Crime and the Bottom Line
Companies assaulted by thievery and violence are being robbed of precious profits
Executives at the Gap won't comment on the murder while it is under investigation, but neighboring merchants have plenty to say. Several blocks away, at a trendy clothing shop on Madison Avenue, the women employees won't work after dark and the store manager is not permitted to open up without a guard on the premises. "We have a scare tax on the place that's unbelievable," says Bud Konheim, owner of the store. Konheim says his costs--and the price he has to charge customers--are inflated 10 percent by guards, surveillance cameras and extra clerks to escort his deliverymen.
These security expenditures are beginning to weigh heavily on the bottom line. Crime protection expert James Cawood of Factor One estimates that a violent crime like Steinberg's death can cost a business $250,000 in workers' compensation for stressed-out employees, lost revenue, management time and extra security. Across the country, business was victimized by $11.6 billion worth of burglaries and robberies last year and spent $36.3 billion on guards, locks and surveillance cameras. These outlays are growing at two to three times the rate of inflation as companies scramble to protect customers and employees against crime and themselves against litigation.
It isn't easy. Just ask Motel 6, the Dallas-based budget-lodging chain. In September 1988, a 24-year-old freelance photographer checked into one of the chain's Fort Worth motels. Later that night, two strange men forced their way into her room and beat and raped her. The woman survived and sued, charging that the attack had left her unable to work. Motel 6 and its insurers paid $10 million to settle the suit.
Since the 1988 incident, Motel 6 has spent more than $8 million to train security personnel and install brighter lights and fencing. Guest-room doors are now fitted with deadbolt locks, safety latches and peepholes. Hugh Thrasher, executive vice president of the chain, says it will spend $3 million a year to maintain these safety-related changes and cover costs for increasing insurance premiums.
TOUCH-TONE THEFT One team of detectives crouched behind a concealed camera above the concourse of Newark's Pennsylvania Station. Another sat below the depot floor, monitoring phone calls on earphones. What they recorded several weeks ago was startling: a steady stream of long-distance crooks, using pay telephones to call overseas destinations as remote as Ghana and Ecuador but charging the calls to stolen account numbersin the United States. Before the day was out, the New Jersey Transit Police had arrested a dozen long-distance thieves.
It is called toll fraud, and it's just one example of the way a computerized society has given birth to some $3 billion in high-technology crime. Toll fraud alone cost the major phone companies $1.2 billion last year,according to the Communications Fraud Control Association. And it is becoming more sophisticated every day. Hackers now dial into a corporation's switchboard, use computer programs to crack the company's long-distance security code, then place their own long-distance calls through the corporate switchboard. That is apparently what happened in 1990 to Mitsubishi International Corp., which is based in New York and saw its long-distance bill mushroom from $17,000 to $400,000 in one month. Today Mitsubishi is suing AT&T, which sold it the long-distance switchboard, for $10 million.