Scrutiny on the Bounty: business rewards for crime tips - offering employees a reward for helping solve a crime

Business Horizons, Nov-Dec, 1992 by Gilbert Geis, Ted Huston, Joseph Wells

Executives surveyed think rewards are more appropriate in non-business related crimes involving their employees than in business-related ones.

Business executives are sometimes confronted with criminal acts that take place on their premises, involve their employees, or threaten the community in which they are located. The offer of a reward for information to help solve such crimes is one strategy executives often follow. Money is a powerful incentive to transmit to the authorities clues that otherwise would be kept quiet. Posting a reward can also be a tangible indication that a company cares.

There can be a downside as well. The police might resent what they regard as outside interference with their work. They might be swamped with people providing false leads in the hope of gaining a reward. And of course, there can be problems in determining what information qualifies for a reward and how money is to be divided among different claimants. Offering rewards can also thrust a company into the world of informers and diverse unsavory characters.

But rewards do seem to work. Each year more than 100,000 Americans volunteer information about other taxpayers to the Internal Revenue Service, which pays out more than a million dollars for the 10 percent of the claims that are allowed. In 1988, the Securities and Exchange Commission was authorized to post rewards to encourage informants to come forward with tips on insider trading cases.

Typical of the use of rewards by companies was the 1989 case in which Du Pont offered $10,000 for information leading to the conviction of the person who had used a Du Pont product, Velpar, to poison a 500-year-old historic tree, the Treaty Oak in Austin, Texas. A conviction resulted from information provided by someone seeking the reward.

If rewards are desirable, under what circumstances should they be offered and how much should a company pay? We surveyed a sample of American firms, offering the following three vignettes and asking a number of questions.

Vignette A

Anna C., a 31-year-old secretary in the accounting department of a large company, was raped and beaten in the company parking lot. She has not been identified in the newspaper, but the company is in a small town and information about the crime is widely known. The victim had been working overtime, and no one else was in the vicinity when the crime took place.

The victim has specifically indicated to the company that she does not regard the company as liable and has no intention of suing. Anna is able to offer only fragmentary descriptive information about the offender. Other women employees have been frightened by the crime, and the company has improved the lighting and installed a security station in the parking lot. The rape victim was not hospitalized but missed several days of work and is now receiving counseling at a rape crisis center.

Vignette B

The 15-year-old son of a couple who have worked for the company for more than ten years was beaten and killed on a deserted road outside the city. The boy, an excellent student, was, so far as anyone can tell, simply in the wrong place at the wrong time. It appears he was waylaid by someone who wanted to steal his car and take his money. Several clues have been found, but the police anticipate that the crime, which occurred five days ago, will not be readily solved.

Vignette C

Auditors have discovered a $10,000 discrepancy in the accounts for the purchasing department and believe it was brought about by a conspiracy involving several employees. The company has suspects but has been unable to gather enough satisfactory evidence to bring charges. The company is considering offering a reward for additional information.

Forty executives responded to our survey. On a ten-point scale, the company representatives thought the rape case was by far the most likely to induce their company to offer a reward (6.62 points). The murder was far behind (3.97), though relatively close to the embezzlement case (3.38).

A slight majority of the respondents believed that if a reward were offered in the rape or murder case, it should be between $1,000 and $5,000, but that it ought to be under $1,000 for the embezzlement. About 30 percent believed the reward should be in the $5,000 to $10,000 range for the rape and murder, though none went as high as this for the embezzlement.

More executives (83.8 percent) thought the rape episode should draw a reward offer from the company than for either the murder (59.5 percent) or the embezzlement (40.5 percent). On the other hand, there was a strong feeling that the reward, though smaller, would be more effective in solving the embezzlement than either of the other two criminal offenses.

Most of the executives (56.8 percent) believed the award should be paid on conviction, though 30.6 percent said on indictment and 11.1 percent on arrest. Only 16.7 percent favored granting an award to a law enforcement officer, and only 19.4 percent believed it should be given to an accessory who turned state's evidence. Somewhat less than half (42.9 percent) of the respondents replied that police agreement should be a prerequisite to making an award.