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Occupational
Crime
Deterrence, Investigation, and
Reporting in Compliance with
Federal Guidelines
1377_frame_FM Page ii Tuesday, July 9, 2002 8:26 AM

Praise for Occupational Crime: Deterrence, Investigation, and Reporting in

Compliance with Federal Guidelines

“…captured my attention …aided me with understanding the impact occu-

pational crime has on my staff, myself and the organization I am employed
to support and protect. [The book] does a succinct job of outlining the
problems, the costs, and the solutions. …provides well-researched and prac-
tical support materials to assist the proactive security conscious individual
with development of a security awareness/loss contingency program.”

— Paul P. Donahue, CMA, CBM, ACFE

“A well-written eye opener, the subject of which is very timely and definitely
needed in the current economic turmoil we are in. A ‘must read’ for all
business management and auditors.”

— Richard J. Kamentz, CIA

“The compelling insight [the author has] provided regarding the develop-
ment of a culture for ethical corporate behavior transcends various diverse
industries. I found this book to be an excellent resource for anyone who cares
about the conduct and survival of their business. [It] not only provided great
insight as to ‘why’ anyone in today’s business environment would need to
develop a meaningful corporate compliance program, but also a demystified
and commonsense ‘how to’ approach.”

— Steven Mellion, MBA, MHA, CNHA

Occupational
Crime
Deterrence, Investigation, and
Reporting in Compliance with
Federal Guidelines

Ernest C. Blount

CRC PR E S S
Boca Raton London New York Washington, D.C.
1377_frame_FM Page iv Tuesday, July 9, 2002 8:26 AM

iv Occupational Crime

Library of Congress Cataloging-in-Publication Data

Blount, Ernest C.
Occupational crime : deterrence, investigation, and reporting in compliance with federal
guidelines / Ernest C. Blount
p. cm.
Includes index.
ISBN 0-8493-1377-5 (alk. paper)
1. Employee crimes--United States--Prevention. 2. Industries--United States--Security
measures. 3. Criminal investigations--United States. 4. White collar crime
investigation--United States. 5. Criminal law--United States. I. Title.

HF5549.5.E43 B583 2002

658.3′8--dc21 2002025926

This book contains information obtained from authentic and highly regarded sources. Reprinted material
is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable
efforts have been made to publish reliable data and information, but the author and the publisher cannot
assume responsibility for the validity of all materials or for the consequences of their use.

Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic
or mechanical, including photocopying, microfilming, and recording, or by any information storage or
retrieval system, without prior permission in writing from the publisher.

The consent of CRC Press LLC does not extend to copying for general distribution, for promotion, for
creating new works, or for resale. Specific permission must be obtained in writing from CRC Press LLC
for such copying.

Direct all inquiries to CRC Press LLC, 2000 N.W. Corporate Blvd., Boca Raton, Florida 33431.

Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are
used only for identification and explanation, without intent to infringe.

Visit the CRC Press Web site at www.crcpress.com

© 2003 by CRC Press LLC

No claim to original U.S. Government works

International Standard Book Number 0-8493-1377-5
Library of Congress Card Number 2002025926
Printed in the United States of America 1 2 3 4 5 6 7 8 9 0
Printed on acid-free paper
1377_frame_FM Page v Tuesday, July 9, 2002 8:26 AM

Dedication
For Shirley Ann Brickell of Halifax, North Carolina
— My wife and best friend
1377_frame_FM Page vi Tuesday, July 9, 2002 8:26 AM
1377_frame_FM Page vii Tuesday, July 9, 2002 8:26 AM

Introduction

The central focus of this book is occupational crime: its prevention, detection,
reporting, and incident management. Its motivation originates not only with
management concerns about internal loss prevention, but also the conse-
quences in the event an employee is convicted of a federal crime and the
organization is subsequently charged. More on how these interests correlate
as you proceed.
Occupational crime is defined as those crimes committed by employees
on behalf of or against an organization — public or private — with or without
the express or implied consent, approval, or knowledge of management. The
purpose herein is to provide organizational management, their internal staffs,
and contract professionals who provide ancillary support services an infor-
mational resource that will aid in the prevention, detection, and reporting
of illegal behaviors occurring within an organization.
When occupational crime is prevented, deterred, or detected post com-
mission, with reported and effective remedial action initiated, many obvious
benefits accrue to the organization. Those benefits are explored herein. And
there is more. An additional incentive may not be so obvious and, under
certain circumstances, hold critical significance to a particular organization.
If you have not heard of the United States Sentencing Commission and, more
specifically, Chapter Eight, Sentencing of Organizations, of the United States
Sentencing Guidelines, perhaps it’s now time to learn.
The United States Sentencing Commission is an independent agency of
the federal judicial branch of government. The Commission was created by
Congress through provisions of the Sentencing Reform Act of the Compre-
hensive Crime Control Act of 1984. Congress was not pleased with the
perceived lack of certainty and disparity at the federal level in sentencing for
criminal behavior. Crime control issues had also gained its attention. Con-
gress wanted to rein in federal judicial sentencing discretion and add formal
structure where none had previously existed. It also wanted heavier penalties
imposed on white-collar criminals and on violent and repeat offenders in all
categories.
The Commission was to create, among other tasks, a national set of
sentencing guidelines to be used by federal criminal court trial judges in

vii
1377_frame_FM Page viii Tuesday, July 9, 2002 8:26 AM

viii Occupational Crime

making their sentencing decisions. The inaugural set of the United States
Sentencing Guidelines took effect November 1, 1987. They have, of course,
been amended over the years. The controversy generated by the Guidelines
continues to this day. Many question their constitutionality, which has been
tested for constitutionality in the U.S. Supreme Court. Challenges were ini-
tiated almost immediately and centered on the Sentencing Reform Act and
allegations of improper legislative delegation and violation of the separation-
of-powers doctrine. On January 18, 1989 the Court rejected the challenges,
upholding the Commission as a judicial-branch agency (see Mistretta v.
United States).
While the constitutional debate was ongoing, not much sympathy existed
for convicted individuals. In the years since the U.S. Supreme Court’s decision
upholding the Commission, there has been a continuing debate as to whether
the Guidelines unreasonably restrict judicial discretion and are, therefore,
unfairly harsh to some defendants. This debate continues and, in all proba-
bility, will never be resolved to everyone’s satisfaction.
In the period between November 1987 and the Court’s ruling on the
constitutionality of the Commission in January 1989, congressional interest
in controlling organizational crime did not abate. Thus, on November 1,
1991, Chapter Eight of the Commission’s Guidelines became effective,
expanding the Guidelines. Chapter Eight, entitled Sentencing of Organizations,
drew the attention of an entirely new set of the organization’s interests. The
provisions of Chapter Eight covered “corporations, partnerships, labor
unions, pension funds, trusts, nonprofit entities, and governmental units.”
Things had changed.
Federal sentencing guidelines were no longer limited to individual mis-
creants — they now covered organizations. Like individuals, organizations
can be indicted, criminally charged, prosecuted, and found guilty of criminal
conduct. Chapter Eight sets forth punishments for organizations convicted
of federal crimes, including felonies and Class A misdemeanors. It also offers
incentives that can mitigate sanctions. The enactment of Chapter Eight and
its provisions got the attention of organizational managers, at least those who
knew about it. The term, Compliance Program, took on a new meaning and
level of importance.
Judicial discretion in the sentencing of convicted organizations is now
statutorily defined and limited. Organizational entities cannot be sent to
prison — but they can be and are heavily fined, ordered to make restitution,
placed on probation, forced to forfeit property, suffer public and stakeholder
recriminations, and can be forced out of business. The rules of the game
changed with the post-November 1, 1991 implementation of Chapter Eight
— and fundamentally so. It is prudent for organizational management to be
familiar with and understand the implications of the new rules or suffer the
1377_frame_FM Page ix Tuesday, July 9, 2002 8:26 AM

Introduction ix

consequences if ever convicted of a federal crime. Statistically, organizations

are most frequently convicted of violating criminal laws related to fraud,
environmental waste discharge, taxes, antitrust, and food and drug offenses.
There are many reasons why management should pay closer attention to
organizational crime prevention, detection, and reporting — those that pre-
date November 1, 1991 and those post November 1st.
Criminal liability can attach to an organization whenever an employee
of the organization commits an act within the apparent scope of his or her
employment, even if the employee acted directly contrary to company policy
and instructions. An entire organization, despite its best efforts to prevent
wrongdoing in its ranks, can still be held criminally liable for any of its
employees’ illegal actions.
Read that last paragraph again; you’ll have to read it at least twice for the
gravity of it to sink in.
Organizational sentencing guidelines offer convicted organizations an
opportunity to mitigate potentially harsh sentencing impacts through incor-
poration of incentives that take the form of credits. These potential credits
are set forth in Chapter Eight, § 8C2.5 — Culpability Score. Credits earned
can substantially mitigate the size of a potential fine and other types of
sanctions. The essential qualifier or credit trigger, if you will, is whether the
miscreant organization had an effective compliance program in place. The
operative term being effective. Eye wash compliance programs will not meet
federal effectiveness criteria and should be avoided. Within the provisions of
Chapter Eight is the architectural framework that sets forth the seven criteria
for establishing an effective compliance program. Those seven criteria are:*

Compliance standards and procedures reasonably capable of reducing the

prospect of criminal activity

Oversight by high-level management

Due care in delegating substantial discretionary authority

Effective communications to all levels of employees

Reasonable steps to achieve compliance, which include systems for moni-

toring, auditing, and reporting suspected wrongdoing without fear of
reprisal

* From: An Overview of the Organizational Guidelines, by Paula Desio, Deputy General

Counsel, United States Sentencing Commission. (January 1999).
1377_frame_FM Page x Tuesday, July 9, 2002 8:26 AM

x Occupational Crime

Consistent enforcement of compliance standards including disciplinary

mechanisms

Reasonable steps to respond to and prevent further similar offenses upon

detection of a violation

These seven criteria establish the necessary basis for the evaluation of
and suitability for issuance of mitigation credits in federal criminal courts.
They define the core components of an effective compliance program but do
not provide precise details for their design and implementation. Each orga-
nization is, therefore, left with the flexibility and independence to design a
program that is responsive to its specific requirements and circumstances.
What is a “compliance program?” In the absence of industry-specific
regulatory requirements and definitions a compliance program may be
viewed as the totality of those actions taken by an organization to set the
legal and ethical tone of the organization and to prevent, detect, report, and
legally manage internal criminal behavior. Such a program will encompass
a broad spectrum of policies and procedures that includes ethics, integrity
components, employee education, incident investigation, disciplinary issues,
reporting requirements, and managerial and audit oversight. Program design
should incorporate Guidelines criteria as an integral part of its architecture
if mitigation credits are to be sought should the organization ever be con-
victed of a federal crime. In some industries like banking and securities, there
are specific statutorily defined compliance programs and oversight mandates
that must be met.
Congress has now emphasized the importance it places on organiza-
tional efforts for internal crime-control measures and the effectiveness
thereof. Allocation of any mitigating credit, however, is contingent upon
the miscreant meeting two basic requirements: (1) prompt reporting of a
violation to proper authorities and (2) no involvement of high-level per-
sonnel in the commission of the violation. That’s right, management must
not only report a crime, known or suspected, but also fully cooperate with
authorities in the investigation of itself — and the results of the investiga-
tion better not show high-level involvement.
If these two requirements are not met, mitigation of sanctions becomes
highly problematic. A management dilemma is thus created. Here are some
options: do nothing and take the risks, or put an eyewash program in place
and hope its transparency is not discovered, and then hope your attorney
effectively pleads ignorance or comes up with some creative defense upon
conviction. With both options there is no possibility of mitigating federal
sanctions, and the results could be disastrous. Conversely, management can
design and implement an effective compliance program and if ever prosecuted
1377_frame_FM Page xi Tuesday, July 9, 2002 8:26 AM

Introduction xi

and convicted sanctions can be mitigated. What about self-incrimination; are

you required to waive that protection? No, not if you do not intend to seek
sanction-mitigation credits and are willing to take your chances in federal
criminal court. But, if you intend to collect credits for sanction mitigation,
then the answer is yes. In the latter instance, if you report internal criminal
behavior, you may have voluntarily incriminated your organization.
Are the key criteria outlined in Chapter Eight mandated by law? The
answer is no. Given, however, the pervasive all-encompassing number and
complexity of federal criminal laws and the number of federal investigative
agencies, the potential exposure to and risk of an employee committing
violative behavior are substantially increased. Even in the absence of the
aforementioned significant motivators exist for creation and implementation
of internal crime and loss-prevention programs. When benefits are consid-
ered, it seems that good and sufficient cause exists to produce and implement
such a worthwhile program. Even if an organization never has to deal with
a federal crime conviction, the upside in internal loss prevention may just
be sufficient justification for such a program.
Illegal, unethical, and irresponsible employee behavior is a multifaceted
organizational problem. When this behavior is manifested, it is often
described as fraud, theft, embezzlement, corruption, or white-collar crime.
That is the legal context. Concurrently, unethical behavior can have moral
and legal ramifications. Irresponsible behavior encompasses careless inatten-
tion to blatant illicit actions; it has become a national quagmire.
Preventing, deterring, and detecting such behavior and responding
appropriately upon discovery have become significant concerns for the man-
agers of America’s commercial interests and for those individuals who run
our societal and governmental institutions. In each venue abusive employee
behavior and occupational crime are costly and intricate issues demanding
vigilant management attention and diverse remedies.
A review of the elements necessary for the prevention, deterrence, detec-
tion, reporting, and management of wrongful employee behavior is included
here. The means recommended to enhance existing management practices
and controls is the employee security-awareness program. The employee
security-awareness program is an expansive educational, motivational, and
procedural approach custom-designed to accommodate the needs of a spe-
cific organization. Providing management with the essential “How tos” of
such a program is the purpose of the present book.
If your intent is to design and implement a compliance program that
incorporates the seven criteria of the Guidelines, then this material will assist
you. You and your legal and other professional contributors, however, will
have to ensure that the burdens of effectiveness are met and that each of the
seven criteria is sufficiently incorporated into the compliance program to
1377_frame_FM Page xii Tuesday, July 9, 2002 8:26 AM

xii Occupational Crime

meet the requirements of law. Given the uniqueness of each organization, no

attempt is made herein to provide a model compliance program, and no
attempt is made to produce a “one size fits all” approach. Each compliance
program, therefore, must be custom designed to fit the individual require-
ments of the organization it is intended to serve.
The author has tried to create a resource in an easy-to-use and readable
form: a book that connects the practical and the philosophical aspects of
planning for producing and operating a successful employee security-aware-
ness program — a resource that will assist the user from start to finish, from
recognition of a problem to determination of need and program design and
from program implementation through maintenance; a guide for those starting
a program from scratch or for those who wish to enhance an existing one; and
a source of information that will provide a framework for success if properly
used and applied. Depending on the organization, the design, scope, audit, and
other essential functions and components of a successful program will vary
from the relatively simple to the highly complex. Each must be custom
designed. The contents set forth herein cover the “big picture,” and each orga-
nization must provide the details that fit and fulfill their specific requirements.
Organizational crime and other abusive acts committed by employees
are management problems. This book is intended for management use; any
discussion of the referenced problems will require some analysis by man-
agement, which will include an examination of management’s ethics, busi-
ness practices, and attitudes. We examine how those three areas influence
the existence of abusive employee behavior or, conversely, how they work
to eliminate it.
The book is organized as follows:

• Chapter 1: The Problem — Reviews and places organizational crime and

the abusive-employee behavior problem into perspective; discusses man-
agement’s contribution to the problem and suggests remedial action.
• Chapter 2: The Cost — Examines the price business, institutions,
individuals, and the nation pay for organizational crime and abusive
employee behavior, and how to calculate those costs.
• Chapter 3: The Solution — Provides specifics for the development,
implementation, and maintenance of an employee security-awareness
program. The intent is to prevent, deter, and detect organizational
crime and other abusive employee conduct. Input is interfaced with
criteria proscribed by the federal sentencing guidelines for organiza-
tional crimes.
• Chapter 4: Support Materials — Provides supplemental materials used
for program planning, records, and communications media.
1377_frame_FM Page xiii Tuesday, July 9, 2002 8:26 AM

Introduction xiii

Two points must be made prior to review and use of this book. First,
any discussion of abusive employee behavior has negative overtones and
implications that are inherent and unavoidable. Second, when management
is taken to task about an issue, the author is not indicting every current or
former business or institutional manager. The emphasis is on those issues,
attitudes, and practices that apply to or come under the auspices of manage-
ment. Keeping these two points in mind will assist you in keeping the purpose
of the book balanced and in proper perspective.
Furthermore, I would be negligent in my treatment of management if I
did not acknowledge the leaders — those ethical, highly competent, entre-
preneurial, imaginative, empathic, and concerned business and institutional
managers — who set the standard for managerial excellence in America and
throughout the world. It is those individuals who by their actions contribute
immeasurably to the richness of our daily lives and the American experience.
It is their commitment to excellence, entrepreneurial spirit, and determina-
tion that moves America. It is their character, integrity, and vision of the
future that will take us into many tomorrows.
The use of the pronouns “he” and him” throughout this text are used
generically and not intended to singularly imply the male gender. Thus, “he
and “him” are simply used in place of “he or she” and “him or her.” This
convention has been adopted to convey the point with an economy of words.
In closing, a word of caution about the use of the book. The author
provides some basic discussion and input on a few legal, accounting, and
personnel matters and references federal sentencing guidelines for organiza-
tions. However, such information is not a substitute for professional advice
in those areas. The author is neither a lawyer nor a certified public accoun-
tant; therefore, you are encouraged to seek and use the services of professional
advisors in all matters where such input is dictated.

Ernest C. Blount, CFE

1377_frame_FM Page xiv Tuesday, July 9, 2002 8:26 AM
1377_frame_FM Page xv Tuesday, July 9, 2002 8:26 AM

About the Author

Ernest C. Blount is a seasoned business executive with extensive manage-

ment, corporate security, and law enforcement experience that encompasses
a broad range of investigative and executive posts. In business he has served
as a vice president with a major multinational security firm, heading up their
public services division. Mr. Blount has been the director of internal affairs
and director of corporate security for two large Florida corporations over a
period of 25 years. In government he has served as a chief of police, the
organizer and first administrator of the Office of Safety and Security for the
Palm Beach County Public School System, and as a part-time instructor in
the Criminal Justice Degree Program at Palm Beach Community College. He
is a graduate of Florida Atlantic University.
Mr. Blount’s experience in the investigation and prevention of fraud and
white-collar crime began as criminal investigator for the Palm Beach County
Sheriff ’s Department. He is a Certified Fraud Examiner and has served as a
business consultant and expert witness in federal court. This is Mr. Blount’s
second book. His first book is entitled Model Guidelines for Effective Police-
Public School Relationships.
Mr. Blount is a member of the Association of Certified Fraud Examiners.
He has been a member of the International Association of Chiefs of Police
and The Florida Association of Chiefs of Police.

xv
1377_frame_FM Page xvi Tuesday, July 9, 2002 8:26 AM
1377_frame_FM Page xvii Tuesday, July 9, 2002 8:26 AM

Acknowledgments

Anyone who has ever undertaken a research and writing project of the nature
contained herein soon finds many of his or her weaknesses exposed. During
the time it took to complete the project the support, encouragement, sug-
gestions, criticism, factual analysis, and other inputs from those persons who
took an interest in the project were very important to its completion. For
that help, I shall always be appreciative.
In saying thank you I acknowledge the many industrial security profes-
sionals who pioneered and contributed so much to the body of knowledge
now identified with professional security management, loss-prevention, and
employee security-awareness programs. Through the years I have drawn on
and grown with that knowledge. So much of what this manual contains
reflects what I have learned from others. I give credit, then, to those profes-
sionals who through their written or personal input have influenced my
professional life.
There are a few friends and professional colleagues who I wish to
acknowledge and thank as well: Jim Manor, Paul Duffy, Margaret Devine,
Mario Martinez, Paul Johnson, Jim Kirkland, and Ken McNabb. There were
others who added their two cents’ worth. Several senior executives took a
look at the manuscript and, while they squirmed at the criticism of manage-
ment, acknowledged the truth it contained. All recognized the problems
illustrated and the need for solutions.

Ernest C. Blount

xvii
1377_frame_FM Page xviii Tuesday, July 9, 2002 8:26 AM
1377_frame_FM Page xix Tuesday, July 9, 2002 8:26 AM

“Where the law ends, tyranny begins…….”

William Pitt, 1770

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