How to Keep Your Business Safe from the Betrayal of Fraud and Theft

What is employee theft and fraud costing you? That never happens in my business ever. I can trust everybody who works for me. Think again. That's what we're talking about today on Marc Haine Live. Welcome to today's show! This is where small business owners and entrepreneurs pick up core skill sets to help them create the jaw-dropping, show-stopping experiences that their customers and their employees deserve. I am your host, Service Expert and Master of Experiences Marc Haine. It is so great to have you here with me today. My guest for this episode is the Pink Collar Crime Expert, Kelly Paxton. And today, we will be talking about how good people can sometimes make really bad decisions. So stay with us and we will uncover some common schemes that may be affecting your business and your profitability. My one ask is that if you know somebody who could use this information, please go ahead and share the link. It's knowledge is power but only if it's shared. I am blown away by the statistics regarding employee theft and what's called occupational fraud. According to the California Restaurant Association, 95% of businesses encounter a problem with employee theft. Even more surprising, a 2019 report states that 64% of employees steal from small businesses. That's businesses like yours. So this brings us to our Question of the Day. What has been your experience with employee theft and fraud? I'd love for you to be part of this conversation. Why don't you share your story along with a link to this webcast and hashtag it #ExperienceLeadership. Let's share our stories a little bit. Maybe people can learn from what you're suffering with as well. As I mentioned, I am really excited to be joined today with Kelly Paxton. Kelly has more than 20 years of investigative experience. She is a Certified fraud examiner, a private investigator, author, podcast host of Fraudish. She has worked in the public and private sector, most recently working as an investigator for Nike. Her investigations include embezzlement, conflict of interest, intellectual property, open source intelligence, and fraud. Keltie is also the proud owner of pinkcollarcrime.com. You should really check it out. And she has a passion about embezzlers in the workplace. Not a passion for the embezzlers but just on the topic of embezzlers in the workplace. She is the founder of Great Women in Fraud. And her new book, Embezzlement: How to Prevent, Detect, Investigate Pink Collar Crime was just published a year and a half ago. Kelly, welcome to the show! It's so great to have you.

Thank you so much, Marc. It's an absolute honor. And the thing about— I love about this is you're getting it out to the business owners. And those are the people who really need to hear this message.

Oh, brilliant! Thank you so much for that. And I really appreciate you taking time to do this. It is such an important topic. And while I was reading your bio and your credits, you've had such a fascinating career. How did you ever get into this line of work?

Well, I start— I say my career has been 3 different versions of money. The first, I was in a stockbroker financial bond trader. And I saw how people saved and invested money. But we had a hinky client, as we call a hinky client. And it turns out he committed wire fraud. And so, I called up the U.S. Customs special agent and I said, I know something was not right with him. And all of a sudden, I became a U.S. Customs special agent and I investigated white-collar crime. Basically, white-collar crime because of my financial background. So, my third career is the Pink Collar Crime Expert because I want people to understand why people do the things they do with money, whether it's stealing it, investing it. But basically, there's a whole world out there that thinks of crime as bad guys. And you are much more likely to be a victim of Sweet crime. Like S-U-I-T-E instead of street crime. Yet, we pay a lot of money to lock our houses and live in gated communities and things like that. But then, you trust your employees at your work and you don't lock certain things down. And in my world of the Certified Fraud Examiner, Private Investigator, we have this fraud triangle. Opportunity, pressure, and rationalization. The easiest thing to control for is opportunity. We really can't control for rationalization because we don't live inside people's heads.

Right, right. So, what's the difference when we've heard white-collar crime and blue-collar crime? What's the difference between white-collar crime and pink-collar crime?

So, white-collar crime is the big umbrella and then pink is in it. But what's interesting is, is a subset of it. What's interesting is until 1939, people thought of criminals as icky people. People that lived on the wrong side of the tracks. Mental defect people. Poor people. And then, a famous sociologist came along and he said, There's this thing, it's called white-collar crime, and it's people of respectability and high social status who, you know, commit crime. Now, he made it about the offender, not the offense, but that became white-collar crime. So, not until 1939 did we even have the definition of white-collar crime. And I think we know it pretty well. Rich people can be criminals.

No.

Really?

Yeah.

But up until 1939, no. People didn't. There was no term of white-collar crime. So, it was a big deal. And then, fast forward 50 years, half a century, and Dr. Kathleen Daly popularized the term pink-collar crime. Now, this is the definition. Low to medium-level employees, primarily women, who steal from the workplace. She made it very clear it's all about the position, not gender. But in the United States, 90% of all bookkeepers are women. Those are the people that know every dollar that goes into a business and every dollar that goes out of the business. And we don't pay attention to those people. The CEOs don't pay attention. And those are the people that handle all the money. The CEO, they don't even know. Or the CFO, a lot of times can't even do a journal entry.

Okay. So, the fact that it's called pink-collar crime is not necessarily because it's all women. It's just a subset of the white-collar crime aspect to it. So, some of the stats around employee theft and fraud are really crazy. Are there some common schemes that you see time and time again?

Oh yeah. So now, I don't want to give away how to do it. But hashtag, it's not rocket science. I'm known as the fraud hashtag queen. And I use a lot of hashtags just to get people to be able to search for things that are important. Money is here in a business. And it goes to the suspect. It doesn't go from the business to Luxembourg to Panama to Dogecoin to the suspect. These are really simple cases. How do they do it? Number one way, forged or unauthorized checks. Number one.

Wow!

And then, things like payroll shenanigans, expense reports. But the number one way is— and some people are like, well, You know, I have 2 signatures on checks over $5,000. Well, if you can forge one signature, you probably can forge 2.

Wow! So right there, I mean, you've just given us a tip on what's one of the very first things we could do to avoid being frauded upon as it were or become victims is to run through the checks every once in a while.

So, I like to say surprise and delight your employees. Not your customers, your employees. And I'm in the middle of packing and so I don't have it. But I have a client who sent me this great luggage tag that says, surprise and delight. Now, what I mean by surprise and delight is if your, say, office manager or bookkeeper thinks you only look at checks over $5,000, pull a check for $1,000. And surprise them and say, hey, I need to see the backup for this. If they think that the accountants only come once a quarter, mix it up. If the auditors only come in May, have them come in October instead one year. So, you need to keep them on their toes and have them think you are looking at various things.

Yeah.

So, that's where I say surprise and delight.

It's so funny because back in the '80s when I used to have to make a cash run to the bank to do the nightly deposits, we were told back then, take different routes each time. Don't take the same route. Don't go at the same time. Take different routes. Go different times each time to make sure that you mix it up so people can't track necessarily your patterns. So right there, there's the paper trail version of that. Are there any myths about these types of crimes that you think should be busted? Like people lull themselves into a false sense of security based on some philosophy somehow.

Well, I wouldn't say it's a myth. But this optimism bias, we don't think it will happen to us.

Hmm.

We're too smart. We pay our employees too well. We like them. We hire people we know, like, and trust. So, we think, and it's a real bias. And actually, the bias is even more so for a negative event, meaning you might not think that you're going to win the lottery. But you're even less likely to think, say, you'll get cancer. So, the bias towards negative and fraud would be a negative event. So, they think it's even less likely to be able to happen to them. And now, I can show you any industry, any geography where it can happen. And some people are like, I don't have enough money to steal. Oh yes, you do because it's all relative. You might say, well, I'm only making $250,000 a year. But if you're paying Gladys in the basement $30,000, an extra $10,000 a year is going to send Gladys to the beach.

Yeah, it's interesting. You know, I just recently published a podcast talking about how necessary it is for us to have a culture of trust where we become trustworthy. We also trust the people who are around us. So, is that really naive?

No. No. It's all about culture. It's all about tone at the top, especially if you're a small business. There's a term in the accounting world called living out of the corporate checkbook. So, say for example, Marc, and I know you wouldn't do this. But say that you had a conference in Key West and you decided to bring your family. And you come back from your conference and you've taken a nice little vacation with your family. And you go to Gladys. And you're like, here's my American Express bill, pay it. And then Gladys says to you, Marc, well, I know you took the family, like, how do you want me to split this out? And you go to Gladys, Gladys, just pay it, it's none of your business. Well, when Gladys wants to go not to Key West, she just wants to go to the shore, she's like, well, Marc cheated. So, I'm going to take a little bit. And that's that rationalization.

It's so—

Your employees see. And I did this presentation for, I call it my Masters of the Universe group. Now, they were all male business owners because that's what the group was. But I gave an example and you could see the eyes kind of, oh yeah. So, say for example, You have a business and you have a loan at a bank, and your biggest customer calls you on November 27th and says, "Hey, I'm out of town. I'm not going to be able to sign my you know agreement for the next year until December second." You call down to Joe in accounting and you tell him to backdate it. You're out of loan covenants. Maybe by your loan because you don't have it signed by November 30th. But in your mind, what you're saying, if I don't sign this, the bank could call my loan and I might have to lay people off, including Joe. And it's only a couple of days. Well, what happens 6 months later when Joe is like, well, they cheated on this. Maybe I'm going to say that I had to drive, you know, 250 miles instead of 52 miles. And it's that trust. And you have to instill it in your employees. And they see you. They look up to you. So, tone at the top. Culture is so important.

I love that tone at the top. And I can tell you, having grown up in the restaurant industry, I had clients who would skim the cash. They had the cash hooked up that sometimes it wouldn't record all the sales. And then, at some point, the owners would then have to go into the till so that the till would balance at the end of the night. And they'd skim out the cash. And then, they were pulling out their hair months later when they realized that their money's disappearing. And what was happening was because the owners were skimming the cash, the employees thought, well, he's not going to know if I take an extra $20 or he's not going to know if I take $40. Hey, we were super busy today. I'll take $60. And they couldn't. And the owner couldn't understand why his business was going down the toilet. And to your point, people will do what you do as the owner-operator as well.

Well, and so another example, and I call this the get out of jail free card. So, say you're a business owner and you're skimming or you're paying for your kid's car payment through the business. And this is a true story. So, there was a woman who worked at a medical practice. And when she got caught, the owner confronted her with an attorney and said, hey, we know you've been stealing. You know, they say it in legal terms. But, and we're going to turn you into law enforcement. And this woman said, you know what? I know that you pay for your kids' car, your home utilities, your, you know, whatever. I'm going to turn you into the IRS and the State Revenue Authority. Now, the business owner was like, feel free, do it. Only 15% of embezzlement cases, and it's a hard number to prove, get turned into law enforcement because that employee has the get-out-of-jail-free card. Now, what's interesting about that real case was she did go to jail. Another company hired her, didn't do a background check. She starts stealing there because she owes restitution at the previous company and she had a raging gambling habit. But she gets caught and she does the exact same thing to this business owner. And she says to him, I've warned you about Bob. As he walks by, he gives me a little pinch. And there's Playboy centerfolds in the men's locker room. I'm going to turn you into the Bureau of Labor. Now, because we had told him that she was going to try and do this, he held fast. But there's a lot of employers that would just say, You know what? Let's call it good. You're gone. Don't ever, ever give my name as a referral. And I don't ever want to see you again. So, that's what happens. That get-out-of-jail-free card because think about it. I don't know if you've been audited. No one wants to be audited. You have a theft. You have an embezzlement. You know what's going to happen? The cops need to see your books.

Yeah.

And people freak out. Now, cops don't know K-1s and depreciation and blah, blah, blah. But everyone has a little bit of a guilty conscience there like, oh, do I really want the cop to see? He might question that my son, I paid for my son's car. And I'm gonna have to explain that he comes home from college and on the weekends, he works for me. So, true stories. I only tell true stories.

It's really interesting because this whole dichotomy of what happens when you want to create a trusting relationship and a trusting workplace. But to your point, if there's anything wonky about the culture in which you're working in, it gets harder and harder to be able to do that. And I was lucky because my mentor way back when looked at me and he said, Marc, just make sure you never do anything you might have to apologize for later. And for me, that was a drive. That was a driving thing. It was like even through growing up as a leader and becoming a leader and so on, did I make mistakes? Yes, I made mistakes. But I could always use that as my check to turn around and say, if somebody finds this out again, will I have to apologize for it? And for me, that was a double check. That became my moral compass. Will I apologize for this later?

Yeah, everyone has a price. I've worked with a guy in the past and he's like, I don't have a price. And I'm like, yeah, you do. You have a kid. If your kid gets sick, That's your price. Now, some people's price is $20 every day. Other people's price is hundreds of millions, if not billions of dollars, or your kids' health, or something like that. But I think it's disingenuous to say that you don't have a price because everyone does.

Yeah, and I mean, we see it in where situations change. Like one of the things that I saw recently, I got upset because one of my acquaintances went to the food bank and she got a big basket of food. Well, she doesn't need that. And for me, it just really irked me at a moral level because for me, it was to help people who can't put food on the table. And my thought process is, if you're taking from that person, if you're taking from the food bank, it means that person can't get it or one person in need might not be able to get it. And it frustrates me when I see this this idea. But yeah, I mean, it's the price. If you're hungry or if your heating is going to get turned off and so on, your price I think just gets lower, doesn't it? Desperation will kick in. I'd love to— I know that every time it's happened to me where I've been running an operation and I found out that people were stealing from me, the very first question I always ask is, why? Like, why did this happen? Why did they feel inclined to do that? And I'd like to, when we come back, I'd like to talk a little bit more. You mentioned the Fraud Triangle. I'd love to mention a little bit more about that and we'll get to that right after this.

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Welcome back! I am speaking with the Pink Collar Crime Expert, Kelly Paxton. You know, I pay my staff great wages. I trust them. Why does this happen? Kelly, let's talk a little bit more about this idea of this Fraud triangle. You mentioned I think 2 out of the 3. Can we dig a little bit deeper into some of those? Let's talk. Maybe let's start with under pressure. You mentioned under pressure. What do you mean by that?

So, this is especially interesting with COVID So, pressure is any type of financial pressure. Pressure that can be relieved by money. Example, say you were an orthopedic surgeon during COVID and you had a million-dollar practice. You know, you took home a million dollars a year and you had a million-dollar lifestyle. And all of a sudden, COVID happens and elective surgeries were shut down. So, what happened to those million-dollar lifestyles when you can't do your work? That's a pressure. Now, I'm not saying that there are surgeons out there that did that. But that is a pressure. And it can happen. All sorts of people have different types of pressure. Say, your spouse lost their job during COVID Your kid got thrown in jail. Your kid crashed the car and that's how you have to get to work. So, pressure is just anything where the money is going to solve it for you. You think. It's short-term thinking.

Yeah.

I mean, the long-term thinking in this, say, orthopedic surgeon case is, you know, you got to cut back. Maybe you don't. Well, in COVID, you weren't supposed to travel. But maybe you don't take those nice vacations. Maybe your kid goes to state school instead of an Ivy League school or something like that. But short-term, the money fix will fix it. Long-term, you need to fix the budget, whatever it is. If you have too expensive of a house, your spouse leaves you, or God forbid, they die, long-term, you have to readjust.

And so, that pressure. And we see that with a number of, especially in nonprofits with gambling debts and that sort of thing. I think the very first time you and I spoke about it, I mentioned how somebody who was running a nonprofit embezzled from the nonprofit because of her gambling addiction. And because of that, she served I think 5 years in prison. as she went forward through it. So, those kinds of pressures as well are, I mean, sometimes it's not a business pressure. Sometimes, it's not that necessarily a personal pressure. But this idea that, hey, if I do this now, maybe I can win back the money afterwards. And this is at the opening when we talked about good people making bad decisions.

Well, that's the thing is like most of these people don't have a criminal history. Like they don't have a criminal record. That doesn't mean they haven't done it before. So, my rule is if someone steals within 6 months of starting a new position, you might want to go back to the previous employer because they didn't learn on the job within the first 6 months. They probably did it somewhere else. So, that's where a timeline comes into play. How soon? Like, I mean, I've literally seen people who started stealing within a week of starting a new job. You know they stole at the prior place.

Yes. And it's so interesting you mentioned the same because the second time that you've mentioned this about talking to previous employers. I do know that sometimes, especially if somebody was terminated on questionable grounds, that they can't discuss it with you unless they took legal steps to do it. For instance, you can't tell somebody on the phone, no, I fired her because she stole from me. You can't say that unless you've charged her and she's been convicted of it because now it's public record. So, A lot of times what happens is people will say, oh, I can't. Our policy is we're not going to give references. And for me, I train leaders that that is a big red flag. If somebody's not going to give you a reference, then you have to ask one question and one question only. Would you rehire this person? And chances are, they will answer that question. They'll say no. And that is your early warning system right there.

And it's free.

It doesn't cost you anything.

That's the thing. These embezzlement cases, like you don't have to go hire one of the Big 4 accounting firms to stop embezzlement. And I'm not going to say as easy as opening your bank statement. But it kind of is like all the artificial intelligence in the world is not going to stop embezzlement if you don't open your bank statement. And if you don't surprise and delight. I had a— he ended up not being a client because he couldn't afford us. But he owned a car repair place. And he owned it with a sort of a partner. He was an absentee owner. He thought his partner was skimming cash. And they had an operating agreement that stated no cash will be accepted. And he wanted us to look at his books and blah, blah, blah and do pivot tables and things like that. And I said, okay, first off, you can't afford us because you're not making any money. But second off, I said, go do like a mystery shopper. A friend of yours who does— he doesn't know. Send them in. Have a lube, oil, filter change, whatever. And have the person try and pay cash. And if the guy accepts cash, bingo! Like, you don't have to hire the Big 4 to like— and you should have seen the guy's eyes. He's like, oh my God, that's genius! And I'm like, that's the surprise and delight. I'm not gonna— I'm not smart enough to be a CPA. And my coach says, don't ever say that, Kelly. I'm a different kind of smart. I'm a woo-woo smart with people's behaviors and things like that. But cops aren't CPAs and they have to do these cases. So.

Yeah, it's so interesting because right there again, here's another— there's the other tip. As a customer service expert, I use— I get contracted to do secret shopper reporting. And so, one of the things that we offer is we offer this kind of COVID transaction stuff to see, to test systems. And we'll do that at the request of the owners to see, are the systems being followed? Is cash control at par? And is there any weakness that we could see or we could even monopolize in order to move forward with that? So that the owners could know whether or not the people, especially in the case of absentee owners. It's crazy how often it happens.

In the States, there are some states, I don't think it's changed, that you have to be a licensed investigator in order to do mystery shopping like that.

Ah, interesting.

Yeah, because it kind of technically is an investigation. I don't know which states it's in. But it was an issue at one point.

Right. That's interesting. So, yeah, exactly. At the end of it, when it comes down to taking whatever evidence you collect, I mean, you have to make sure it's legal and above board. We've talked about being under pressure. What about this idea of rationalization?

Yeah, so that's the— if I were to redo my career, I would want to become a behavioral scientist. And behavioral economics, behavioral science. The idea is people are not rational. We are just not rational. An example that I've started to use lately is if we were rational, would we ever steal? And you're like, no, because you'd go to prison. But then, you see your boss stealing and they're not going to prison or they're treating you poorly. So, why wouldn't you steal? We're not rational. There was a woman Who worked for a dentist. And this is him being tone deaf. And it was a male. And he was complaining one day. The patient was under and the hygienist was helping. And he was complaining about how expensive it was to take his Lexus, his Jaguar, his BMW, whichever luxury car that he was going to have to take into the shop again. And the hygienist literally said, if you tell me one more time about your expensive European cars going into the shop, I'm going to take this drill and put it in your ear. That's being tone deaf. Like, my dad was a businessman and he had a thing. He's like, you know, you can't drive the nicest car. Like, drive a nice car. But he had a thing when he'd go look at a house to buy. He'd never drive the nice car. He'd drive my mom's car. There's appearances. Like, appearances are important. And people can rationalize a lot based on appearances. So, this is a funny thing. I think you'll enjoy it. I don't gamble. And I've had a couple of places recently where I've been at casinos and I have pictures of me standing next to a slot machine. And I posted them on social media. Now, if someone saw me, they're like, oh, Kelly's gambling. It's— you can't believe what everything you see on social media. That's kind of like my point of when I go to these casinos because a lot of conferences are held at casinos. And so now, I have these pictures of Kelly next to Willy Wonka's slot machine. And someone's like, oh, Kelly's gambling. It's like, no, I do it that you can't always believe what's out there.

Very true, very true. The rationalization piece is really interesting as well because I have seen it from the perspective of having 400 employees. But yet, the COO has a Private parking spot. Everybody else has to walk the miles in order to get into the building. He's got the Porsche, right? So, at every— and it seems like at every opportunity, he gets in the Porsche, which everybody is absolutely sure that was a business deal, kind of like a payoff to get a contract. Like everybody was talking about, oh yeah, he got the Porsche because he signed up with this construction crew or this construction company. And that because that they gave him a Porsche. And it's like, we don't know for sure. But that becomes the talk inside the culture. And so, to your point, that rationalization is, oh, I'm going to skim some of the cash because he can afford it. That's the big thing. Oh, the business can afford it. In fact, when I talk to owner-operators, one of the things I say is, do you actually let your staff know how well you're doing, how well the business is doing? And to this point, they turn around and go, well, no, we don't tell them how much profit we make or how well we're doing because they're just going to steal from us.

So, this is a really funny story. A plumbing company. There was a woman and your hot water heater never goes out between 9 and 5. It goes out at 5 AM or on the weekends or something like that. So, this plumbing company had a woman. We'll call her Gladys. And the owner of the business said, Gladys, you have to take the phone calls when we get these emergency calls at all hours. And she's like, no, I work 9 to 5. And he's like, no, you're gonna take the calls. So, she actually researched what it would cost to have an answering service. And she went to her boss and she said, this is XYZ answering service. It's going to cost this. He's like, I can't afford it. It's your job. And so now, Gladys baked cookies for the plumbers. Everyone loved Gladys. Loved her. Well, her rationalization was, I told the guy what it would cost. I asked to be paid an hourly rate for when I took the calls. He said I couldn't afford it. She goes, I did his books. She literally stole what it would have cost him to hire the company. That was her rationalization. She probably ended up stealing more because she got angrier and angrier. But like, she brought cookies, home-baked cookies for the plumbers. The plumbers loved her. The boss was kind of a jerk to her. And she gave him the options like, go hire a phone service. I don't want to be called at 10 at night and have to call Joe the plumber. And you're gonna pay for it. And he paid for it. But unfortunately, she went to prison.

It's so amazing how easily it could have been all avoided though, isn't it? Like really, when you think about it, it could be— you could get rid of that whole scenario just to your point, not be tone deaf to what the conversation is actually about. And that is about a person's value and what they feel is important. It's so interesting. Yeah. The last thing on the triangle is opportunity. This is one of probably my favorite because when I go into working with bars, restaurants, Casinos. This is one of the things that I find is probably the easiest thing to control. And yet, time and time again, it's just, it makes me shake my head.

It is the easiest thing to control. But like, at some point, you kind of have to trust. Otherwise, I mean, why are you this successful business owner if you're working 26 hours a day double-checking all your employees' work? But there are— that goes to the surprise and delight.

Yeah.

I consult for this water district and people— this is another thing. People don't understand how other people live sometimes. Water district. I pay my bill pay, online bill pay. There are a lot of people that pay their bills in cash. And so, I said, how do you account for it? And, you know, he's, well, this, this, that. And I'm like, do you have a camera? And he's like, well, yeah. Does it cover the whole, like, you know, front desk? Well, it's just right above where they'd normally take it. And I'm like, dude, you got multi-cameras because Sally just needs to move a couple of feet over and she's off camera. And so, you know, you You kind of have to look at things kind of like a crook. Like, how would the easy— and I'm sure you've done that in your business. Like, what is the easiest way? And again, it's not rocket science.

Yep.

You know, it's just not. I mean, you guys have Panda Express, the Chinese food, don't you?

Yes.

Okay, so you know they have the thing, if you don't get a receipt, your meal is free. You know what that's for. Yes, yeah.

And I've seen it in other businesses as well. What a perfect way to be able to do that because the customer will want a free meal. So, they're going to be, oh, he gave me the receipt. Damn it!

Yeah, exactly. So, I mean, that's again, you don't need artificial intelligence or the Big 4 accounting firms to do these things. You need people that have been in the business and know. Like I used to consult for a dental embezzlement company. These were people who actually worked in dental offices. So, they knew. They knew the software. They knew when you could code things a certain way and things like that. You need that practical expertise to know where the opportunities are.

Yes. Yeah. And once you put control systems in place, it can make a world of difference.

Yeah.

It's to your point about checking the register, the check register. Being able just to go through that and just see how things are being coded and put through. And to your point, shaking it up a bit and maybe looking at $50 transactions, $100 transactions, $500 transactions instead of all the big heavy ones. I went into one. I was contracted to go into one establishment. They couldn't figure out why they weren't making money. When I did my first inventory with them, it turned out that their liquor pour cost was like 78%. It has to be somewhere between 20% and 24%. And when we started putting in inventory control, we made absolutely sure that every time we did inventory control, we let the staff know, hey, we're aiming between 20% and 24%. And that's a big leeway. That's huge. That's taking into account a 2% pour loss because of spillage and that sort of thing. And so, every month, we would Publish the results. And it was amazing how accountable everybody became when they knew that you were monitoring this stuff. And it became from 78%, all of a sudden within 4 months, got it down to that 24%. And it increased performance at the time of the pour. People were more consistent, more cautious with what they were doing while they were doing it because they knew at the end, they'd get a report at the end. of what they were doing. So, how cool was that?

Yeah, you know, most people want to be honest. But most people will cheat to a certain degree. There's some great work out there by Dan Ariely, who's a behavioral economist at Duke University. And the thing is most people will cheat up until the point they think they're still honest. And my thing is I start a lot of presentations with a picture of a mirror. And it's like at the end of the day, You need to look in the mirror and see a good person. Now, that good person might not be as good as you thought. But you're like, I'm not a cheat. I'm not Bernie Madoff. I just took $10,000 this year. I didn't do a Ponzi scheme. And I paid for my kid to go to get tutored or whatever it is. Go to Disneyland. So, we all cheat to a little degree. So good.

It's just— you said that you wanted to become a behavioral psychologist. And for me, it seems like you're already there. Just out of curiosity for people who are watching this, how do you serve your clients?

Well, I kind of say I'm a fraud therapist on both sides of it. I talk to a lot of victims. I consult with them because a lot of times, This is a crime that some people, some police agencies, some law enforcement are like, well, if you could afford to lose $250,000, it's not our problem. We've got dead bodies, you know. Um, that's not the right attitude to take, but resources are limited. So I will consult when I will say, this is what the cops need. You need to provide this to law enforcement. Now, on the other side, I have defended people who have stolen because there is nothing worse than bad police work and overreach, and people's liberty is at, you know, peril. So I had a case where they, you know, charged a woman with stealing all sorts of stuff. She had receipts, and yeah, So on both sides, but I kind of like to say I'm a fraud therapist. And I have a one— I have a woman who just, bless her, and I'm not that way at all, uh, she wrote to me one afternoon on email. She saw something I posted online and I was on email and I immediately responded to her. She was on her way to check herself into a mental home because— a mental hospital because No one would listen to her. She thought she was going crazy and she didn't know where to turn. And I immediately wrote to her. I mean, she didn't— she told me this 3 years after the fact. I didn't realize it was quite that bad. But like, I'm there to kind of hold their hands and tell them that it does take this long. There's no CSI embezzlement. There's not an hour. People get really, really frustrated. If you're a victim of an embezzlement, you're like, why can't this be over? And I kind of guide them through the process.

Very cool. And how can they get a hold of you, Kelly, if they want to look you up and have a conversation with you?

Well, you very nicely put my little logo, pinkcollarcrime.com. I'm on LinkedIn, Kelly Paxton. I'm on Twitter. I love Twitter, @PDXCFE. And I also have kellypaxton.com.

So, I'm surprised you don't have a picture of yourself in a cape going, Kelly Paxton, PI.

Well, I do wear a lot of pink.

Oh, there you go. Hey, in the scope of things, how concerned should we be about time theft?

That's an interesting thing with whole COVID and everything. There's a lot of people working remotely. Time theft can be an issue because law enforcement doesn't want to deal with time theft. They consider it to be a management issue. But people are working remotely. But it also, we've seen studies that show that people are actually working more hours than 40 hours in the office. So again, it's the culture. Are you going to be emailing your employees at 3:00 a.m.? Like, they're not going to like it. So, time theft. They need to see you doing the work. So, if you're out gallivanting and going to the South of France and cars are Black Ubers picking you up and they're taking a yellow cab. And again, it's a lot culture tone at the top.

Playing golf every afternoon.

Yeah, exactly.

I saw a stat this morning as we were getting ready to to do this podcast. And I haven't been able to find any current— the last piece of content I found was in 2019 saying that from 2018 to 2019, that the amount of employee thefts and fraudulent activity have gone up to almost double. Have you seen anything from 2019 to now through COVID? Have you seen Anything that is saying that we're on an increase?

So, Warren Buffett, who I think we all would agree is pretty smart, says, when the tide goes out, we'll see everyone who's not wearing shorts. So, when money is— when there's a lot of money coming and there has been from COVID and relief and all that sort of stuff, people don't pay attention. When things get tight and I was just at this fraud retreat and most The professionals there think that— I don't want to say that our recession word is coming. But we've kind of been in a boom cycle. And eventually, things go boom and bust. And when things do get a little tighter, people look closer. So, that's kind of when our work increases. People also— there's a thing in behavioral science. If you're not working next to each other. So, you're working remotely. That rationalization, it is easier to cheat and steal because your boss isn't looking at you. And there's work Ariely has done that shows that cheating increases when— and you know this from casinos. Casinos don't have you pay with cash. It's chips because mentally, that's a different feeling. Remote work is a different feeling. You're like, so there's a lot of companies who have decided to be generous and give like a $1,500 allowance to set up your home office. Well, fakereceipt.com, you can go on and say that you bought a $1,200 desk and instead you bought one for $12 on Facebook Marketplace. So, people are gonna— we feel that there's going to be an increase in discovery of the Because the tide, because the water levels dropped, you can see.

That's so cool. Hey, I'd like to talk a little bit about some cautionaries and we'll do that after this.

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This has been an absolute fabulous conversation. I am speaking with the author of Embezzlement: How to Prevent, Detect, and investigate pink-collar crime. Kelly, tell us a little bit more about your new book.

Well, so here it is. It's in pink.

It's pink.

It's kind of funny. My daughter calls it a pamphlet and I'm like, it's not a pamphlet. It's over 100 pages. And it kind of goes towards our attention span has gotten shorter. And I just ordered a book by a lawyer on ethics that is like this big. And I'm like, I'm not going to get through it. This book you're going to get through and there's examples. So, I have a lot of examples. I have citations. You know, there's like pink versus white-collar crime. You know, the background, the fraud triangle, right? All about the fraud triangle. How do they do it? I don't want anyone to become a pink-collar criminal, but you could figure out how to do it from my book. You know, the difference between corporate fraud and healthcare fraud. And then also, what happens after? This is so important. I don't like to be negative. And I will say that everyone I have dealt with, victims and suspects, When the gig is up, there is something good. There is a silver lining. The woman who reached out to me who was you know devastated and ready to check herself into a mental hospital, she actually got restitution, which is very unusual. But their business has increased a huge amount. Another woman, Cheryl Obermiller, who owned a construction company. She's tripled her business since this happened because it made them a better business person after it. So, the book I like to say is just kind of like, it's little snippets and they're all real stories. And it's an easy afternoon read. And you can get it on Kindle because are you going to walk into your office carrying this book and have your employees see it? Like, I kind of think there's this little embarrassment factor of that. So, you can do it on your Kindle too.

Well, and I thoroughly encourage people to get your book and read it. And while you're reading it, I want you to hum the Mission: Impossible theme song. Any kind of cautionaries? We've been talking a lot today. You've given us a lot of hints. A lot of things become self-evident when you pinpoint the problem. Are there any cautionaries when people are dealing with fraud or employee theft in the workplace?

Well, I call some certain things pink flags. One is make your employees take vacations and real vacations, not 2 or 3 micro-cations that the sort of younger generation does. You need people to be cross-trained. So, if you're gone for 2 or 3 days, no one's going to cover your work. But if you're gone 2 weeks, yeah, someone's got to cover your work. Goes through your mail, goes through your email, stuff like that. So many cases get discovered when someone either ends up going on vacation or gets sick, hospitalized, gets in a car accident. So, it seems silly but you need vacation time. And yeah, another thing is you got to be the first one to get to your mail. Whether it's your home mail or a PO box you control, I can get a bank statement, and if you have $1,000, I can make it look like a million dollars. Trust but verify. I have all sorts. You can't see it; it's on the back of my computer. I have a sticker: trust but verify. The fat finger caper: a woman knew that she had written a check. To ABC Company for $2,500 to XYZ Company for $4,000. She's going online and online, it says check 102, $2,500. Check 103, $4,000. Well, she accidentally clicks the fat finger caper, view image. The check to ABC wasn't ABC. It was to her office manager. She had changed it. So again, she had for over a year, she ran a mental tally, $2,500, $4,000. She knew that she had signed those cheques. She didn't realize was that the person changed the name. It's not that hard. Again, it's not rocket science. Yeah.

And now, we have all sorts of image editing software that's able to make stuff happen. So, This has been absolutely phenomenal. And you have so many different stories about this. I do encourage people to get your book to keep up on those stories. Do you have any last thoughts about what we're talking about today?

This one is I love. It's called the parking lot audit. And I have to give a shout out to a colleague of mine, Deanna Sullivan. I called it, just look out the window. And there's a guy who lives about 2 hours from me. He looked out the window one day. And he saw his administrative assistant. We'll call her— oh wait, what? Her name is Rhonda. And she pulls up in a brand new Cadillac Escalade. And he's like, hmm, I know what I pay Rhonda. And he decides to start listening to Rhonda. And Rhonda starts talking about her horses and her stables. And so, he started digging. If the car doesn't match the salary, You might want to pay attention. That's the parking lot audit.

Wow!

Yeah, and so the same thing goes with devices. All of a sudden, people are buying new MacBook Pros or coming in with all sorts of gizmos. That's brilliant. Parking lot. Kelly, thank you so much. This has been a tremendous conversation. I really enjoy you sharing your passion and your expertise with us. Could you just remind everybody one more time how can they get in touch with you?

pinkcollarcrime.com, kellypaxton.com, or I'm Kelly Paxton on LinkedIn.

Wonderful! Thank you again, Kelly. This has been brilliant. Brilliant, I tell you! Why don't you let me know if this was of value to you? As always, my offer stands. If you would like 30 minutes of my time to brainstorm your business with you and your team, please feel free to book a time that works for you on my online calendar. The link is in the show notes. It's the one marked meetwith.marchaine.com. It would be my honor to be of service to you. And why don't you go ahead while you're here with us and leave a comment or a review about this episode? I'd love to get your feedback. Was this of value to you? Did you learn something? What was your big takeaway? Thanks again for joining me today. My name is Marc Haine. I hope you stay safe. Stay well. Stay healthy, and I hope you dare to be the exception.