White Collar Crime

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467 2013

10.1016/B978-0-12-385057-7.00018-X

Selected Security Threats of the 21st Century

OBJECTIVES

The study of the chapter will enable you to:

1. Gain knowledge of specific security threats not assigned to chapter level coverage.

2. Know the extent of the specific security problems and identify some of the security strategies used to reduce company or personal exposure.

Introduction The preceding chapters highlighted some of the most important aspects of the security and loss-prevention field. The discussions in the past few chapters centered on security in areas such as terrorism, retailing and transportation/cargo security, and on the devices and tech- niques used to reduce potential losses. This chapter examines several of the security threats common to many businesses. Although these threats are common to many businesses in the United States, they are not necessarily vulnerabilities, with one possible exception, that will be faced by every firm.

Economic/White-Collar Crime Today, the concept of white-collar/economic crime is familiar to most of us. The deceptions of executives at Enron, WorldCom and Martha Stewart and Bernie Madoff made the news as we entered the 21st century. Along with the corporate misconduct of these enterprises, accounting giant Arthur Andersen was humiliated (and ultimately ruined) in its alleged fail- ure to apply proper accounting practices in its dealing with Enron. The junk-bond market and insurance scams are regularly reported in the news media. Ivan Boesky and other names are familiar for their involvement in various financial scams. We know that white-collar crime is against the law, yet there is no legal definition for it, and it does not appear as part of the crimi- nal code (although some of the crimes committed by white-collar criminals are codified—for example, embezzlement). The Federal Bureau of Investigation (FBI) has defined white-collar crime as “those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence. Individuals and organizations commit these acts to obtain money, property, or services; to avoid payment or loss of money or services; or to secure personal or business advantage.”1

Fischer, R., Halibozek, E., & Walters, D. (2012). Introduction to security. ProQuest Ebook Central <a onclick=window.open('http://ebookcentral.proquest.com','_blank') href='http://ebookcentral.proquest.com' target='_blank' style='cursor: pointer;'>http://ebookcentral.proquest.com</a> Created from apus on 2020-08-22 20:32:58.

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http://dx.doi.org/10.1016/B978-0-12-385057-7.00018-X

468 INTRODUCTION TO SECURITY

Government and the private sector keep declaring war on white-collar crime, yet they have failed to define what they are fighting. The problem is that white-collar crime is a social abstraction, not a legal concept. Morality and society’s commitment to equal justice are more a part of the white-collar crime issue than is a true legal definition. While some white-collar crimes are violations of criminal laws, others are violations of regulatory statutes and general standards of moral conduct. The most recent addition is the Sarbanes-Oxley Act of 2002, which addresses securities fraud. Corporate executives and auditors now face prison time if they knowingly submit false financial reports, alter or destroy records or fail to maintain a proper audit trail. Furthermore, most major corporations (including for-profit and non-profit) have instituted corporate ethics programs designed to ensure all employees, including those with fiduciary responsibilities, understand their obligation to comply with company policy, defined standards of conduct, government regulations and the law.

Still, the way corporate “wrongdoers” are handled appears to be lax, as borne out by the frequent lack of harsh penalties faced by executives at Enron, Arthur Andersen and Martha Stewart. A good example is the Credit Suisse First Boston settlement. Accused of a perva- sive scheme to siphon tens of millions of dollars from customers’ trading profits in 2000, the Securities and Exchange Commission noted that the company had failed to observe “high standards of commercial honor” and fined them $100 million dollars. Still, no one was charged with a crime.2 Conversely, after pleading guilty to 11 federal crimes including securities fraud, money laundering, and theft from an employee benefit plan, Bernie Madoff was sentenced to 150 years in prison and $170 billion in restitution. Clearly, his penalty was deservingly harsh.3 Executives generally do not go to jail. According to a University of California Irvine and New York’s St. John’s University study, executives who stole more than $100,000 got an average of 36.4 months in prison, while burglars received an average of 55.6 months, car thieves, 38 months, and first-time drug offenders, 64.9 months. Ironically the total cost from all bank robberies in 1992 totaled $35 million, about 1 percent of the estimated cost of Charles Keating’s fraud at Lincoln Savings and Loan.4

While we are familiar with traditional white-collar crime activities, the newest entries, compliments of a shrinking global environment, are transnational white-collar scams. Criminals, terrorists, warlords, and drug-barons can reach freely around the globe. According to Michael Robert, editor of Threat Level, a newsletter devoted to corporate security issues, “Mafia-like organizations are springing up like daisies all through what used to be the Warsaw pact.”5 Perhaps one of the best-known activities in this area is the Nigerian money scam. The Nigerian money scam is a fraudulent scheme designed to extract money from residents of affluent nations, primarily Europe and North America.

Definitions

Edwin H. Sutherland made the first mention of white-collar crime as a concept in 1939 at an American Sociological Society conference. He defined white-collar crime as “an offense committed by a person of respectability and high social status in the course of his [or her] occupation.” In 1970 Herbert Edelhertz presented a newer and perhaps more descriptive

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Chapter 18 l Selected Security Threats of the 21st Century 469

definition: an “illegal act or series of acts committed by nonphysical means and by traditional notions of deceit, deception, manipulation, concealment or guile to obtain money or proper- ties, to avoid the payment or loss of money or property, or to obtain a business or personal advantage.”6 Edelhertz’s definition has been widely accepted because it relies more on the actions of the perpetrator than it does on the economic social status. By including regulatory issues as well, there is also no restriction to criminal offenses in his definition. Experience has shown that white-collar offenses are not limited to the rich and powerful and that the offenses need not arise out of the context of one’s occupation.

Regardless of which of the definitions one chooses for white-collar crime, the concept today has the following common elements:

1. It is an illegal act committed in the context of a lawful occupation. 2. It generally involves deceit, deception, manipulation, and breach of trust. 3. It does not rely on physical force. 4. It has the acquisition of money, property, or power as the primary goal.

Impact

Although the crime itself may be nonviolent, the end result could be violent (an industrial plant knowingly allows carcinogenic waste to pollute water; a pharmaceutical corporation knowingly sells a weight-loss drug that has potentially harmful effects on the heart). Thus, the nonviolent statement is only appropriate to the means of delivery or action necessary, not to the end results. As Gilbert Geis says, “corporate criminals deal death not deliberately, but through inadvertence, omission and indifference.”7

The exact extent of white-collar and economic crime is difficult to establish. A lack of standard classifications and definitions coupled with limited reporting of workplace crime contributes to the problem of accurate measurement. Over the past 25 years, five studies have identified the need for indexes to measure economic crime and its true impact on society accurately. But there is still no progress! “Security executives told the Hallcrest research staff that their companies’ incident or crime loss reporting system was incomplete or nonexistent.” One key security executive with one of the nation’s largest corporations said, “We probably know of only 1 fraud out of every 10 that is occurring or has occurred.”8

White-collar crime will continue to be a growing problem into the 21st century. A rela- tively recent $1.1 million loss was the result of collusion between the contracting company vice president and the security firm vice president. Even security is not immune from white-collar crime problems.

Burglary and Robbery Burglary and robbery have remained, in terms of the number of incidents, two of the most persistent crime problems in the United States. All types of establishments are subject to their attack, but certain businesses are more prone to these crimes than are others. Obviously banks and retail stores have more to fear from robbery than do manufacturing firms. Before

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470 INTRODUCTION TO SECURITY

discussing these two problems, we should define them; far too often people use the terms burglary and robbery interchangeably. Burglary is committing a crime through stealth by entering a building or other structure. In most cases, the crime committed is larceny (theft), but burglars also commit rape and arson among other felonies.

Robbery, on the other hand, is a crime of force or threat of force. While burglars do not like to confront people, robbers work by creating fear or by forcing people to give up their property. Although burglary may involve different kinds of crimes, robbery is strictly a crime comprising only two offenses—theft and assault and battery.

Statistics presented in the Uniform Crime Report (UCR) indicate that the growth of these two crimes has decelerated; however, both are difficult crimes to deal with. Robbery has the potential of physical harm that all firms must consider. Burglary has the problem of insolvability because less than 2 percent of all burglary cases are solved, and the recovery rate for stolen property is less than 4 percent.

Burglary

According to the FBI’s UCR, burglary accounted for over 23.8% of all property crimes in 2010 with an average loss of $2,119 per incident.9 Even though the number of incidents has decreased over the past two decades, burglary costs Americans billions of dollars annually. Because burglary is the most frequently occurring crime, it is essential that every business take particular care to protect itself against this form of crime.

The Attack

A burglary attack on a retail establishment is similar to such attacks on other types of facilities except that the job of the burglar is simplified by the ease with which the premises can be inspected before the attack. The physical layout, store routines, police patrols, and internal inspections (if any) can be easily assessed by a burglar posing as a customer. For a more exhaustive survey, the burglar might even pose as a building or fire inspector and make a minute examination of alarm installations, safe location, interior lock construction, and every other detail of the defenses.

Assuming a weak point has been found, the burglar enters through a door or window, through the roof, or possibly from a neighboring occupancy. Most successful burglaries (and more than 90 percent of detected attempts are successful) are made without forced entry. Curiously enough, the greatest numbers are made through the front door or main entrance.

A considerably smaller number of burglaries involve the stay-in who gathers the loot then breaks out and is gone before the guards or police can respond to an alarm.

Merchandise as Target

Most burglaries involve the theft of high-value merchandise, although any goods will do in the absence of the big-ticket items. Police reports repeatedly show the most astonishing variety of goods that have been targeted by enterprising thieves. Anything from unassembled cardboard

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Chapter 18 l Selected Security Threats of the 21st Century 471

cartons to bags of flour is fair game. Obviously such merchandise would hardly be considered high-risk assets, but it cannot be overlooked because possible burglars of loot come in all sexes, races, and sizes and what may seem to one as cumbersome and unprofitable may be remarkably appealing to another.

Cash as Target

Cash is naturally the most sensitive asset and the most eagerly sought, but because it is usually secured in some manner, it represents the greatest challenge to the burglar.

Stores keeping supplies of cash on hand are particularly susceptible, especially before payday. If such stores customarily cash payroll checks as a service to their employees, a burglar can assume that adequate cash must be on hand in anticipation of the next day’s demands. Particular care must be taken in such cases if there is no way to handle cash needs other than to store it on the premises overnight. Every other avenue should be explored before the decision is made to keep substantial supplies of cash on hand overnight.

Because any cash will normally be held in a safe, it requires some degree of expertise to get at it. Boring, jimmying, blasting, and even carrying away the entire safe are the methods most commonly used. Few burglars are sufficiently skilled to enter a safe by manipulation of the combination, so applied violence is the normal approach. Unfortunately, even in cases where an attack is unsuccessful, the damage to the container is likely to be severe enough to require its replacement. This is equally true in all areas where entry is made or attempted. The high cost of repairs of damage to buildings and equipment can be almost as harmful as the loss in cash or merchandise.

Physical Defense against Burglary

Burglary defense has been widely studied for years, and several strategies have been devel- oped to combat this crime. The most common approach is referred to as target hardening. Simply speaking, this means that the basic security precautions outlined in the preceding chapters are applied to the facility, including attention to door construction, locks, alarms, and surveillance devices.

It is always wise to let potential burglars know that the facility is well protected. In most cases, a burglar will avoid facilities where the chance of getting caught is great, and instead seek out other locations that are not as well protected.

Another defense against burglary that has met with some success is “reducing the value of merchandise.” This approach usually includes marking company property with company identification tags or recording serial numbers that are easily traced. Because many fencing operations will turn away merchandise that is well marked and thus identifiable, burglars prefer merchandise that has no identifiable numbers.

In addition, some communities have developed “sting” operations—that is, fencing operations run by law enforcement officials. These operations require large outlays of cash but have proven effective in closing down major theft rings. Firms suffering substantial losses from theft should consider working with local officials in developing sting operations.

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472 INTRODUCTION TO SECURITY

Alarms Alarms of some kind can make the difference between an especially effective program and one that is providing only minimal protection. The type of alarm providing the best results is a mat- ter of some disagreement, but there is little disagreement over the effectiveness of having some kind of system, however simple. Several alarm systems are covered in Chapter 10.

Many stores report satisfaction with local alarm systems. They feel that the sound of the signaling device scares off the burglar in time to prevent the looting of the premises. Many police and security experts feel such alarms are ineffective because the response to the sig- nal is only by chance and because such a device serves to warn the intruder rather than aid in capture. Because most managers are less interested in apprehending thieves than they are in preventing theft and because local systems are inexpensive and can be installed anywhere, they continue to be widely used. Certainly they are preferable to no alarm system at all. With the relatively inexpensive dial alarm systems and national central station paid services, many retailers and homeowners have replaced older, less reliable systems with new state-of-the art technology.

Whether the outer perimeter should be fitted with alarms and whether space coverage alarms should be used is a matter peculiar to each facility. This must be carefully studied and determined by the manager. But it is always important to have the safe fitted with an alarm in some way.

Safes The location of the safe within the premises will depend on the layout and the location of the store. Many experts agree that the safe should be located in a prominent, well-lighted position readily visible from the street where it can be seen easily by patrols or by passing city police. In some premises—especially where no surveillance by passing patrols can be expected—it is generally recommended that the safe be located in a well-secured and alarm-rigged inner room that shares no walls with the exterior of the building. Floors and ceilings should also be reinforced. The safe should be further protected by a capacitance alarm. The classification of the safe and the complexity of its alarm protection will be dictated by the amount of cash it will be expected to hold. This should be computed on the maximum amount to be deposited in the safe and the frequency with which such maximums are stored therein.

Basic Burglary Protection Obviously the amount of protection and the investment involved in it will depend on the results of a careful analysis of the risks involved in each facility. There is no single way—no magic solution to the problem of burglary. Every system and each element of that system must be tailored to the individual premises.

Managers must evaluate the incidence of burglary in their neighborhoods as well as the efficiency and response time of the police. They must consider the nature of the construction of the building and the type of traffic in the area. Consideration must also be given to the ease with which merchandise can be carried off and by what probable routes. Managers must con- sider the reductions in insurance premiums provided by various security measures. The advice

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Chapter 18 l Selected Security Threats of the 21st Century 473

of city police in antiburglary measures and their experience in analogous situations should be sought out. In short, retailers, home owners and other businesses owe it to themselves to learn as much as they can about coping with the problem of burglary and dealing with it as force- fully, economically, and energetically as possible.

Robbery

Although the number of robbery incidents has declined, robbery remains a serious crime because of the potential harm to its victims. Firearms were used in 41.4 percent of the robberies for which the FBI’s Uniform Crime Reporting Program received additional informa- tion in 2010. Furthermore, in another 16.7 percent of robberies, cutting instruments and other dangerous weapons were used.10 Deaths in convenience store holdups make this point all too clear! However, convenience stores have taken a proactive approach to robbery reduction. According to the Bureau of Justice Statistics, the overall rate of robbery has remained relatively low since 1973.11 Attention to the following points is credited with most of the reduction:

l Employee training programs. l Proper cash control, extensive use of “drop” safes with signs noting that there is no more

than $50 in the register during the day and $30 at night. l Visibility measures, including proactive work with police agencies offering police

substations in conjunction with store operations. Other programs allow police to write up reports at convenience stores.

l Use of technology, for example, closed-circuit TV (CCTV) and silent panic alarms.

Aside from private individuals, retailers and banks take the brunt of these attacks. Because less than a third of all robbers are arrested, retailers are obliged to take measures to protect themselves from this most dangerous crime.

The Nature of Robbery The incidence of robbery varies only slightly according to geographical location, and the occurrence of such incidents is fairly constant throughout the week. The daily peak of robberies is at 10:30 p.m. Those stores remaining open all night, however, suffer the majority of robberies between midnight and 3:00 a.m. More than 90 percent of the money stolen is taken from cash registers, and 8 out of 10 robbers are armed with handguns. Eight out of 10 assailants are generally under 30, and of these, the vast majority is male. Although weapons are used (or the threat of harm), violence is generally carried out in less than 5 out of 100 cases. Eighty percent of the fatal cases occur in situations in which store personnel did nothing to motivate the attack. And while a lone robber carries out 60 percent of all robberies, 75 percent of the death or injury occurrences take place in situations involving two or more robbers.

We thus find that the robber is most apt to be a young man working alone, carrying a pistol, and threatening employees with bodily harm unless they hand over the money from cash reg- isters. He rarely carries out his threats—probably because the employees wisely comply with his demands—unless accompanied by a partner, in which case he is very likely to cause death

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474 INTRODUCTION TO SECURITY

or injury without provocation. The deaths of convenience store employees during holdups with multiple assailants clearly illustrate this trend.

Robbery Targets Robbers are typically criminals making a direct assault on people responsible for cash or jewelry. Their targets may be messengers or store employees taking cash for deposit in the bank or bringing in cash for the day’s business. Robbers frequently enter stores a few minutes before closing and hold up the managers for the day’s receipts, or they may break into stores before opening and wait for the first employees, whom they force to open safes or cash rooms. In some cases, managers or members of their families have been kidnapped or threatened in order to coerce access to company cash.

Delivery trucks and warehouses can also be targets for robbers. These latter cases require several holdup people working together, and they are a very real threat and do occur. The majority of cases, however, are still carried out by the lone bandit attacking the cash register.

Businesses most frequently attacked are supermarkets, drugstores, jewelry stores, liquor stores, gas stations, and all-night restaurants or delicatessens.

Cash Handling Probably the major cause of robbery is the accumulation of excessive amounts of cash. Such accumulations not only attract robbers who have noticed the amount of cash handled but they are also more damaging to business if a robbery does occur.

It is essential that only the cash needed to conduct the day’s business be kept on hand, and most of that should be stored in safes. Cash should never be allowed to build up in registers, and regular hourly checks should be conducted to audit the amounts each register has on hand.

Every store should make a careful, realistic study of actual cash needs under all predict- able conditions, and the manager should then see to it that only that amount plus a small reserve is on hand for the business of the day. Limits should also be set on the maximum amount permitted in each register, and cashiers should be instructed to keep cash only to that maximum. Overages should be turned in as often as necessary and as unobtrusively as possible.

In large-volume stores, a three-way safe is an invaluable safety precaution. Such safes pro- vide a locked section for storage of 2 or 3 hours’ worth of money that may be called on for check cashing or other cash outlays. The middle section has a time lock that is not under the control of any of the store personnel and has a slot for the deposit of armored-car deliveries or cash buildups. Cash register trays are stored in the bottom compartment.

Movement of cash buildups from registers to the safes should be accomplished one at a time, and every effort should be made to conceal the transfer. This is particularly important at closing time when registers are being emptied. The sight of large amounts of cash can prove irresistibly tempting to a potential robber.

Cash-Room Protection If the store has a cash room, it must be protected from assault. Basic considerations as to loca- tion and alarming were outlined in the discussion on antiburglary measures earlier in this

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Chapter 18 l Selected Security Threats of the 21st Century 475

chapter, but an additional precaution to protect against robbery should also be noted. The room itself must be secure against unauthorized entry during business hours. If possible, a list naming those persons authorized to enter the cash room and under what conditions should be drawn up. It should be made clear that there are to be no deviations under any circumstances from these authorizations.

The door to the room must be secure itself and securely locked. If fire regulations indicate the need for additional doors, they should be equipped with panic locks and have alarms fit- ted to them. The entrance should be under the control of a designated person who, through a peephole or other viewing device, can check persons wishing to enter. In larger facilities, an employee at a desk outside the room can control entrance, although this arrangement should be studied carefully before implementation because a robber could force such an employee to permit entrance unless the position is protected from the threat of attack.

Opening Routine Because the potential for robbery is always present when opening or closing the store, it is important that a carefully prescribed routine be established to protect against that possibility.

At opening, the employee responsible for this routine should arrive accompanied by at least one other employee. The second employee should stand well away from the entrance while the manager prepares to enter. The manager should check the burglar alarm, turn it off, and enter the store. The interior, including washrooms, offices, back rooms, and other spaces that might offer concealment to robbers, should also be checked. After a specific, pre-estab- lished time, the manager should reappear in the main entrance and signal the second person with a predetermined code.

This code, which should be changed periodically, should be given both in voice and in some hand signal or gesture such as adjusting clothing or smoothing hair. One coded reply and gesture should indicate that all is clear; another should indicate trouble. It is important that this code be innocent and reasonable sounding to allay any suspicions on the part of robbers (if any are present).

If assistants get the danger sign, they should reply with something to the effect that they will return after getting a paper, checking the car, or buying a cup of coffee. The assistants should then proceed slowly and deliberately to a predetermined phone and call the police. In the past, experienced security experts all stress the value of a card with the number of the police station typed on one side and coins to make the call taped to the back. For lack of change, stores have been robbed. However, with today’s communications capabilities, virtually everyone carries a cell phone. Store personnel should consider maintaining local police and other emergency numbers programed in their cell phone contact file for quick access.

Transporting Cash Because a basic principle in robbery protection is minimizing cash on hand, money will neces- sarily have to be moved off the premises to a bank from time to time. Ideally this should be done by an armored-car service. If this cannot be done because of cost or unavailability of such ser- vice, efforts should be made to get a police escort for the store employee acting as messenger.

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476 INTRODUCTION TO SECURITY

In any event, messengers so assigned must be instructed to change their routes; they should also be sent out at different times of day and if possible on different days of the week. They should regularly change the carriers in which the money is stored. It might be anything from a brown paper bag to a toolbox. They should stay on well-populated streets and move at a predetermined speed. The bank should be notified of their departure and given a close estimate of the time of arrival.

Closing Routine Shortly before closing time, the manager should make a check of all spaces, similar to that conducted during opening. An assistant should watch unobtrusively for any unusual activ- ity on the part of departing customers. When all registers have been emptied and the money locked up, the assistant should wait in the parking lot and watch as the manager completes the closing routine. When the manager has checked the alarm and locked up, the assistant will be free to go. If the manager signals trouble during any of this routine, the assistant should follow the same routine as at opening.

Other Routines Because any entry into a store leads to a potential for robbery, it is important that the man- ager never try to handle it alone. There have been a number of instances where robbers have called managers and reported damage or a faulty alarm ringing in order to lure the managers into opening the store. They are then in a position to be coerced into opening the safe or at least into providing a bypass of the alarm system. If so notified, the manager should phone the police and/or the appropriate repair people and wait for them to arrive before getting out of the car. A manager should never try to handle the matter without some backup present.

Employee Training A fully cooperative effort by all employees is essential to any robbery prevention program. Properly indoctrinated employees will know how to use a silent, “hands off” alarm if such an installation is deemed advisable. They will learn to question persons loitering in unauthorized areas. They will be alert to suspicious movements by customers and will know what to do and how to do it if they are aware that a holdup is in progress in some other part of the store. They will remain cool and make mental notes of the robbers’ appearance for later identification. They will cooperate with the robbers’ demands to an acceptable minimum. They will not under any circumstances try to fight back or resist. If possible, they will hand over the lesser of two packs of money if that choice is open, but they will never do so if there is the slightest chance that the robbers will notice. They will remain alert to the possibility of robbery, and if they are involved in one, they will make careful observations for assistance in apprehending the criminals.

Robbery Prevention By incorporating some of the ideas already discussed in this chapter, several companies have developed robbery prevention programs. These are comprehensive plans designed to make stores less attractive targets for robbers, to protect employees, and to assist officials in apprehension.

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Chapter 18 l Selected Security Threats of the 21st Century 477

The primary goal of these programs is to make the store less attractive to potential robbers. One successful strategy has been to publicize the fact that the store has a robbery prevention program and does not keep large amounts of money in cash registers and that employees do not have the combination to the drop safe. Today it is not unusual to see large signs stating these facts placed in plain view in many stores. This program became essential to several major convenience store and gas station chains during the early 1970s when a rash of robber- ies left several employees dead, and the importance of such programs again dramatically came to public attention with the rash of slayings associated with convenience stores in the 1990s.

Cash register location has also been carefully studied. In general, it is advisable to locate cashiers in areas where they are visible from the street but where the register drawer and cash transactions are not easily observed by passersby.

Robbery prevention programs also stress the well-being of the employee. No cash loss is worth the death of an employee. Employees should be instructed to cooperate and not do any- thing that would make the robber resort to violence. Although they should cooperate, employ- ees should also be trained to be observant and to note any features and actions of the robber that might later help officials apprehend the robber. After a robbery has occurred, employees are often supplied with forms that ask for specific details about the robber’s appearance and voice and show pictures of various weapon types as an aid to identification. While it may not be pos- sible to describe a robber in the police jargon (for example, 6’2”, 200 lb, light complexion, dark brown hair), it is possible to use descriptive aids that will allow the police to develop such a description. Because many people are not practiced enough to guess someone’s specific height, such information is often not reliable. Employees can be trained, however, to match a person’s height to reference points in the store or to other people. For example, employees might notice how the robber’s height compared to their own or might observe that the robber came up to a certain point on a doorway. Weight and build might be better described by comparing the rob- ber with another person—perhaps the police officer or store manager. In addition, employees must realize that the best information concerning the robbery is the escape mode. Did the rob- ber leave on foot, on a motorcycle, or in a car? Only one employee should try to follow the robber after allowing the robber the time to get far enough away so that the employee is not in jeopardy.

As in the case of burglary, there is no absolute solution to the problem of robbery, but this does not mean that firms must accept robbery as a given of business. It has been shown that robbery attempts can be reduced by careful management procedures and by certain physical security measures.

Labor Disputes If a facility is faced with a deteriorating labor-management relationship during negotiation of a new union contract, it may be necessary to review those security measures designed to protect personnel and property during unusual periods.

With the passage of the National Labor Relations Act and the Norris LaGuardia Act in the early 1930s, followed by similar legislation in many industrial states, a change in strike profiles began that has continued to the present. Whereas violence occurs with significant frequency, it

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478 INTRODUCTION TO SECURITY

is not generally planned or used in a tactical way by modern management or organized labor. Still, in specific disputes and local situations, violence may be intentionally generated.

Spontaneous violence occurs in almost every strike situation except the most mild. Dealing promptly and effectively with these sudden crises is critical in preventing the entire mood and complexion of the strike from becoming violent.

Security’s Role

Security directors should review every element of the company’s strike plans with their depart- ments to ensure that the staff is totally familiar with the job to be performed and that every member of the staff is adequately trained to perform as necessary. They should be certain that all security personnel are aware of their role to protect personnel and property only and that they not participate in any way in the elements of the dispute, which is strictly between management and the participating union.

In clarifying policy and getting approval of specific plans of action from responsible manage- ment, foresight is indicated. The earlier the protection system is established, the better. Many ele- ments will require time and considerable concentration from those executives who will later be occupied with handling the labor problem and therefore may not be available for consultation.

A checklist of some possible measures is listed below as a guide to the development of a more thorough plan that will apply more specifically to a given facility.

1. Secure all doors and gates not being used during the strike and see that they remain secured.

2. Remove all combustibles from the area near the perimeter—both inside and outside. 3. Remove any trash and stones from the perimeter that could be used for missiles. 4. Change all locks and padlocks on peripheral doors of all buildings to which keys have

been issued to striking employees. 5. Recover keys from employees who will go out on strike. 6. Nullify all existing identification cards for the duration and issue special cards to workers

who are not striking. 7. Check all standpipe hoses, fire extinguishers, and other fire-fighting equipment after

striking workers have walked out. 8. Test sprinkler systems and all alarms—both fire and intrusion—after striking workers have

walked out. 9. Consider construction of barriers for physical protection of windows, landscaping, and

lighting fixtures. 10. Move property most likely to be damaged well back from the perimeter. 11. Be certain all security personnel are familiar with the property line and stay within it at all

times when they are on duty. 12. Guards are not to be armed, nor are guards to be used to photograph, tape, or report on

the conduct of the strikers. The only reports will relate to injury to personnel or property. 13. Notify employees who will continue to work to keep the windows of their automobiles

closed and their car doors locked when they are moving through the picket line.

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Chapter 18 l Selected Security Threats of the 21st Century 479

14. Consider the establishment of a shuttle bus for nonstriking employees. 15. Establish, in advance, which vendors or service persons will continue to service the

facility, and make arrangements to provide substitute services for those unwilling to cross the picket line.

16. Keep lines of communication open. 17. Because functional organizational lines may be radically changed during the walkout, find

out who is where and who is responsible for what.

Right to Picket

Federal and state courts, along with the Labor Management Relations Act, protect picketing on public property as an exercise of the right of free speech and free assembly. Although picket- ing is protected, there are established rules restricting both the purposes and methods used by picketing unions. The employer, nonstriking employees, customers, suppliers, service per- sonnel, management staff, and visitors have a right to enter and leave the business without obstruction. There is no right to picket on private property.

It is important to remember that union officials and pickets have the right to talk to anyone entering or leaving company facilities. On the other hand, the nonunion individuals, truckers, managers, etc. also have the right to not engage in conversation. There is also no law against passing out pamphlets or leaflets on public property.

The responsibilities of security generally do not involve pickets unless they extend onto company property. Pickets are usually the responsibility of public law enforcement.

Pre-strike Planning

The best place to begin handling a strike is long before one is anticipated. The company should have comprehensive written strike and work stoppage procedures. These policies should be reviewed annually. Education of all management personnel, especially security, is a must.

Law Enforcement Liaison

Because a portion of the responsibility in dealing with strikes falls on the shoulders of local law enforcement agencies, it is essential that security and police personnel understand each oth- er’s mutually supportive roles. At least one company person, usually security management or someone from human resources, is assigned as a liaison to ensure a common understanding of company roles and law enforcement expectations. Such relationships should be cultivated over time and not wait until a strike situation. Similar relationships should be developed with local fire, telephone, city services, etc.

Espionage Espionage usually brings about thoughts of spies sneaking into a company’s private vaults and copying or stealing formulas or products. Government spies, typified by James Bond, working in glamorous settings, retrieve government secrets. The reality is somewhat different, but in a world

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480 INTRODUCTION TO SECURITY

of increasing corporate competition and computer-based data storage, the problem of espionage is increasing. The spy’s tools may have transitioned to the computer and other sophisticated technology, but many of the people are Cold War participants, now working for private firms.

Still, the issue of what constitutes espionage can be gray. Competitive intelligence (which if not properly conducted can also be a form of industrial espionage) involves legal means of data collection. This ranges from analyzing publicity documents, schmoozing representatives to research on securities filings and news reports. It does not involve illegal means. The fol- lowing quotation from a 2001 Business Week publication illustrates the point well: “Companies that engage in corporate spying see a payoff in increased revenue, costs avoided, and better decision-making.”12

Research and development investment in the United States was about $174 billion for 1996. By 2010 research and development investment in the U.S. had more than doubled to nearly $380 billion, or 2.62% of nominal GDP.13 In 1994 the FBI reported that its economic counter- intelligence unit had information that nearly 50 percent of research and development firms had a trade-secret theft, and 57 percent reported repeat or multiple thefts. An employee most often accomplished the thefts. Director of the FBI Louis Freeh noted that the cost to U.S. busi- ness for all types of espionage was more than $100 billion annually.14 Corporations have gath- ered information on products, pricing, research, and corporate strategies for years from media reports, public financial statements, and other open-source research materials. In today’s mar- ket more and more companies seem to be turning to the dark area of industrial espionage. According to James Chandler, executive director of the National Intellectual Property Law Institute, “We have seen industry after industry collapse after losses of intellectual property.” An American Society for Industrial Security (ASIS) report found that 700 cases of theft of intel- lectual property at 310 companies were discovered during 1993.

Although espionage is not a new threat, the fall of the Soviet Union in the 1990s has prompted increased activity. The 2005 case of Hewlett-Packard executives spying on employees and each other and members of the press may be the current pinnacle of unethi- cal practices. In this case the espionage (spying) was used against their own people in an attempt to find out who was leaking company information to reporters. In a recent Amercian Management Association and ePolicy Institute survey of 526 companies 76% reported that they monitor website connections used by workers, 26% have fired workers for “misusing” the Internet and 6% have fired workers for misusing the office phones.15 Espionage (spying) can involve the disclosure or theft of many types of information. We tend to think of espionage involving information classifed under national security legislation and relating to political or military secrets. However, economic espionage where industrial, trade, and economic secrets are compromised or stolen is a real and growing threat and is practiced by private individuals and organizations as well as nation states.

Probably the most embarrassing case in recent years occurred in 1994, when the FBI arrested Aldrich Ames on espionage charges. Ames had been working for the CIA for more than 31 years and spying for the Soviet government since 1986. Ames passed secret CIA infor- mation on Russian agents working for the U.S. government to the KGB, resulting in the deaths of some compromised agents. Ames was paid millions of dollars by his KGB contacts during

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Chapter 18 l Selected Security Threats of the 21st Century 481

the years that he provided them with intelligence information. The case shows that any organi- zation can be victimized.

One of the biggest cases of industrial espionage was filed in December 1996 against a pur- chasing chief for General Motors after he defected to Volkswagen. The former GM employee is accused of taking thousands of pages of confidential documents, slides, computer disks, and price lists. Specifically, the former GM employee is accused along with two other GM associates of tak- ing plans for a superefficient car factory. VW recently opened a plant similar to the GM plan.16 VW has also been the target of espionage. In September 1996 the company discovered a night-vision video camera and satellite uplink transmitter hidden in its Wolfsburg, Germany, testing facility.17

The full extent of the problem is not known, because many corporations do not disclose problems. Companies fear that disclosure of problems will hurt their image with stockholders and customers. A recent survey of Fortune 1000 companies, conducted by ASIS, estimates that the theft of intellectual property may amount to more than $300 billion each year.18

Those cases that are known tell a story of great financial gain for the agency or company acquiring information, while the victim suffers bankruptcy in some cases. Ellery Systems Inc. of Boulder, Colorado, a software developer, went out of business when an employee allegedly transferred 122 computer files with source codes from Ellery Systems computers to his own start-up company. In 1994 Genetics, Inc. was the victim of a theft of a patented drug formula. FBI agents posing as Russian agents discovered the theft. The two thieves contacted the agents in an attempt to sell the formula.19

To counter these espionage trends, the U.S. House Judiciary Committee approved the Economic Espionage Act of 1996; the legislation was sponsored by the U.S. Justice Department.20 The Department of Justice has prosecuted several major cases since the intro- duction of the act. Insiders played a major role in the espionage cases providing information for pay to interested third parties. In one case an insider sold information to rival company Four Pillars Enterprises, Taiwan. The insider received a 6-month sentence while Four Pillars Enterprises was fined $5 million. This was the first case tried under the new law but not the last.

Following the implementation of the 1996 Act, the U.S. government has successfully pros- ecuted offenders with the most recent case occurring in 2007, where a naturalized American citizen of Chinese heritage was convicted of conspiring to export restricted defense technology to China. Chi Mak was employed by Power Paragon, a California defense contractor, part of L-3 Communications.21 The actual data he shared with foreign nationals was export controlled. The United States Arms Export Control Act places restrictions on the sale of certain technolo- gies with military applications. Such technology sales or transfers must have prior approval by the United States Department of State.22

In a 2004 presentation before the International Security Managers Association in Scottsdale, Arizona, Deputy Director Bruce Gebhardt highlighted the importance of dealing with economic espionage. Over $250 billion per year is lost in the theft of trade secrets and technologies. Counterfeiting of U.S. products by overseas competition costs at least the same. The number of countries now spying against U.S. companies has increased, with many coun- tries using students and business executives to gather information. However, approximately 75% of the cases involve company insiders.23

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482 INTRODUCTION TO SECURITY

Piracy While certainly not a new problem, the copying of copyrighted materials by unauthorized means is a problem that has grown with the increase in the amount of material produced for public consumption. A police raid of a private home in Queens, N.Y., in 1996 discovered more than 85,000 pirated cassettes. The operation was copying a Mariah Carey tape with the confis- cated value of $82,000 in cassettes and $30 million for 3 million labels.

According to the Recording Industry Association of America (RIAA), this one operation alone cost the recording industry more than $300 million in 1995. Overall the U.S. indus- try loses $200 billion from counterfeiting, according to the Better Business Bureau.24 This is up from $60 billion in 1988. In 1982 the loss was only $5.5 billion. However, the problem has become so prevalent and complex that in 2010 the Government Accounting Offfice (GAO) con- cluded it is difficult, if not impossible, to quantify the economic-wide impact.25

Advances in technology have made possible high-speed, high-quality duplication by pirates. Compact disks (CDs), either audio or video, are the medium most often copied. Even home computer owners have the ability to download and copy their own audio (CD) and video (DVD) with burners. In a statement made in November 2002, the RIAA chairman and CEO pointed out the growing problem of piracy of CDs in Mexico. The Mexican Supreme Court recently relocated to a quieter area in an effort to get away from the loud music being played by street vendors who were selling pirated CDs.26 Russia and China top the United States Trade Representatives list of piracy hot spots in 2007. Russia has pledged to take action against CD and physical piracy as it is seeking admission to the World Trade Organization.27

In related events Kazaa, a file-trading firm, was charged with American copyright violations through the use of the Internet. An Australian firm, the company has to date avoided the fate of par- allel company Napster. The use of international offices to continue offering its product has upset the International Federation of the Phonographic Industry, which represents global music industry interests. The World Intellectual Property Organization (WIPO) tried to eliminate nation hopping when it enacted the WIPO Copyright Treaty, which outlines copyright legislation that all countries should adopt. The problem is that many European Union nations and Italy did not sign on.28

Piracy refers to the illegal duplication and distribution of recordings. It takes three specific and often confused forms:

l Counterfeiting. The unauthorized recording of the prerecorded sounds, as well as the unauthorized duplication of original artwork, label, trademark, and packaging.

l Pirating. The unauthorized duplication of sounds or images only from a legitimate recording. l Bootlegging. The unauthorized recording of a musical broadcast on radio, television, or a

live concert. Bootlegs are also known as underground recordings.

With the growth in this type of criminal activity, security measures are a must for any company involved in the production of audio and visual products for sale. The United States Customs Office seized $100 million in counterfeit products in 2003, almost double the figure seized in 2001.29

Besides the high-publicity piracy, other violations of copyrights and patent laws are less known to the public. In fact, many individuals who use the Internet and download documents

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Chapter 18 l Selected Security Threats of the 21st Century 483

may be committing violations of the copyright and patent laws. While there have been guide- lines in the copying and distribution of copyrighted materials for years, recent use of materi- als from the Internet has prompted the federal government to take a closer look at electronic media and the potential abuse of copyright laws.

Of interest and some recognition, however, is the production of illegal copies of computer software. Much like the battle to control file swapping of music, production and sale of ille- gal copies of operating systems and computer games is big business. While Microsoft sells its Microsoft Office CD-ROM for approximately $800, pirated copies sell for much less, for as little as $10. The problem costs Microsoft an estimated $300 million each year.30

In the past several years counterfeiting of products has also come to represent a number of health and safety risks. Counterfeit pharmaceuticals have caused physical harm. An alert on Cialis sold on several websites was issued in March 2006 by the Danish Medicines Agency when counterfeit products were advertised on the Internet.31 The pet industry is also plagued by counterfeit pet health care products. And most recently counterfeit auto parts have been making their way into the system. Brake pads that look like the real thing are made from com- pressed grass. It has been reported that there are enough counterfeit parts to assemble a com- plete car. In still another area, a shipment of counterfeit extension cords was seized by U.S. Customs. Not so lucky were Verizon customers who purchased new batteries that later over- heated. In China, 60 infants were reportedly killed by fake baby formula.32

The worst violators of copyright law are China and Russia, according to a recent report by the International Intellectual Property Alliance (IIPA). The IIPA reported losses from indus- try members that topped $15.25 billion in 2006 from only the top 60 worst pirating nations. If the United States and the rest of the world were included, the figure could be as much as $35 billion annually. The only recourse available to the IIPA is through the U.S. Trade Representative, which could take action against countries by taking away certain duty-free trade privileges.33

Summary Although the security concerns we have covered are not present in every business, they are of significant interest to private individuals where the impact of the crime is often felt in increased costs for merchandise and services. With the growing use of the Internet and associ- ated technology, many of these crimes are changing direction to make use of the reach of the Internet or to exploit computer technology. In order to combat these crimes, security and law enforcement will need to enhance their tools by becoming proficient at monitoring and inves- tigating crimes using computers and related technology.

CRITICAL THINKING Why should we as individuals have any concern over the illegal copying of products, particularly DVDs and CDs? After all, the only one hurt is the large corporation and they lose only small amounts compared to their total profits.

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484 INTRODUCTION TO SECURITY

Review Questions 1. What distinguishes robbery from burglary? 2. What is target hardening? List several target-hardening techniques. 3. Describe the concept of robbery prevention. 4. List some of the measures that should be taken prior to a labor strike. 5. What is the latest problem associated with espionage? 6. What is the difference between piracy and bootlegging in the recording industry?

References [1] U.S. Department of Justice, Federal Bureau of Investigation. In: White collar crime: a report to the public.

Washington, DC: U.S. Department of Justice; 1989.

[2] Leaf C. White-collar criminals: enough is enough, downloaded 1/17/2003, <www.doublestandards.org/ leaf1.html>.

[3] 10 White Collar Crime Cases That Made Headlines – Criminal Justice USA: <http://www.criminaljustice- usa.com/blog/2011/10-white-collar-crime-cases-that-made-headlines/>.

[4] Leaf C.

[5] The new white collar crime: enemy within? SC Magazine, downloaded 1/17/2003, <www.scmagazine. com/scmagazine/enemy>.

[6] Edelhertz as quoted in Green GS. Occupational crime. Chicago: Nelson Hall; 1990. p. 11.

[7] Gilbert Geis as quoted in Green, p. 16.8. Cunningham W, Strauchs JJ, Van Meter CW. The hallcrest report II: private security trends 1970–2000. Boston: Butterworth-Heinemann; 1990. p. 28.

[8] Cunningham W, Strauchs JJ, Van Meter CW. In: The hallcrest report II: private security trends 1970–2000. Boston: Butterworth-Heinemann; 1990. [p. 28]

[9] http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2010/crime-in-the-u.s.-2010/property-crime/ burglarymain

[10] http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2010/crime-in-the-u.s.-2010/violent-crime/ robberymain

[11] Bureau of Justice Statistics. National crime victimization survey: violent crime trends, 1973–2001, down- loaded 1/17/2003, <www.ojp.usdoj.gov/bjs/glance/tables/viortrdtab.htm>.

[12] The corporate spy. The Integrity News, November 26, 2001; x(28).

[13] http://en.wikipedia.org/wiki/Research_%26_development

[14] Economic espionage plots loom. Security August 1996:14–5.

[15] As quoted in “The Changing Rules of Corporate Spy Games,” <www.csmonitor.com/2006/0925/p02s01- usec.htm>.

[16] Maynard M. Execs indicted in theft of GM secrets. USA Today, December 11, 1996:1.

[17] Industrial security. Security October 1996:31.

[18] Wallace WA. Industrial espionage experts, downloaded 4/5/2003, <www.newhaven.edu/california/CJ625/ p6.html>.

[19] Bernstein D. Pilfering trade secrets. Infosecurity News May/June 1996:23–5.

[20] Industrial security. Security October 1996:31.

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http://www.doublestandards.org/leaf1.html

http://www.criminaljusticeusa.com/blog/2011/10-white-collar-crime-cases-that-made-headlines/

http://www.scmagazine.com/scmagazine/enemy

http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2010/crime-in-the-u.s.-2010/property-crime/burglarymain

http://www.fbi.gov/about-us/cjis/ucr/crime-in-the-u.s/2010/crime-in-the-u.s.-2010/violent-crime/robberymain

http://www.ojp.usdoj.gov/bjs/glance/tables/viortrdtab.htm

http://en.wikipedia.org/wiki/Research_%26_development

http://www.csmonitor.com/2006/0925/p02s01-usec.htm

http://www.newhaven.edu/california/CJ625/p6.html

Chapter 18 l Selected Security Threats of the 21st Century 485

[21] http://en.widipedia.org/wiki/Chi_Mak

[22] http://en.widipedia.org/wiki/Arms_Export_Control_Act

[23] <www.fbi.gov/pressrel/speeches/gebhardt011204.htm>, downloaded 7/15/2007. [24] Better Business Bureau.

[25] Today @ PCWorld, April 14, 2010. <http://www.pcworld.com/article/194203/government_says_data_esti- mating_piracy_losses_is_unsubstantiated.html>.

[26] Glasner J. No More Music Piracy, Por Favor. Wired News November 22, 2002 [downloaded 4/5/2003, <www.wired.com/news/digiwood/0,1412,56522.00.html>].

[27] Russia, China Once Again Top USTR List of Piracy Hot Spots, <www.riaa.com/newsitem.php?news_year>, downloaded 7/16/2007.

[28] King B. Kazaa taunts record biz: catch Us. Wired News September 25, 2002 [downloaded 4/5/2003, <www. wired.com/news/mp3/0,1285,55356.00.html>].

[29] <www.bosbbb.org/counterfeit/index/html>, downloaded 7/16/2007. [30] Kamber M. Street scene: mexico’s CD pirates. Wired News July 22, 2000 [downloaded 4/5/2003, <www.

wired.com/news/culture/0,1284,37482.00.html>]. [31] Warning: Illegal copy of the medicinal product Cialis sold on the Internet, <www.dkma.dk/visUKLSAr-

tikel.asp?artike1ID=8728>, downloaded 7/16/2007. [32] Hazardous Counterfeit Products, <www.cbsnews.com/stories/2004/06/25/eveningnews/consumer/

main626211.shtml>. [33] Nystedt D. China and Russia Top List of Worst Copyright Violators. InfoWorld, <www.infoworld.com/

archives/article/07/02/12/HNwortcopyrightv… 2/13/2007>.

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