Who’s minding the store?

Posted on 27. Mar, 2011 by in Blog

Fellow brothers and sisters in Pawnland ..

I hope this blog finds you all well in today’s business world. This is probably one of the most dis-heartening posts I have ever had to make. This past week I have been working with a client in Texas and have to tell you we have discovered some of the most significant organized theft I have ever witnessed in this industry in some 40 years in the business.

Many of us may have other projects, businesses and or lives outside of our stores. For the same, many of us do not. The one constant I have seen in my extensive history in this industry remains to be true. That is that as hard as we work to create, others are working equally as hard trying to figure out how to deceive or defeat the systems, whatever those are.

IN years past I have presented a number of seminars and much more on this subject matter for many groups in many countries. IN the years prior to computers our exposures were seemingly significant in the old days and now with automation and technology I have to tell you our exposures have actually increased.

The shear amount of creativity that can be applied by those who are quote “minding the store” can be staggering if left to their own demises. For those of you who do not have standardized routines and systems for audits, cash flow analysis, inventory assessments, background checks on personnel, drug testing programs and much more, I have to tell you your exposure is significant.

The client I have been working with this past week has a number of stores and for years they had another primary business that took most all of their time to manage. They assumed they had a good team of people minding their stores for them.

After a week of extensive forensic type auditing on my behalf, I have to tell you I have never seen anything like what we discovered. The snapshot is that over a decade of unmonitored activity with zero accountability and or consequences, this one family lost over 1-million dollars of cash and assets to a very organized group of conspirators. The conspiracy reaches far beyond the boundaries of several of the stores and also encompasses outside vendors and other individuals as well.

We found so much material and recreated trails of activity that span over a decade and involved numerous individuals internally and externally in which to create the largest fraudulent activity I have ever seen in this industry.

The shear audacity of the parties involved would make your stomach’s turn!

Every possible area of a large volume stores’ activities were manipulated. Examples would include inventory additions, deletions, changes, corrections, cash in, cash out, cash transfers, force balancing, credit card posting schemes, layaway manipulations internally and externally, voided sales, deleted sales and or transactions, scrap gold bucket and carat manipulations, wholesale sales and or electronic refunds and exchanges, data corrections to every transaction type possible in the systems and the list just goes on and on and on.

I am happy to report that we found through our discovery the easiest and most efficient way to seek prosecution for the numerous individuals involved. It came from the most unlikely source as well and this is where the story gets better.

We noticed that an extraordinary amount of high value product, mostly jewelry was sold to one particular vendor. We took our decade long list to this vendor and showed it to him. He is in the jewelry retail business and also does jewelry repair for many others in our industry and more.

When we approached him and asked him if he had bought some 300K of merchandise from us in the past decade and also sold us over 200K worth of merchandise, well his look was priceless!! Not only no, but hell no. AS a business owner he also understood the potential ramifications of having his business drawn into a criminal investigation. His first thoughts as were ours, to first contact the Internal Revenue Service followed by the state sales tax authorities here in Texas.

All at once all of our light switches went off. What better way to get an investigation going on hosted completely by Federal authorities as well as state authorities. We can illustrate where these transactions were conducted at our stores and we made or lost whatever money’s we did on them and paid our tax consequences we had on them in real time. On the other hand, the outside vendor has financial implications implied on his business he clearly did not get or give. IN his case, he can claim these are fraudulent activities and can list the employees he did deal with, and then the investigations turn to those former employees. What happened to the goods, who were they sold to, where is the income and who owes the taxes.

Since we are talking about 500K plus in cost of goods over the past decade, this represents more than 1 million dollars of unreported income somewhere and fraudulent activities were discovered that hid these tax and income consequences to the culprits involved in this massive conspiracy.

From personal experience, I can you both the FEDS and the local TAX authorities will absolutely pursue those that have defeated their tax consequences, legally and illegally and as such the criminal implications will be far more extensive than anything we could have hoped to achieve by filing our own civil or criminal charges on this crew.

Of course once the FEDS get involved, complete lifestyles are examined, bank accounts, assets and cash flow assumptions as to their ability to live at the levels they may or may not have.

In the end as business owner and operators, we see JUSTICE. There is an old saying out there, don’t do the crime if you can’t do the time and due to the shear volume and blatant disregard for their fiduciary responsibilities along with greed and ignorance, to put it mildly they are screwed.

This represents JUSTICE yes.

The moral of the story is, “who is minding the store” – do you have partners in your business you are not aware of? Are you taking the steps and measures to minimize your exposure and to know what IS happening in your business everyday?

We at the Pawnshop Consulting Group pride ourselves on our abilities to help you maintain and monitor these critical areas of your business as well. When in doubt, call the pros.

We would be glad to assist any of you with any questions, concerns and or suspicions you may have.

Who’s minding the store?

Jerry Whitehead
onetravel@aol.com
www.pawnshopconsultinggroup.com
jerry@pawnshopconsultinggroup.com

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