IN 2009 LOSSES from retail theft and fraud exceeded £4bn – or £68 per person in the UK!
A substantial proportion of the theft and fraud is done by staff, but the process of bringing a criminal prosecution is time consuming – and hence expensive – for the retailer, so there is a tendency for the employer to simply dismiss the employee and turn their back on the problem.
But when retailers do decide to support a criminal prosecution, just what does their evidence prove? As an expert witness I often find that it is less than convincing! Was the stock missing?
In the case of R-v-TS the retailer alleged that they had undertaken a series of fraudulent refunds. They supported their case with a claim that they could prove that the stock had not been returned by the customer since stock-takes showed an error rate of less than 2%. But my analysis revealed a very different story: for 41% of items they had too few and for 39% they had too many – which is where their 2% error rate came from. So, with just 20% of items having the correct stock levels, how could they even hope to prove that the stock was missing? The case was never taken to court.
What did the CCTV really show?
When a retailer’s CCTV system showed DW accepting payments from customers without recording the transaction through their EPoS (electronic point of sale) terminal, it was alleged that he then pocketed the money. But I found CCTV evidence of the store manager doing exactly the same thing and he was the person who reconciled the cash at the end of the day! DW was found not guilty.
When NM was accused of 60 fraudulent cash-back transactions (worth £3,000) I pointed out that the prosecution had served only four short extracts from the CCTV system, but on the day she was arrested they could have preserved a complete 30-day history.
She pleaded guilty to the four, valued at £200, and the remaining 56 were dropped.
Are computer-generated reports always correct?
Most of the information processed through EPoS terminals is retained by the computer system and the reports produced from that system can be very persuasive to a jury. We have come to regard computer printouts as being reliable evidence, but this is not always the case.
Two brothers who ran a convenience store were accused of knowingly accepting fraudulent debit cards to the value of more than £150,000. The prosecution’s expert witness referred to a 120,000-line computer report, but that report was not actually served on the defence until part-way through the trial. The defendants were found guilty but then released on appeal when I was able to show that the report was inaccurate.
To quote the Appeal Court judge: “This important piece of evidence was in fact valueless and should have played no part in the deliberations of the jury.”
Can user IDs and passwords be relied upon? When any member of staff used the EPoS terminal at a particular footwear retailer they signed on using a twodigit ID – which was printed on the receipt and known to everyone else – and a four-digit password, in the same format as a bank card or credit card PIN – which should have been secret.
When the company realised that there had been 49 fraudulent transactions (total value in excess of £1,500) in a single shop in the space of a few weeks, they identified that all of the transactions were linked to a single employee’s ID.
A vital question was: Could the prosecution rely on the use of this employee’s ID and password to prove that she did the transactions or could her password have been compromised and used by someone else? The prosecution’s expert sought to show that the password was secure, but I successfully challenged that and the young lady was found not guilty.
Can forensic accountants count?
Sometimes, even the obvious things can catch out the unwary. So I have two questions to ask:
1: If you went shopping for some eggs how many would you buy?
Your answer is probably 6, 12, 15 or 18.
2: How many did the retailer sell you?
If you answered 6, 12, 15 or 18, then I suggest that you are wrong. The retailer almost certainly sold you one box!
When the SFO’s accountant analysed the retailer’s business, it appeared to show that 600,000 items had been purchased but only 100,000 of them had been sold. He concluded that the remaining 500,000 had been ordered and paid for but never received.
That pointed to a conspiracy between the retailer’s buyer and the supplier to defraud the retailer of about £7.5m. My report explained that, as the item was sold in boxes of six, it was possible that the apparent discrepancy could have been caused by different ‘units of measure’ being used for buying and selling. The charge was subsequently dropped by the SFO.
If each of us is paying £68 more than we should for the goods that we buy each year, isn’t it about time that retailers were encouraged to prosecute more of those who are responsible?