PROTECTING YOUR BUSINESS FROM EMPLOYEE THEFT.

• Author: PARMELEE, CATHERINE

Even your most-trusted employee may be dishonest. Watch for warning signs and take precautionary measures to ensure your business runs as it should. You may even want to purchase an insurance policy to protect you from losses due to employee dishonesty.

One of the most significant crime loss potentials is that of employee dishonesty. Yet many business owners are not aware of just how vulnerable they are of financial loss caused by employees' fraudulent acts.

"They all think it will never happen to them," said Peter Kelley of Kelley's Insurance Associates in Fairbanks.

Lori Wing, senior vice president at Brady & Co. in Anchorage, agreed. "Business owners need to understand it's not just about money," she said. "It can be theft of any kind, including patents, trade secrets, and so on."

Perhaps part of the problem is that business owners are just not aware of the magnitude of the crime. Employee theft is ranked as one of the most underreported crimes in the United States today. Estimates vary, but experts believe it's safe to say that millions of business owners' dollars are siphoned off by dishonest acts of employees every year. "It could put you out of business," Kelley said.

Many are one-time or occasional thefts. However, most large-term losses are caused by long-term schemes, usually committed by a trusted employee, often one who's considered like family. Of course, these are the people usually placed in the best position to steal from your company.

"You want to trust people," said Dan Graves, co-owner and general manager of Valley Sentry Lumber in Juneau. Nevertheless, a sales manager-a 10-year employee described as Graves' right-hand man--was found guilty of second-degree theft in June. Second-degree theft refers to property or services valued at $500 or more and less than $25,000.

The sales manager was helping Graves track down fraudulent credit transfers made by other or former employees. During that time, Graves discovered credits transferred to cards that did not involve those employees. The affidavit alleged this sales manager fraudulently transferred Valley Lumber money to his personal debit or credit card for two-and-a-half years.

It's not unusual for employee dishonesty losses to go undetected for several years. When the Valley Lumber story became public knowledge, Graves said several business owners came forward and said it had happened to them, too.

Valley Lumber can't change its system, according to Graves, but management can...