NewsNotables – Issue 64

Cyber-Scams on the Uptick in Downturn

Wall Street Journal, January 29, 2009

The bear economy is creating a bull market for cyber-crooks. Experts and law enforcement officials who track Internet crime say scams have intensified in the past six months, as fraudsters take advantage of economic confusion and anxiety to target both consumers and businesses.

Thieves are sending out phony emails and putting up fake web sites pretending to be banks, mortgage service providers or even government agencies like the Federal Bureau of Investigation or the Federal Deposit Insurance Corp. Cell phones and Internet-based phone services have also been used to seek out victims. The object: to drain customer accounts of money or to gain information for identity theft. Cyber assaults on many banks have doubled in the past six months in the U.S. and other parts of the world, including the U.K., Canada, Mexico, and Brazil.

Until recently, most attacks were scattershot, with spam emails blasted randomly to thousands of computer users at once. Now crooks are starting to single out specific targets identified through prior research, a tactic called “spear phishing.” In these attacks, emails are sent to the offices of wealthy families or to corporate money managers. They address potential victims by name and company or appear to come from an acquaintance.

In one such attack, hundreds of senior executives received personally addressed emails saying they were being subpoenaed to testify before the grand jury by the U.S. District Court. When users clicked on the link containing the attachment, their computers were infected with malicious software.

Comment: Unfortunately, a sagging economy is an opportunity for many kinds of crooks. You just can’t be too careful about responding to email messages that are unsolicited or from unknown senders. Firewalls and up-to-date antivirus tools are very important.

Businesses Say Theft by Their Workers Is Up

Wall Street Journal, December 11, 2008

Companies find that trusted employees often commit the crimes, and they believe the recession is to blame.

In the wake of the recession, more businesses are facing a growing financial threat: employee theft. New research shows that employers are seeing an increase in internal crimes, ranging from fictitious sales transactions and illegal kickbacks to the theft of office equipment and retail products meant for sale to customers.

Employers suspect that workers are pilfering from them to cope with financial difficulties at home or in anticipation of being laid off. It’s often the most trusted workers who are committing the thefts. “In leaner financial times, people have a tendency to give in to temptation to commit criminal behavior,” says Brian J. Mitch, head of anticorruption compliance and investigation at BDO Consulting in New York. At the same time, he says, “employees give additional attention to the bottom line, which results in more fraud being discovered. It’s a little hard to tell which is the chicken or the egg.”

Comment: Employers are targets for theft because employees know their systems, controls (or lack of controls), and weaknesses, and wait for the right opportunity to steal from their employer. The moral compass of many employees does not change in an economic downturn, it just comes to the surface. Many times the employee rationalizes that they are not being treated fairly and they have the right to pilfer from their employer as an offset.

Layoffs Herald a Heyday for Employee Lawsuits

The New York Times, January 31, 2009

More workers are being let go as corporate layoffs have accelerated in recent weeks. So now many more people are looking around and complaining that they have been unfairly or improperly dismissed.

Former employees of Lehman Brothers, for example, say they were not given the required 60 days’ pay before their jobs vanished, while Dell is being sued over allegations of age and sex discrimination, which lawyers say are growing choruses. Discrimination lawsuits filed with the government have fallen for years, but rose more than 15 percent in 2008 over 2007. Lawyers expect a bigger jump this year.

“People take legal action out of desperation as it becomes more difficult to find new employment,” said Lawrence Lorber, an employment lawyer in Washington, D.C. The Worker Adjustment and Retaining Notification Act requires 60-days notice before laying off workers. A complaint by a group of displaced workers who did not get pay for that time led to a Chicago sit-in recently. Even though the company did not have the money to pay ex- employees, they were able to get a bank loan to do so. It’s unknown how, or if, they will be able to repay the loan.

Comment: Issues that are ignored in good times are many times stretched and sometimes violated when times get tough. Many times employers retain an over-40 marginal or slightly underperforming employee in a stable economy. When the economy is struggling and layoffs are the only survival mode, many older employees will sue claiming age discrimination. In most of these cases, the only determinate is age, not quality of their performance.

By Roger Eigsti
Board President,
Institute for Business, Technology, and Ethics