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April 29, 2014

Undercover operations receive a lot of the “Hollywood treatment” in movies and television. Characters like James Bond or Jack Bauer of “24” infiltrate the international workings of master criminals looking to rule the world. In the corporate world, undercover work may be less “glamorous” but it is essential for many companies to use this form of internal investigation to discover and solve problems that may be costing them millions of dollars.


What Does "Undercover" Mean in Business?

Simply put, conducting a corporate investigation using someone undercover is done so that the person can observe a department or operation and learn about the issues which might be having a large impact on the company. Hired as a “regular” employee, the undercover agent will blend in, interact with other employees, and act like an every-day person on the job. However, their main purpose will be to study the operation and see where there are problems. Generally, a person undercover gains the trust of other employees and gets the “real deal” from them, which they then report back to company management.


Why Have Someone Undercover?

In large companies, there are so many “moving parts” that it is nearly impossible for managers and executives to know everything about the company’s operations. Even though they might study warehouse ledgers, shipping and receiving documents, P&L statements, and HR reports, this doesn’t necessarily mean they will have a realistic grasp of how the company operates. Compounding that level of disconnection is the fact that a lot of employees, even when they see something going on that is in violation of company policy, or the law, will not say anything for fear of retribution. Someone undercover operates without that fear and, in fact, is there for just that purpose. We are called into companies to do undercover investigations for a variety of purposes but they can be classified into three general categories: intelligence gathering, illegal drugs, and theft investigations.


Ground Level Intelligence Gathering

Many times, companies use undercover agents just to determine IF they have any problems. While things look fine at the management level, executives still want reassurance that the operation is running the way it should. And many times, issues/problems are discovered that were previously unknown. We had a client who shipped a lot of product out of its warehouse. The managers in charge of overseeing the operation reported overtime was up because of the increased shipments that required additional work. However, those looking at the numbers said the overtime wasn’t needed since the shipping level should have been handled within normal work hours. They assumed that product was being stolen, which is why they needed investigative services to determine the issues. The key suspects were security guards. However, when an undercover agent was put into the shipping facility, he developed trust among many of the loading dock workers. They shared with him a glitch in the computer system that allowed them to manipulate the numbers so that it looked like overtime was required, meaning more money for them. It exposed a lack of checks and balances through which, if someone was properly managing the flow of shipments, they would know that the numbers just didn’t make sense. We will explore the many areas of intelligence gathering for which undercover personnel is a valuable tool in later posts. However, many times what is uncovered by these operations surprises management. One of the most common shocks is learning about illegal drugs in the workplace.


Uncovering Drug Operations

Each situation regarding illegal drug sales and consumption within company operations is unique. It can happen at any level of the company or in any part of the operation. It might involve just a few employees or dozens. Discovering the drug operation is only part of the undercover work. Gathering enough evidence to truly be able to eliminate the problem takes time. When law enforcement is brought into the mix, then the investigation is raised to a higher level of complexity since their goal, unlike a company’s, is the conviction, not termination. Drug dealing can also be a dangerous business steeped in guns and violence, while employee dependence on drugs has an impact on productivity. That being said, an undercover agent has one decided advantage when attempting to find a drug operation when compared to identifying other crimes. That advantage is greed. People selling drugs want to do just that...sell drugs. So, if a willing buyer approaches them, it means more money for them. Finding out about the drug operation is only part of the solution. The undercover operative also needs to investigate how many people are involved, to what level in the company does knowledge of this operation extend, how the operation works and what outside entities are part of the activities. It is especially important to include law enforcement for this latter element since the outsiders are likely perpetrating crimes elsewhere which, while not affecting the company, are still part of the investigation. It is at this point the company needs to assess the balance of wanting to be helpful compared to the rising costs of an extended investigation. Generally, we find that companies want to be helpful and do what they can to assist law enforcement. However, sometimes there are factors at play that cause the company to pull out of the investigation. Of course, this is the company’s prerogative, but it could result in law enforcement not having enough evidence for a conviction. As a result, they might be hesitant to invest resources in any future investigations at the company.


Theft Is a Tough Nut to Crack

There are generally two types of theft operations: overt and covert. An overt theft is relatively simple and usually does not involve large amounts of products. An example is a worker pulling his car up to the warehouse late at night and loading it with the product. For the most part, these thefts are for personal use or small-scale selling. Since not much thought goes into the crimes, the perpetrators are more easily caught. Covert operations are the opposite. They can be well- planned, well-executed and involve many people at multiple locations inside and outside the company’s business. We had a client that managed a large network of hospitals. Employees at various outlets in the network, including nursing homes, were involved in the theft ring, resulting in tens of thousands of dollars of stolen items. Sometimes with a theft operation, just having an undercover person inside is not enough. We bring in our surveillance team so that crimes can be witnessed and recorded. “Buys” are set up in advance and the surveillance team is alerted to be ready so that it can be documented for evidence. As with drug operations, working with law enforcement could extend the length and cost of the investigation since breaking up a theft ring could require setting up several expensive “buys” and funding the cost of the internal investigation longer.


Surprising Benefit: Boost in Morale

It is said that “one bad apple should not spoil the whole bunch.” When there are problems at a company, whether it be the types described above or others, they could have negative effects on employees: worker safety is threatened, job satisfaction is diminished and/or faith in the company is weakened. Even when the activities are discovered and stopped, once employees learn of the undercover operation, it might shake them up a bit. They might think that “big brother is watching.” We stress the importance of talking directly with employees about why the undercover initiatives were undertaken. If communicated openly that the undercover activities were initiated to counter the negative impact the illegal or harmful operations had on the “good” employees; it can result in a boost in morale. 

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