Retailers Susceptible to Embezzlement

cash%20drawer.jpgLast week both Fry's Electronics and Best Buy found leaks in their respective ships in the form of embezzlement. A VP at Fry's convinced the company they'd save money letting him handle vendors directly. He then proceeded to take $65M in kick-backs over the course of three years, spending much of it in Las Vegas casinos where he already had a reputation with police.

The Best Buy saga isn't much different. A couple owning a company called Chip Factory managed to underbid and overcharge Best Buy for computer parts by having the manager of vendor-relations in their pocket. Between 2003 and 2007 they allegedly netted at least $31M from their lucrative scheme.

I suppose its pretty easy for a buyer to overpay or overbuy and take a little something for his troubles. Audits are part of the answer, and job rotation is probably a good thing as well. Occasional background checks would have unearthed lavish lifestyles not in sync with pay-grades, but apparently none of these precautions were followed. I guess SOX doesn't plug all the holes.

Comments:

You know, I don't think these stories are all that unusual, even though most everyone in a retail organization (including IT) typically has to sign an agreement not to accept gifts of any kind.
Obviously this is a lot more eggregious than getting a free trip to China.

I am reminded of a former CEO of Marshalls (now part of TJX). Apparently in its zeal to hire this fellow, the board did not do any background checks and failed to uncover the fact that he was under indictment in California. He was later dismissed for other reasons (and a very untidy dismissal it was!) but the story became a Massachusetts retail legend.

It takes a very strong-willed (and powerful) HR VP to insure background checks happen no matter WHO is being hired.

Posted by Paula Rosenblum on December 30, 2008 at 12:04 AM CST #

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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