DATE: July 2007 Employees Cause "Worst Situation"
Men, women and leaders of billion dollar operations, say their worst day “on the job” was because of a single internal employee.
The same thing could happen in your organization, caused by someone in a trusted position or one who was considered a friend.
Take for example what has happened recently in both the National Football League (NFL) and the National Basketball Association (NBA). In the NBA, one of their long-time referees Tim Donaghy pled guilty to two felony gambling charges. In the NFL, one of its biggest and most marketable stars, Michael Vick, pled guilty to felony dog fighting charges.
Considering the many years and millions of marketing dollars the NBA has spent to spread the popularity of the league— it is scary to consider the consequences of one individual’s actions. “As expected, former NBA referee Tim Donaghy pleaded guilty today to betting on NBA games, including games in which he officiated, and providing confidential information to others who bet on NBA games,” David Stern said in a written statement. Stern has been commissioner of the NBA since1984 and called the investigation “the most serious situation and worst situation that I have ever experienced either as a fan of the NBA, a lawyer for the NBA or a commissioner of the NBA.”
"This was an act of betrayal of what we know in sports as a sacred trust," Stern said. "I feel betrayed by what happened on behalf of the sport."
Donaghy pleaded guilty to two felonies: conspiracy to commit wire fraud and conspiracy to transmit wagering information. In a prepared statement Roslynn R. Mauskopf, the United States attorney for the Eastern District of New York, said: “The participation of an official of one of the world’s premier sports leagues in an illegal betting scheme involving his own sport demonstrates the corrupting allure of easy money. Today’s guilty plea and charges serve as a warning that seemingly easy money often comes at a high price.”
The fraud triangle or tri-pod is a theory that for a person to commit fraud, three things must be present: incentive, opportunity and rationalization. Even with a complex evaluation and rating system for NBA referees, Donaghy still had the opportunity. He apparently was in over his head to the mob and therefore, had the incentive to commit fraud. Rationalization can always be accomplished—whether he felt he really didn’t affect the outcomes of games or whether the players make all that money and he just wanted to get his.
This situation points out what was a flaw in the NBA’s background screening policy. In the past, they only ran credit reports on referees pre-employment. Now they monitor their referee’s credit annually. The NBA employs 60 referees and one with Donaghy’s experience would make approximately $260,000.
Pre-employment and annual credit reports are vitally important to monitoring your employee’s financial pressure. Donaghy did not handle cash for the NBA and was not in a financial position. He did have a position of trust and authority. Donaghy could cost the NBA millions with the bad publicity and lost trust and loyalty of some fans. It is important in your own organization to recognize positions of trust and realize the damage one person can cause. Review the fraud tri-pod and eliminate opportunity as well as monitor the pressure or incentive your employees have.
Arthur Blank, owner of the Atlanta Falcons and co-founder of Home Depot, has a net worth of over $1 billion dollars. When Michael Vick was indicted, the media often replayed the moment when Vick had a broken leg and Blank wheeled him out in a wheel chair from the locker room to the sideline.
Upon Vick’s guilty plea, Blank stated: “Today, Michael Vick admitted his guilt to very serious charges related to his earlier indictment. His admissions describe actions that are incomprehensible and unacceptable for a member of the National Football League and the Atlanta Falcons.”
"You think you know somebody for six years and you find out another side of their personality that you didn't know. It's always disappointing. If it's a positive thing you welcome that, but something like this, I don't know if any of his teammates anticipated anything like this. I certainly know this owner didn't anticipate anything like this. It's very sad." Reportedly, Blank has contemplated how Vick’s behavior could have gone unnoticed and will likely consider more in-depth background checks before drafting players or signing free-agents.
Vick may never play in the NFL again. Even if he does, he will lose millions in endorsement deals. The Falcons were not able to cut ties with Vick due to salary cap and financial reasons. They intend to sue Vick to recover some of his $22 million signing bonus. Besides Vick and the Falcons, companies who paid Vick handsomely for endorsements will also lose millions. Nike may also consider more extensive background checks before signing athletes to $100 million dollar contracts.
It’s easy to be consumed with minimizing external risk and monitoring the market and competitor activity. It can be just as important however to monitor the internal risk to your company from your own employees. Pre-employment background screening as well as pre-promotion or annual checks can provide a means to get to know your employees better. Contact CI to get the PROACTIVE TRUTH™ regarding your employees and candidates before their actions blindside you, leading to your worst day on the job or “most serious situation”.