High-tech crime has high costs
for business
By: Lisette Hilton
June 24, 1996
Source: The
Business Journal
Joseph Merino knows the sting of high-tech crime.
In 1993, someone stole one personal computer from the offices of Unipower
Corp., a manufacturer of electronic power supplies. But thieves made
the loss even more costly than it appears.
"They took all the diskettes next to the
computer, which had our 125,000-name mailing list -- a list that took
us many years to compile," says Merino, president and CEO of
the Coral Springs company. "All we could claim was $2,000 for
the computer; yet, to date we have only retrieved about 20,000 of
those names."
High-tech crime doesn't have the Hollywood
sizzle of violence in the streets, but it costs businesses plenty.
Manufacturers and other technology companies lose valuable physical
inventory and even more valuable data. Semiconductor chips, memory
boards and other electronic components are stolen in large-scale burglaries
or by employees.
Everyone pays in the long run. "The way
it's going to affect us is we are spending more money on things that
don't provide value to the customer," says Merino. Since the
incident, Unipower has installed motion sensors and a secondary safe
for company records.
Many companies are purchasing costly alarm
systems, employing security personnel and using consultants to weed
out dishonest job applicants with advanced screening methods.
The goods are often sold on the "gray
market," which promises high profits and little risk. It's a
hard crime to track. High-value components, such as integrated circuits,
SIMM modules, flash memory and disk drives, can change hands three
times within 48 hours and may cross several state lines or international
boundaries as quickly, according to the Technology Theft Prevention
Foundation, in Warren, N.J.
Thieves can be employees who pocket a few hundred
dollars in chips a month and sell them to their friends or use them
for their own PCs. Organized crime gangs are profiting, too.
The American Insurance Service Group estimates
the worldwide loss for high-tech theft, including intellectual property,
is approaching $8 billion and is expected to reach $200 billion by
2,000.
The Chubb Group of Insurance Companies, which
claims to insure 30 percent of the hardware and software companies
in North America, has seen its customer claims rise from an average
of $5,000 per incident in 1990 to $450,000 in 1994. Thomas R. Cornwell,
vice president and technology underwriting manager for Chubb, puts
the value of intellectual theft losses at $24 billion to $40 billion
"The issue is that we need to work on
all the elements of this problem --from shipping to electronics, to
law enforcement," says Cornwell.
In South Florida, more companies are reporting
losses. "We get new computers that have 32 megs of memory, store
them for a few months, and find them with only four megs," says
Paul Thomas, security operations manager at Coulter Corp. of Miami.
"Once, we lost eight computers and monitors.
The police couldn't do anything. You can try and recoup the losses,
but high insurance deductibles make that impossible." Thomas
thinks the thefts affect the company's profits and year-end employee
bonuses.
But Thomas believes that police consider the
crimes less important. "There are times we'll call in a theft,
and we won't see a detective for three to five working days,"
he says.
South Florida police departments report little
high-tech crime. In most cases, these cases are treated as routine
burglaries -- taking a back seat to violent crime.
The problem, according to John O'Loughlin,
corporate security director of Sun Microsystems Inc., in Mountain
View, Calif., is that law enforcement doesn't give much heed to business
crime. O'Loughlin, a former FBI agent, is blunt: "Most crime
enforcement wouldn't know a computer chip from a potato chip.
Detective Richard Grossman, an investigator
in the economic crime unit of the Coral Springs Police Department,
says the issue of police attention on high-tech crime has to be put
into perspective. "These are property crimes, not crimes of violence,"
he says. "Many departments are understaffed in their economic
crime units."
He agrees that law enforcement needs to be
more aware of laws against high-tech offenders. He refers to a Florida
computer-related crime law that covers offenses against intellectual
property and trade secret information, offenses against computer equipment
or supplies and offenses against computer users.
Experts suggest affixing alarm sensors on windows,
since smashing glass is a favorite form of entry; installing line
security on burglary alarm systems, which sends an alarm signal to
police even if the phone line is cut; hiring guard service at night
and on weekends and holidays; getting employees involved in practicing
ethical work habits; and using advanced screening methods to detect
prevent thieves from becoming employees.
O'Loughlin mentioned a film product which when
applied to glass prevents the glass from shattering. While the technique
won't prevent the crime, it will slow thieves down -- hopefully allowing
police to catch them in the act.
Other recommendations are strict inventory
control procedures that hold people accountable for inventory, closed-circuit
cameras, and regular contact with truckers and dispatchers, who should
be careful not to maintain predictable routes while transporting goods.
The key, O'Loughlin says is to get proactive.
"We need more reliable data, and executives need to realize they
too should get involved," he says. "No one seems to understand
the impact."
