violent crime, you can deny him employment for the safety of your other employees. But if you like everything else about the candidate and the crime was several years ago and the person hasn’t had a problem since, you can talk to the person’s probation officer and ask if he is a danger. If the probation officer says no, you can write that up and put it in the personnel jacket to prove due diligence in hiring an employee with a criminal background.
Q. Are there cases when an employer would want to hire someone with a criminal record?
A. A lot of employers have good reason. There are people who are very high-level engineers and physicists who have histories of violent crime.
Q. Do you have any idea how much crime is in the work force?
A. In 1985, I estimated about 58% of the work force is stealing at some level, which could be as little as stealing pencils or paper clips. Today, with drug problems in the workplace, that figure has gone up considerably. I would say a good 65% of the work force is guilty at some level of internal theft. Probably 20% to 25% of workers are involved in serious theft or drug trading.
Q. Why do you say workplace crime is increasing because of drugs?
A. Drugs are becoming harder to get and more expensive, and at the same time people now have greater access to smaller and more expensive things in the workplace that are easier to steal.
Microchips are a prime example. Microchip theft in Orange County has increased dramatically in the last five years. I have one client, a microchip manufacturer, who every three days moves $2.9 million in microchips to a different secret storage location in the county just to avoid theft.
Also, there has always been a fairly high rate of drug thefts at pharmaceutical manufacturing houses.
Q. Are hospitals targets for drug thefts?
A. There is quite a bit of criminal activity in hospitals because drugs are so easily accessible. Many of the problems in a hospital are internal. A lot of nurses and doctors are drug addicts and have keys to the medicine chest.
Q. Have you found hospital employees with criminal records that their employers didn’t know about?
A. Yes. We had an instance where a hospital orderly was taking the results of cancer tests and picking up the telephone and posing as a doctor. He was telling women that their Pap smears were found positive for cancer, and two women committed suicide over it. The reports were untrue. The women did not have cancer. When we did a background check, we found he had previously lived in Boston, where he was convicted of doing the exact same thing.
Q. Is much undercover investigation going on in companies?
A. A tremendous amount. It may involve putting someone in a manufacturing facility to see who is stealing the raw materials or products or who is dealing drugs. Employers are doing this because they are tired of being burned or being the transfer points for drug deals.
Our company doesn’t do much undercover investigation. But we develop background information on suspects.
Q. Do you find that criminals move from company to company?
A. Yes. Last April, after I read a Fortune magazine article depicting Southern California as the fraud capital of the country, I had a guy cross my desk for the sixth time. He was 26 and looked 18 and moved from bank to bank in Los Angeles and Orange counties taking teller trainee jobs. In each case, he stole money out of his cash drawer.
Q. Why wasn’t he prosecuted for the thefts?
A. The loss for each bank was too small. He had taken an average of $40 to $50 a day. He had eight banking jobs in three months. He would use different names and slightly different Social Security numbers on each application.
Q. Don’t banks do background checks on employees?
A. Most of the banks who don’t use services like ours rely on a fingerprint check. But those results don’t come back from the FBI sometimes for 30 to 60 days. In this case, six of the banks hired my company to check out the new teller, but by the time we did, he was gone.
Q. So you realized that there was probably a single culprit when several banks told you the same story?
A. Yes. One day I pulled up my bank files and found six of these similar cases. So I knew something was fishy. I called my bank clients, and their description of the person was the same, and in every instance, within a week they had let him go for stealing petty cash out of the cash drawer.
Q. Do you give advice on how to prevent internal theft?
A. We do that in the form of a security survey. There are several ways internal theft can be addressed. In a manufacturing facility, you might put in cameras to monitor the workers or make people change their clothes in a locker room, or you might not let them have pockets in their coveralls, or you might require them to carry clear purses.
Some of the most effective methods for preventing theft are just common sense: locking your file cabinets and your office door when you go home at night, making sure sensitive papers are not left out on your desk. Most things are stolen casually. If there is an opportunity for someone to steal who has a propensity to steal, they will take that opportunity.
Q. What kinds of things get stolen?
A. Everything. Supplies, computers, tools, monitors, even auto parts. For example, I had one client firm that maintains its own fleet of trucks. Management couldn’t understand why the company’s auto maintenance budget kept increasing about 20% a month for parts when their trucks were new and didn’t need that kind of maintenance.
We found out that the guy who was their supply manager during the day also worked nights at a firm that sold auto parts. He would steal auto parts during the day and put them in the bins at the auto parts business. When he was alone on night duty at his second job, he would sell the stolen parts and keep the money for himself. Both of his employers suffered. One lost auto parts, and the other lost sales.
Q. Is business fraud especially prevalent in Orange County?
A. Orange County is an extremely entrepreneurial environment. I mean that in the fullest sense of the word. Entrepreneurs not only start and create successful businesses here, they start and create successful theft operations too. It is a magnet for people’s creativity.
Q. What is the most innovative fraud you have encountered in Orange County?
A. One of the most innovative embezzlements I have seen was a case where the controller of a bath and tile company refused to have a payroll service and insisted on performing that task to save the company money. So he wrote out the payroll checks. On his particular check, he would write the amount way to the right side, leaving space in front of the number.
After he had the partners in the business sign the checks, he would take his check and write a five or six in front of the number. He was supposed to make $998.16 every two weeks, but instead he was getting paid $5,998.16. When the bank statement came at the end of the month, he would destroy the cancelled check and erase the five off the bank statement.
Q. How did he get caught?
A. He had taken a vacation, and the person who did the payroll checks in his absence noticed discrepancies in the bank balances. The principals of the company discovered the controller had been embezzling money for three years.
Q. Was there a way the theft could have been prevented? Did you recommend any changes in the company’s business procedures?
A. Yes. I recommended more strict accounting controls. I immediately recommended a payroll service to write up the checks. They also needed stronger audits and a more attentive accounting firm.
Q. Companies seem to be making much more use of part-time employees. Does that pose a greater potential of on-the-job crime because people who can’t get full-time jobs tend to gravitate to temporary-employment agencies?
A. Temporary services are a great hiding place for people to get away with murder. There are lots of internal thefts in the temp business and tremendous turnover and propensity for lack of productivity. On the other hand, a good portion of the people who go into temporary services figure they want to clean up their act and are willing to work hard to prove themselves.
Q. Should a person do a background check of anyone he goes into business with?
A. Yes. A business partnership is a far more involved relationship than a marriage. It will have more ups and downs, more moments of tension, more anger and hatred than any marriage will. Believe me. I am asked to do many asset searches of former partners who are suspected of ripping off the venture. Seven out of 10 times that I investigate partners, I find that they have a history of malfeasance prior to the relationship.
I know of an investment adviser in Costa Mesa who has had 29 lawsuits filed against him in Orange County Superior Court in the last three years for fraud or breach of fiduciary duty or conversion of property. He drives a Mercedes and takes people to nice restaurants, where he lures them into money-losing oil and gas ventures for which he collects hefty management fees. Today he is probably getting ready to fry one more fish.
