WHEN THE LINE IS CROSSED:
FRAUD DETECTION, INVESTIGATION, AND RESOLUTION
INVESTIGATION AND INTERVIEWING IN UNION ENVIRONMENT
Investigating and interviewing in a union-heavy environment is unique and difficult if
you do not know the landscape. Discover how and when to set boundaries for the union
representatives, how to keep the interview on track, and—when you have all of the pertinent
information needed—how to finish the interview.
JACK ROSS
Corporate Director of Loss Prevention
Hostess Brands
St. Louis, Missouri
I spent 17 years with the Dallas Police Department (1966–1984), with assignments in
patrol, field training officer, tactical, and the police academy developing in-service training.
Promoted to the rank of Sergeant in 1973, I spent the majority of the Sergeant years
supervising patrol sectors.
After leaving Dallas PD, I worked for Campbell Taggert Corporation at the Corporate
office in Dallas, managing physical and guard security for one year before moving on to
Hostess Brands, known at that time as Continental Baking Co, in 1986. During the 25 years
with Hostess Brands, I have worked at all levels of Security/Loss Prevention investigating
frauds of all types, workplace violence, and drug/alcohol abuse.
Promoted to Director of Loss Prevention in 2002, I manage the department of four LP
Specialists covering the United States. Hostess has 39 bakeries, 21,000 employees, and
numerous distribution centers and retail outlets throughout the United States, including
Alaska.
The baking industry is heavily unionized so I have learned the fine art of dealing with the
Bakery, Confectionery, and Tobacco union teamsters and other unions all over the country.
―Association of Certified Fraud Examiners,‖ ―Certified Fraud Examiner,‖ ―CFE,‖ ―ACFE,‖ and the
ACFE Logo are trademarks owned by the Association of Certified Fraud Examiners, Inc.
©2011
INVESTIGATION AND INTERVIEWING IN UNION ENVIRONMENT
Part 1: Unions in the United States
The early unions in the United States were very different
from the unions of today. They were anti-communist, right,
critical of the left, capitalists, and racist. Their focus was to
change the conditions of their members through collective
bargaining rather than today’s mostly political focus. After
two decades of moving left, by 1980 they became an
integral part of the American left. The membership of the
traditional trade union has been on the decline. In 1956, 35
percent of the U.S. workforce was unionized, but by 1996
that had dropped to 11 percent. The movement of
manufacturing toward the South and away from the
Northeast and Central United States was a major cause of
the union decline. The percentage would be considerably
less if the public unions were not in the picture. The author
of Unions in America, Epitaph for American Labor, Max
Green, was a New York teacher but left because of the
continuous left movement of the teacher's union and is very
critical of today’s union leadership.
The National Labor Relations Act of 1935, known as the
Wagner Act, created the National Labor Relations Board
(NLRB) and gave workers the right to organize unions. It
prohibited employer harassment of union organizers.
Because of this, probably one of the most significant pieces
of social legislation in our history, union membership grew
from 3.5 million in 1935 to 9 million in 1940. Just five
years of growth almost tripled their members. The major
gains were fringe benefits, wages, and company retirement.
Unions have been and are still in a state of decline. The
private-sector workforce, not counting the public-sector
union members, is only 7 percent unionized (2008 figures).
What has been behind that decline? Twenty-two states have
become right-to-work states (still at that count at the
writing of this paper). Companies are moving south and out
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of the country. Remember the North American Free Trade
Agreement that passed during Bill Clinton’s presidency? I
was watching the debate when Ross Perot said something
to the effect, ―You will hear a giant sucking sound of the
jobs going to Mexico.‖ The highest job shift out of the U.S.
has been to Mexico and the lowest has been to India. From
January to March in 2007, 19,086 union jobs left the
country; 12,511 went to Mexico. Companies are using plant
closings, the threat of closing and movement out of the
country to get union concessions. Companies have easily
gone global but unions have found this to be difficult.
Barriers have been languages, institutional structures, levels
of economic development, and national identity. Other
factors in the decline include the large growth of small
businesses with unique skill needs and few employees.
Employees have realized the value of the companies and
their value to the company. There are fewer and fewer
manufacturing or assembly-line jobs in the United States.
An author I read blamed union decline completely on
corruption. I certainly believe that is part of the story but
blaming it completely on corruption is not realistic. For a
look at union corruption go to www.union-reports.dol.gov.
Headline: Newark—A federal grand jury today
returned a five-count indictment against a former
Sussex County political party chairman and two
other individuals for their roles in embezzlement
schemes that victimized Local 16 of the United
Service Workers of America in Newton and its now
bankrupt health fund.
Government statement: Organized Crime: Over the
past two decades the OIG (Office of Inspector
General) has conducted extensive criminal
investigations of labor racketeering. Traditionally,
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organized crime has been involved in loansharking, gambling, benefit plan fraud, violence
against union members, embezzlement and
extortion. Our investigations continue to identify
complex financial and investment schemes used to
defraud pension assets, resulting in millions of
dollars in losses to plan participants. The schemes
include embezzlement or more sophisticated
devices, such as fraudulent loans or excessive fees
paid to corrupt union and benefit plan service
providers.
Right along with corruption, another cause of union decline
is the cost to maintain the unions. I am not one to tout the
efficiency of the federal government so this statistic caught
me by surprise. The Social Security Administration cost to
service one benefit recipient for one year is $11. The Long
Island City’s Local Teamster administrative cost per plan
benefit recipient for one year is $420. Wow, what is the
difference? Union administrative work force is bloated with
patronage jobs.
There is a long and growing history of union and political
involvement. Obviously there were political forces at work
just to get the union rights into law when the Wagner Act
was passed. There are many instances of government,
union, and corporate officer involvement in various deals
that may or may not have been beneficial to the average
union worker. One major step for union organization was a
sit-down strike by the UAW that started at the Flint,
Michigan, stamping plant in the mid-1930s. This strike had
been declared illegal by the courts but efforts to dislodge
the workers were stopped by the governor, Frank Murphy,
who mobilized the State Guard to protect the workers.
After Murphy lost his next election President Franklin
Roosevelt, a union proponent, appointed him Attorney
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NOTES
General. This was reported to be payback for his pro-union
stand in the Flint strike.
A couple notable political solutions in the recent past are
the Occupational Safety & Health Act of 1970 (OSHA) and
the Family Medical Leave Act of 1993. These laws and
regulations aim to protect workers, inform them of their
rights, and reduce the fear of retaliation. Union efforts to
protect and help their members had previously been
through bargaining.
As mentioned previously the old trade unions are in
irreversible decline. Now their money is being diverted to
political causes. They have completely aligned themselves
with the Democratic party as shown by their contributions
to Democratic candidates.
Leading Union Political Campaign Contributors
1990–2010
Democrats
Republicans
American Fed. of State, County, & Municipal Employees
40,281,900
547,700
Intel Brotherhood of Electrical Workers
29,705,600
679,000
National Education Association
27,679,300
2,005,200
Service Employees International Union
26,368,470
98,700
Communication Workers of America
26,305,500
125,300
Service Employees International Union
26,252,000
1,086,200
Laborers Union
25,734,000
2,138,000
American Federation of Teachers
25,682,800
200,000
United Auto Workers
25,082,200
182,700
Teamsters Union
24,926,400
1,822,000
Carpenters and Joiners Union
24,094,100
2,658,000
Machinists & Aerospace Workers Union
23,875,600
226,300
United Food and Commercial Workers Union
23,182,000
334,200
AFL-CIO
17,124,300
713,500
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Sheet Metal Workers Union
16,347,200
NOTES
342,800
Plumbers & Pipe Fitters Union
14,790,000
818,500
Operating Engineers Union
13,840,000
2,309,500
Airline Pilots Association
12,806,600
2,398,300
International Association of Firefighters
12,421,700
2,685,400
United Transportation Workers
11,807,000
1,459,300
Ironworkers Union
11,638,900
936,000
American Postal Workers Union
11,633,100
544,300
Nat’l Active & Retired Fed. Employees Association
8,135,400
2,294,600
Seafarers International Union
6,726,800
1,281,300
Source: Center for Responsive Politics, Washington , D.C.
Money for these contributions has come from union dues
and fees. Like most organizations, unions have problems
getting their members to contribute to causes. They
requested help from 16 million members to refill the
political contribution bucket and got $243,000. That comes
out to just under two cents per member. There are many
regular union members who do not agree with the
hierarchy’s political stance.
One notable area of difference between the union hierarchy
and the members is immigration. Illegal immigration puts
downward pressure on wages and benefits but the unions,
aligned with the Democratic Party, have supported guestworker programs because they see it as a way to refill their
coffers. The guest worker comes in, has to join the union in
closed-shop states, and when they leave the money they
paid into health and pension plans stay. Sixty-three percent
of the American public consider illegal immigration a
serious problem. Sixty percent of union families do not
support amnesty programs. Another difference between
unions and members was when President Bush attempted to
make changes to the Social Security system—it was
opposed by the AFL-CIO. Their solution to the problem of
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an unsustainable Social Security system was for more
Social Security taxes to be collected. Obviously, the
membership would be paying those taxes.
Public unions have emerged as a force. These include all
public-sector unions, with the most notable being the
teachers’ NEA and AFT unions. They have reason to be
involved politically because they bargain with the elected
officials, many whom they supported in elections. Recent
events in Wisconsin and Ohio brought public unions and
bargaining to the front pages of newspapers and lead stories
on the TV news. The unions reacted severely because there
is more involved than what the politicians and the unions
want to tell the public.
It is mostly about the money. If the unions cannot run a
closed shop (require new hires to sign up with the union),
they lose their ability to get dues paid directly to them by
the employer.
Union advocates are pushing where the old trade unions do
not want to go. The Service Employees International Union
(SEIU) has organized many low-paid service jobs but is
fast becoming one of the most influential unions in the
country. Vanessa Tait, a journalist and union activist, says
unions should prioritize issues such as combating
discrimination, sponsoring fair tax reform, securing
universal health care, fair welfare policies, a shorter work
week, state paid childcare, and affordable housing. This is a
far stretch for the good old boys in the trade unions but they
are moving closer.
Part 2: Legal Issue Related to Investigations
Weingarten: Employee Request or Demand for Union
Representation
In 1975 the court made a decision that had a major
impact on how employers handle investigative
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interviews. The Supreme Court agreed with the NLRB
―that employee insistence upon union representation at
an employer’s investigatory interview, which the
employee reasonably believes might result in
disciplinary action, is protected concerted activity.‖
What does that mean? If an employee wants union
representation during an interview and there is any
possibility they could be disciplined for something they
say or admit to, you better get them a representative. In
the Weingarten ruling, the right arises ―only in
situations where the employee requests representation.‖
We will visit that concept again later. Even if the
employee is an officer of the union (steward) they are
still entitled to representation upon request. If the
employee requests time and privacy for a consultation
with the union representative prior to an interview, this
request must be granted. The employer is not required
to furnish a specific union representative. If the
employee’s chosen union representative is absent or
legitimately not available, another official union
representative fulfills the requirement. However when
the chosen union representative is available, the
employer violates Weingarten by insisting that another
union representative more to the employer’s liking
represent the employee. The board has ruled that an
employer cannot demand a union representative be
quiet (not speak) during the interview. The intent of the
regulation is to provide meaningful representation to
the employee; however, the steward cannot be
disruptive or obstructive during the interview. By
interrupting the interview with objections to questions
asked more than once and by advising the employee not
to answer questions deemed repetitive, a union
representative exceeds his permissible role.
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Using another union employee who is not a union
official as a representative/witness is not sufficient. The
board commented on this issue saying:
(1) Coworkers do not represent the interest of the entire
workforce.
(2) Coworkers cannot redress the imbalance of power
between employers and employees.
(3) Coworkers do not have the same skills as a union
representative.
(4) The presence of a coworker may compromise the
confidentiality of information.
A run-of-the-mill conversation with an employee in
regards to training, correction, or instruction does not
rise to the level of Weingarten. Also there is no need for
representation during an interview called merely to
inform an employee about disciplinary action already
agreed upon. When an employer merely requests an
employee to leave their work area and proceed to an
office or some other location where further discussion
is contemplated, the employee ―acts at his or her own
peril if he or she declines to do so.‖
The NLRB and courts have flip-flopped on rights of
unrepresented employees. At this time, an employer
does not have to furnish representation to a nonunion
employee. A respected friend of mine who is a labor
attorney said he expects them to flip back the other way
because of recent board appointments.
Covert CCTV & GPS Use
Using covert CCTV cameras has been deemed a change
in the work environment. Before a covert camera is
installed the union must be notified the employer is
considering installation of covert cameras in the
workplace. That should be done by letter to ALL unions
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that work in the area of the installation. In the letter, the
union is told the company is ready to discuss this issue
but time is an issue and the discussion should be
scheduled soon. The employer has an obligation to
negotiate in good faith but is not required to divulge
where or when a camera would be installed. In the
meetings with the union, the employer explains the
reason for installation—normally for the safety and
security of the employees and the employer. The
employer would explain the camera will not be used to
monitor performance. Issues that will be looked for are
theft of property, theft of time, drug or alcohol use, and
other prohibited behavior. Many unions will agree to
the use of the covert cameras but some would never
agree. In such instances, the employer can proceed. To
defend against any subsequent arbitration or other legal
proceedings, the employer must be prepared with all the
evidence of notification and good-faith bargaining.
Covert GPS use has not been litigated but the results are
expected to be similar to that of covert CCTV use.
Documents
Most internal documents are discoverable. New Jersey
Bell Telephone Company attempted to claim a security
department report was a witness statement but lost the
argument and had to produce the document. Be careful
what you put in a report.
Informants
In a ruling for Pennsylvania Power and Light the
employer did not have to reveal the names of
employees that informed on drug use in the workplace.
The reasoning was that the informant employee would
likely be harassed. On the other hand they did have to
produce a summary of the informants’ statements.
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Part 3: Jack G. Ross
I started with the Dallas Police Department in 1966 at 22
years of age. The majority of my time was spent in the
patrol unit. I did have assignments in the Tactical Unit, as a
Field Training Officer, and at the academy developing inservice training. I was promoted to Sergeant during my
sixth year on the force. Most of the next 11 years were
spent in patrol at the very active central division. My
favorite area was what we called East Dallas, an area just
east of downtown where there was almost always some
trouble to be had. In 1984 I was terminated for excessive
use of force. The ruling was taken all the way to the Texas
Supreme Court, which ruled in favor of the city’s decision
to discharge.
I spent one miserable year looking for meaningful
employment. During that time I worked as a security guard,
had a newspaper route, and worked in a large grocery store.
Almost by accident, I got a lead on a corporate security
position with Campbell Taggart (Rainbo Bread) whose
corporate office was on Lemon Avenue in Dallas. At
Campbell Taggart I was in charge of security guards,
alarms, and access control. After an initial period of
adjustment and learning, I became very bored. During my
year there, I read Tai-Pan, Noble House, Whirlwind, King
Rat, and Gai-Jin. Noble House is a novel by James Cavell,
published in 1981 and set in Hong Kong in 1963. It is
described by Google as a massive book, well over 1,000
pages with dozens of characters.
After almost a year at Campbell Taggart, I got a lead on a
field security opening at Continental Baking Company
(Wonder Bread and Hostess Cake). Hired in 1986 by CBC
for a position in Atlanta, Georgia, I moved there for a short
18 months. That office was closed and I was assigned to
work the territory covered by the Dallas bakery until 1990,
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when I transferred to Chicago to work the Midwest
Division. In 1992, the division office was moved to St
Louis. Five moves in six years, that’s a trip. In 1995, CBC
was sold to Interstate Brands Corporation, the owner of
Dolly Madison Cake and several brands of bread including
Holsom and Butternutt. At that time IBC had no security
program. I was assigned to the St. Louis Bakery and
worked out of there until IBC established a corporate
security department in 2001. I was given the corporate
director position and was able to hire three security people.
About four years later we were allowed to hire one more.
There are five of us now covering the United States and
called Loss Prevention because the last CEO didn’t like the
sound of Corporate Security. There are 35 bakeries, a large
transportation system, many distribution centers, and retail
outlets. The company employs 20,000 people.
Part 4: Investigation and Interview
Investigation
What is the reason for the investigation? At my work
there are four main reasons we get involved in
investigations.
ETHICS POINT CALLS
These go by various names but are usually designed
for employees to call and leave a message about an
issue of concern. Many companies, including ours,
contract a service that handles these calls and then
sends them to a company official. Unfortunately
some employees call and make accusations against
their most hated supervisor. I think, at most, one in
ten have any merit.
CEO HOTLINE
Why we have this, I don’t know except the CEO
one day thought he would make the employees feel
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that he was accessible and put out in the company
newsletter they could call in their concerns directly
to him. I wonder if he ever sees them. I know the
messages I get come from an administrative
assistant. This is just another phone message system
that produces mostly unproductive work for
whomever gets to investigate the caller concerns.
MANAGEMENT REQUESTS
These often have substance but you have to ask
questions to make sure they aren’t using you to help
manage their problem employees. It does not take
long to figure out who has a real problem when they
call. Those are the calls I like because the managers
I trust usually have most of the preliminary work
done.
CONFIDENTIAL INFORMANT/INFORMATION
I get some of these on my office phone from people
who work in the St. Louis bakery where I still have
an office, even though the dual headquarters are in
Kansas City and Dallas. These are sometimes good
but it can also be a caller who does not like another
worker or supervisor. I get a considerable amount
from people I have worked with over the years that
trust that I will not divulge where I got my
information.
What documents and records will help with your
investigation? This is where the auditor part of you
comes in handy. In my investigations I use payroll,
DOT logs, business records, and financial documents.
This can be a really challenging area if you are a
contractor going into a company you are not familiar
with. Fortunately I get to play in my yard and deal with
records and documents I have seen many times before.
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Occasionally there will be the challenge of not knowing
who can be trusted at the location where the
investigation starts. I have had the unhappy experience
of the records keeper letting people know what records
are being pulled. Besides the normal records, in some
cases there will be video and access control records that
will help pin down the movements of key people in
your investigation. Besides local record-keepers, there
is often duplicate information at headquarters. If
trusting the local person is a gamble, HQ records could
be the best option. E-mail and text messages can also be
a real link to people involved in misdeeds. I can usually
get IT to send me three months of a person’s e-mail
with a two-day turn-around.
The next step is to evaluate the local management. If
you have worked with them before, no problem; you
know what to expect. Unfortunately I have experienced
managers who sabotage investigations to protect their
people. Some of them have the destructive attitude that
it is them against the corporate people. Most of the time
local management understands their profits depend on
the honesty of their work force and cooperate with the
investigation. Knowing whom to trust comes with time
and building relationships with people in the company.
If you don’t know everyone, there might be someone
you do know and trust who can tell you about them.
Remember the Weingarten ruling when interviewing
union employees, even if they are not the suspect. If the
employee reasonably believes the interview could lead
to disciplinary action, he can ask for and must be
furnished with union representation. As outlandish as it
may seem, you never know what an employee is going
to tell you during an interview. If there are concerns
about the culpability of the employee but you need their
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information for the interview, consider giving them
immunity. The word will spread quickly as soon as you
interview the first employee. In fact the word was
passing around when you walked in the front door. Is it
possible to keep the employees you need to interview
separated and isolated?
Once you have gathered all possible information,
preparation for the main interview must be done.
Organize all your documents. I like to put sticky notes
on the important ones so I can find them. In the union
setting you should prepare a file for the employee and
the union. The employee cannot be expected to answer
questions without looking at the documents with which
one has a concern. My rule for myself and my people is
that you can never have too much evidence. Always
have enough evidence that you can give some up and
still win the interview. If it looks like the suspect stole
$1,500, be ready to settle for a lesser amount.
When I began working in the private sector I had never
dealt with unions. I tried to avoid any union presence
during my interviews. After a time and several
interviews with union stewards I began to see an
advantage to having the steward present. First of all
they know the work environment and what the
employees are supposed to do. As I develop my case in
the interview, the steward understands what the suspect
actually did because the steward understands the
process. When the interview was finished, the steward
would go to the union officials and tell the truth about
what happened. There is always push back from the
unions but it is usually not as severe if they know the
employee is guilty.
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In our business, union officials often do not know our
work process. Sales representatives, the people that
deliver the bread and cake to grocery stores, are mostly
represented by the Teamsters’ Union. They are usually
former truck drivers who have never worked with the
handheld computers that generate our sales tickets,
settlement sheets, and other documents used as
evidence in interviews. This makes it important that a
line steward who has firsthand knowledge of the
process be present in interviews to explain accusations
and the evidence.
When possible, I prefer surprise interviews. When the
suspect employee has time to think about an upcoming
interview he might be able to confuse the issues.
However, there are some cases where it is an advantage
to let suspects think about upcoming interviews. Each
case has to be judged on its own circumstances.
The vast majority of the union officials, business
agents, presidents, and secretaries are white males. That
is not a problem for me but if you think all prejudice is
dead you need to reconsider. The strength of the unions
varies from region to region. The Northeast and Central
United States are the strongest, with California right
behind. It is not unusual in the Northeast for union
officials to tell the employee not to talk with an
investigator.
If you work the same area regularly, you will build a
relationship with the union people. That relationship
can be good (useful) or bad depending on personalities
involved. I have found it beneficial to try to build a
respectful relationship. The best way to do that is to be
thorough and right. Always listen to the union official
without interrupting and demand the same courtesy.
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After the relationship is built, it may be possible to have
off-the-record conversations. They are never
completely off the record but enough so that you can
have a constructive conversation. There are some I have
been able to give a heads-up to prior to the interviews
so they are not surprised but others that I could never
have an off-the-record conversation with.
Prior to the interview it is important to prepare the
company representatives who are going to be in the
room. Explain that it is your interview and they should
be quiet. If there are questions they want to ask, write
them down and let them ask after you finish. Also make
sure they the suspect will lie during the interview. They
should let it go and you will come back to it later. It is
important to keep the interview on track and avoid
chasing all the rabbits that come by. There are three
main kinds of defense I have labeled over the years.
KINDERGARTEN DEFENSE
This is the one where the suspect says everyone
does it. In that case, tell them for that defense to
work they have to give you names, dates, and
instances of misconduct.
HITLER DEFENSE
―My boss told me to do this.‖ In that case, the
question to the suspect is, ―are you an adult, and do
you know right from wrong? If the answer is yes,
you are culpable.‖
I DON’T KNOW DEFENSE
In this case your statement to the person is, ―that
answer is not good enough. This is your work
product and I expect an answer.‖
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You must expect lies, note them, and later use them to
your advantage. You must judge the appropriate time
and execute the return to the lies when you show the
evidence that sinks them.
A steady, calm voice all through the interview is most
effective. Make sure you don’t let the suspect or the
union representative make you angry enough to say
something stupid. The silent moments are very effective
at the right time. On a rare occasion, a loud demanding
statement or direction can be appropriate. Always have
a retreat plan if your case comes apart. It is much better
to back off than try to push a case that you cannot
prove.
When in an unfamiliar area, depend on the local staff
(usually HR) to guide you through local practices and
contracts. They should be full of information about the
union and the employees. Some contracts have wording
that protects the employee’s right to representation
beyond Weingarten protections. In such cases, the
contract takes precedence. Another pit to avoid is past
practice. What is usually done under similar
circumstances? There are instances when a good fallback position is a ―last chance agreement.‖ I usually
love these agreements because they protect the
company and the union. The next time an employee
messes up, he or she is gone. If the infraction involves
drinking or drug use, surprise testing must be in the
agreement.
When you have maximized your evidence, weather you
get a confession or not, you need to shut the interview
down. Too many of these interviews begin going
around in circles and never accomplish anything.
©2011
22nd Annual ACFE Fraud Conference and Exhibition
17
NOTES
INVESTIGATION AND INTERVIEWING IN UNION ENVIRONMENT
What is your company policy on individuals who are
guilty of misconduct? What level calls for termination,
reprimand, and so on? In our company, there is not
termination on the spot and usually no resignation
accepted. If the offense is worthy of termination, the
normal process is to suspend the person pending
continued investigation or review. Our process takes it
up the HR chain of command and to corporate legal. I
always explain the three ways a suspension pending
will end:



No wrong has been found and the employee comes
back with lost pay.
There was some wrong found but it does not go to
the level of termination. A return-to-work
agreement will be established.
Termination is appropriate and will be effective as
of the beginning of the suspension.
Sometimes criminal prosecution is appropriate, but
there must be considerable evidence and it must be
clear to someone who knows nothing about your
business. Another problem is that the police and courts
are full of problems much bigger and more dangerous
than yours.
©2011
22nd Annual ACFE Fraud Conference and Exhibition
18
NOTES