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Letter from JANA Partners & CalSTRS to Apple, Inc.

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Anne Sheehan, California State Teachers' Retirement System, on Friday, January 19, 2018 Editor's Note: Anne Sheehan is Director of Corporate Governance at the California State Teachers’ Retirement System (CalSTRS). This post is based on the recent joint shareholder letter from JANA Partners LLC and CalSTRS to the Board of Apple, Inc.

JANA Partners LLC and the California State Teachers’ Retirement System (“we” or “us”) collectively own approximately $2 billion in value of shares of Apple Inc. (“Apple” or “you”). As shareholders, we recognize your unique role in the history of innovation and the fact that Apple is one of the most valuable brand names in the world. In partnership with experts including Dr. Michael Rich, founding director of the Center on Media and Child Health at Boston Children’s Hospital/Harvard Medical School Teaching Hospital and Associate Professor of Pediatrics at Harvard Medical School, and Professor Jean M. Twenge, psychologist at San Diego State University and author of the book iGen, we have reviewed the evidence and we believe there is a clear need for Apple to offer parents more choices and tools to help them ensure that young consumers are using your products in an optimal manner. By doing so, we believe Apple would once again be playing a pioneering role, this time by setting an example about the obligations of technology companies to their youngest customers. As a company that prides itself on values like inclusiveness, quality education, environmental protection, and supplier responsibility, Apple would also once again be showcasing the innovative spirit that made you the most valuable public company in the world. In fact, we believe that addressing this issue now will enhance long-term value for all shareholders, by creating more choices and options for your customers today and helping to protect the next generation of leaders, innovators, and customers tomorrow.


The Significance for Boards and Managements of the JANA/CalSTRs Letter to Apple

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by Ethan A. Klingsberg, Cleary Gottlieb Steen & Hamilton LLP, on Friday, January 19, 2018 Editor's Note: Ethan A. Klingsberg is a partner at Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb publication by Mr. Klingsberg. Related research from the Program on Corporate Governance includes Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here) and Who Bleeds When the Wolves Bite? By Leo E. Strine, Jr. (discussed on the Forum here).

Over the past couple of years, we have seen traditional, actively managed funds, such as Neuberger Berman, borrow activist tactics and push for changes to accelerate increases in share prices. In parallel with this arguable trend toward convergence between actively managed funds and activist funds, a chasm appeared to be developing elsewhere in the investor landscape as pension and passive strategy funds increasingly focused on “social good” issues, while brand name activist funds remained primarily focused on nearer term financial performance and returns. But the activists desperately need the support of the pension and passive strategy funds, as evidenced by the proxy contests over the past year where support from these funds was neither predictable nor easily locked up. The announcement on January 6, 2018 by JANA Partners, a high profile activist fund, and CalSTRs, an outspoken pension fund, that they have teamed up to accumulate a $2 billion equity position in Apple for the purpose of launching a specific “social good” campaign is the strongest indication to date that the magnitude of assets under management focused on social good matters cannot be ignored and that even a successful activist fund like JANA needs to burnish its reputation in this area. 


Citi to Address Gender Pay Gap

Corporate Governance -

Citi reached an historic agreement to disclose wage data and adjust employee salaries in a company-wide effort to achieve gender pay equity. Arjuna Capital agreed to withdraw its gender pay shareholder resolution after the agreement. Citigroup (Citi) and Arjuna Capital disclosed that Citi is taking steps to provide gender and ethnicity wage data and commit to […]

The post Citi to Address Gender Pay Gap appeared first on Corporate Governance.

Weekly Roundup: January 12–18, 2018

The Harvard Law School Forum on Corporate Governance and Financial Regulation -

Posted by HLS Forum on Corporate Governance and Financial Regulation, on Friday, January 19, 2018 Editor's Note: This roundup contains a collection of the posts published on the Forum during the week of January 12–18, 2018. Busy Directors and Shareholder Satisfaction
Posted by Wayne R. Guay and Kevin D. Chen (University of Pennsylvania), on Friday, January 12, 2018 Tags:  What the New Tax Rules Mean for M&A
Posted by Deborah L. Paul, T. Eiko Stange, and Joshua M. Holmes, Wachtell, Lipton, Rosen & Katz, on Friday, January 12, 2018 Tags:  Paying for Performance in Private Equity: Evidence from VC Partnerships
Posted by David T. Robinson (Duke University), on Saturday, January 13, 2018 Tags:  Remarks at the Inaugural Meeting of the Fixed Income Market Structure Advisory Committee
Posted by Jay Clayton, U.S. Securities and Exchange Commission, on Saturday, January 13, 2018 Tags:  Strict Supervision, Bank Lending and Business Activity
Posted by Joao Granja and Christian Leuz (University of Chicago), on Sunday, January 14, 2018 Tags:  What Do Investors Ask Managers Privately?
Posted by Eugene F. Soltes and Jihwon Park (Harvard Business School), on Monday, January 15, 2018 Tags:  How Transparent are Firms about their Corporate Venture Capital Investments?
Posted by Sophia J.W. Hamm (The Ohio State University), Michael J. Jung (New York University), and Min Park (The Ohio State University), on Tuesday, January 16, 2018 Tags:  2017 Year in Review: Securities Litigation and Regulation
Posted by Jason Halper, Kyle DeYoung and Adam Magid, Cadwalader, Wickersham and Taft LLP, on Tuesday, January 16, 2018 Tags:  Delaware’s Prudent Approach to the Cleansing Effect of Stockholder Approval
Posted by William Savitt, Wachtell, Lipton, Rosen & Katz, on Tuesday, January 16, 2018 Tags:  Changes in ISS 2018 Compensation FAQs
Posted by BJ Firmacion and Torie Nilsen, Willis Towers Watson, on Wednesday, January 17, 2018 Tags:  Network Effects in Corporate Governance
Posted by Sarath Sanga (Northwestern University), on Wednesday, January 17, 2018 Tags:  Remarks at Ceremonial Swearing In of Commissioners Hester M. Peirce and Robert J. Jackson, Jr.
Posted by Jay Clayton, U.S. Securities and Exchange Commission, on Wednesday, January 17, 2018 Tags:  A Sense of Purpose
Posted by Larry Fink, BlackRock, Inc., on Wednesday, January 17, 2018 Tags:  The New Digital Wild West: Regulating the Explosion of Initial Coin Offerings
Posted by Randolph A. Robinson, II (University of Denver), on Thursday, January 18, 2018 Tags:  BlackRock Supports Stakeholder Governance
Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Thursday, January 18, 2018 Tags: 

Compliance Bricks and Mortar for January 19

Compliance Building -

These are some of the compliance-related stories that recently caught my attention.

Financial Institutions Are Playing Catch-Up in AML and Sanctions Compliance by Michael Volkov

A recent survey of financial institutions conducted by Alix Partners on AML and Sanctions compliance (here) contains informative results that support some of my general concerns about ethics and compliance programs – board members do not receive adequate training and compliance officers are continuing to struggle with lack of adequate resources. [More…]

A Sense of Purpose by Larry Fink

Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.  [More…]

The New Digital Wild West: Regulating the Explosion of Initial Coin Offerings by Randolph A. Robinson, II

In order to provide the necessary context to understand this new decentralized world, this paper provides a non-technical legal audience with a foundational understanding of how public blockchains work. The paper begins with an introduction to the coming decentralized world, including an overview of both public blockchain technology as well the Ethereum platform, the primary public blockchain upon which ICOs are being deployed. [More…]


What to Watch: Draft Export Control Law of China

Global Compliance News -

The Ministry of Commerce (“MOFCOM“) of the People’s Republic of China (“China“) published the draft Export Control Law (“ECL“) for public comments via a circular on 16 June 2017. If enacted, the ECL will be the first set of comprehensive and unified export control legislation in China, which is aimed at upgrading the country’s existing regime consisting of various administrative regulations and rules. The ECL is still in the draft form and no further update has been announced since its publication last year, but it is widely expected to be introduced in the National People’s Congress within 2018.

1. Controlled Items, Blacklists and Embargoes

The draft ECL sets forth four categories of controlled items (“Control Lists“), including dual-use items which may be used for civilian and military purposes, military items, nuclear items, as well as other goods, technologies, services and items that are related to national security. Items outside the Control Lists could also be temporarily controlled for up to two years, subject to the approval of the State Council, the Central Military Commission and their designated authorities (“Competent Authorities“). In addition, activities subject to ECL control need not involve items on the Control Lists as long as the exporter knows or should know that the export may give rise to national security and terrorism concerns.

The Competent Authorities may also maintain blacklists of foreign importers and end-users that breach the ECL, and may prohibit the export of controlled items to such persons

Furthermore, the draft ECL provides that if China is subject to any discriminatory export control measures by any country, the State may adopt retaliatory measures against such country. The State may also put in place any necessary controls over the export of any goods, technologies and services in order to safeguard security and interests during wartime or urgent situations concerning international relations.

If the draft ECL is passed in its current form, companies must be prepared to regularly monitor dynamic updates to the scope of controlled items, countries and persons in order to ensure full compliance with the law.

2. Controlled Activities and Licensing

The draft ECL introduces the concepts of deemed export and re-export in China, which will bring China’s system many steps closer to the export control regimes in western countries. Deemed exports include the provision of controlled items by a citizen, legal person or other organization in China to any foreign person; the item need not be physically exported from China. Re-export controls cover the export of controlled items (i.e. items comprising a prescribed amount of content controlled by China) from one overseas jurisdiction to another.

It remains unclear whether or precisely how China will implement provisions controlling deemed export and re-export transactions. Given their potentially extra-territorial reach, there may be practical challenges in enforcing such requirements. Furthermore, if ultimately adopted, the deemed export provisions may significantly impact multinational corporations with a presence in China or with access to Chinese controlled items and technology outside of China. In view of the breadth of the draft legislation, even the sharing of information related to controlled items between colleagues (one of whom is employed by a Chinese subsidiary) may be included within the scope of the ECL’s control regardless of whether there is actual cross-border transfer.

The ECL requires licences (categorized into General Licences and Individual Licences) to be obtained from the Competent Authorities for carrying out controlled activities. Additionally, exporters may also be subject to recordkeeping and monopoly qualification requirements.

3. End-Use Requirements

The Competent Authorities may request the exporters to submit end-use certificates or documents issued by the importers or the relevant agencies in the countries of import. The exporters are also under a positive obligation to review the end-users and uses of the exported items, and to immediately report to the Competent Authorities of any change in end-users or uses. Further , the importers shall undertake not to alter the ultimate uses of the imported items, or transfer the imported items to any third parties other than the end-users, without the approval of the Competent Authorities. In this regard, the Competent Authorities are empowered under the ECL to conduct on-site verifications on the end-users and end uses.

4. Enforcement and Penalties

The draft ECL grants Competent Authorities broad investigative powers. They may, for example, enter the business premises of parties under investigation, conduct interviews with relevant parties, access and copy relevant documents, examine the conveyance used for export, seize items and even freeze bank account of the export operators.

The draft ECL prescribes the following key penalties:

  • Export without a Permit – The operator may receive a warning from the Competent Authorities, as well as administrative penalty of not more than 10 times the illegal business revenues and confiscation of any illegal gains derived from such activity. Persons directly in charge and other persons directly held liable (not expressly defined, but may include employees or agents of the exporter) may also be given a warning and fined up to CNY 300,000.
  • Fraudulent Acquisition or Trading of a Permit – In addition to the above penalties, the Competent Authorities may withdraw the licence of any party that obtains it by fraud, bribery or other illegal means, or falsifies, alters, leases, lends, or trades a licence for the export of controlled items.
5. Implications

The ECL is still in the draft form and it remains to be seen how the legislative provisions will be enforced, whether any exemptions will be introduced, and if there will be any meaningful updates to the draft before it is introduced to the National People’s Congress. Given the potentially wide-sweeping impact, multinationals that may be affected are well advised to start early to understand the implications of the new law on their compliance obligations, supply chains, and business operations.

The post What to Watch: Draft Export Control Law of China appeared first on Global Compliance News.

What Level of Due Diligence Should You Perform

FCPA Compliance & Ethics -

Today, I want to take a deep dive and exploration of the levels of due diligence. Due diligence is generally recognized in three levels: Level I, Level II and Level III. Each level is appropriate for a different level of corruption risk. The key is for you to develop a mechanism to determine the appropriate [...]

The post What Level of Due Diligence Should You Perform appeared first on Compliance Report.

The Payoff and Peril of Smart Infrastructure

BRINK News -

Smart infrastructure, defined as the “result of combining physical infrastructure with digital infrastructure, providing improved information to enable better decision making, faster and cheaper,” is changing society. Indeed, the Cambridge Centre for Smart Infrastructure and Construction estimates that such infrastructure is a global opportunity worth $2.8 – $6.6 trillion.

Smart grids, for example, which are used to monitor and manage energy consumption in cities, are starting to come online globally. To a large extent, the growth of these new innovations depends on the public sector’s investment appetite. The European Union “aims to replace at least 80% of electricity meters with smart meters by 2020 wherever it is cost-effective to do so.” This ambition was set in 2014, and progress has been substantial. By 2020, according to the European Commission’s 2014 report on smart metering, “it is expected that almost 72% of European consumers will have a smart meter for electricity. About 40% will have one for gas.”

Smart infrastructure will directly reduce costs, increase reliability, and save energy. Other positive externalities, such as enhanced environmental sustainability, will also contribute to the overall benefit to society. In the U.S., smart grid deployment is expected to deliver $1.3 trillion to $2 trillion in benefits over a 20-year period.  

Although the benefits are substantial, potential risks are severe, and the evidence shows proper planning to meet them is not keeping up with smart infrastructure implementation. Insurance companies are acutely aware that the growing interconnectivity within cities may lead to large loss accumulation. In the case of a large infrastructure failure, for example, insurers could be required to meet claims across many different classes of coverage, including direct damage, business interruption, and third-party liability policies. Or take a cyberattack on the U.S. Northeast electrical grid, which could result in economic losses as high as $243 billion. In addition, insurers are pointing to other potential risk scenarios of emerging risks that have vastly varying estimated costs:

The majority of these and other innovation-related risks are uninsured: The insurance gap is as high as 83% in a cloud service disruption scenario and 93% for a mass vulnerability setting. Other risks are yet unknown. Society faces two stark realities that need to be resolved, says Matthew Leonard, partner at Oliver Wyman: “First, people do not fully understand the risks they are running; and second, those who seek to mitigate their risk with insurance are faced with a decided lack of choice and/or affordability.”

Although the benefits of smart infrastructure are substantial, potential risks are severe, and the evidence shows proper planning to meet them is not keeping up with smart infrastructure implementation.

The World Economic Forum convened a working group comprised of government officials, business leaders from the insurance industry, and technology players in its Mitigating Risks in the Innovation Economy initiative to examine how emerging technologies—such as smart infrastructure—are causing a radical shift in the nature of risks faced by individuals, businesses and society. “The world is changing as new technologies proliferate and the nature of risks facing individuals, and the economy is morphing at an increasingly rapid pace,” says Prashanth Gangu, partner at Oliver Wyman and a member of this initiative. “Society needs to be ready for events bigger than the more than $100 billion loss estimates from Hurricanes Harvey, Irma, Maria which could be caused by risks in the global cyber-physical system, either errors in code, malicious hackers or AI gone wild.”

The initiative provided comprehensive recommendations, and prioritized three high-level areas where key stakeholders could start to collaborate:

  1. Insurers, governments and technology players need to come together to accelerate the development of a solution to this large and pressing issue. Existing liability rules were not designed with complex and autonomous systems in mind, which has left stakeholders guessing as to how current liability rules will be applied in practice.
  2. The exchange of data can and will be an effective tool to support the management of vulnerabilities and threats. In the future, governments should continue to foster collaboration and the sharing of information between the public and private sectors. Insurers and technology players should take an active role in these initiatives.
  3. A patchwork of standards and regulations is likely to ensue if there is no collaboration across borders. The resulting risk is an environment in which new technologies must operate under an inconsistent set of safety and operational protocols globally. It is important to identify areas with significant gaps and promote the development of collaborative efforts to establish these global protocols.

The recommendations, along with the risks and challenges posed by various emerging technologies, are laid out in a report prepared by the World Economic Forum and Oliver Wyman titled How Emerging Technologies Are Changing the Risk Landscape.

The Steering Committee and Working Group are now working on developing specific resiliency solutions against the failure of emerging technologies, starting with smart grids. As adoption rates for smart infrastructure and emerging technologies more broadly increase, the public and private sector must work together to develop resiliency and support the implementation of recommendations. The recommendations are to be further developed and piloted in 2018, starting at the World Economic Forum Annual Meeting in late January.

The Need for Anti-Money Laundering Regulatory Reform

Corruption, Crime & Compliance Blog -

It is rare these days for Republicans and Democrats to agree on political priorities – another profound grasp of the obvious.  Recently, on Capitol Hill there appears to be some common ground on the issue of reforming AML laws and regulations.

The motivation is to make financial AML regulations “smarter” and increase focus on beneficial ownership, terrorist financing and proactive detection of money laundering.  Some of the AML requirements and reporting rules have lost focus on these important priorities.

Two significant issues have been identified: (1) reporting requirements for transactions over $10,000 and (2) the filing of Suspicious Activity Reports.  Banks and law enforcement agree that many of the filings above the $10,000 threshold and in SARs are not helpful to law enforcement.  In response to money laundering and terrorist financing threats, the number of filings required by banks has steadily increased with no firm finding that such filings have directly resulted in increased enforcement.  In fact, banks have suggested that the system is so complex and poorly coordinated that law enforcement’s ability to identify and target investigations has been hindered.

For example, the $10,000 threshold for reporting cash transactions was adopted in the 1970s.  There is a need to increase that figure, and some have suggested setting a new threshold at $30,000.

Also, with respect to filing of SARs, most banks, out of concern that they may fail to file a required SAR, file SARs in situations when the filing is not required.  The banks know that regulators will review their SARs filings and often second-guess these determinations.

In the case of the new beneficial ownership regulations that are effective in May 2018, some have floated the idea of having FinCEN create a national database of beneficial ownership information, mandating that company’s register themselves with federal regulators and not just state incorporation authorities.  While banks are complaining about the burden of beneficial ownership regulations, I do not expect Congress to modify this requirement.  Rather, the politicians floating this idea appear to be giving banks another shot to argue against the beneficial ownership regulations.  The United States is far behind other countries on requiring beneficial ownership disclosures, and consequently the amount of money laundering through hidden accounts in the US is much higher than it should be.

Banks have also sought additional guidance from law enforcement and regulators on AML compliance requirements.  The specific breakdown in communication and information sharing has been between law enforcement and regulators.  In many cases, banks have explained that the regulatory framework and specific requirements does not match law enforcement’s priorities and need for information, resulting in AML regulatory requirements that do not advance law enforcement’s ability to focus on the more serious financial crimes or terrorist financing schemes.

Law enforcement is sure to oppose any major revisions to the AML system and its voice is an important factor to consider in any regulatory modification.  However, there is nothing wrong with banks, regulators and law enforcement working to come up with practical improvements to the regulatory and reporting system.

Community banks have raised complaints about regulatory burdens and the amount of time and expense devoted to AML compliance.  Again, the community banks have suggested that they are not able to design a truly risk-based AML compliance program because of the fear that regulators will second guess such determinations when conducting supervisory reviews of their operations.

The post The Need for Anti-Money Laundering Regulatory Reform appeared first on Corruption, Crime & Compliance.

Distribution Center Security: How Some of the Biggest Retail Companies Deter Theft and Crime

Loss Prevention Media -

One of the modern miracles of retail is the ability to get the right merchandise, in high volume, and across vast distances, either into point-of-sale locations or the customer’s doorstep within a matter of days, if not hours. Enter the distribution center: often an enormous building with hundreds of employees, conveyer belts, thousands of shelves of merchandise and special handling equipment. These centers are the nodes in a web that span continents or the globe for many brands we all know. Several large brands are using security entrances combined with access control systems and cameras at their distribution centers in a certain way to mitigate the risks endemic to distribution center security. Let’s take a closer look.

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Distribution centers on any given day contain millions of dollars’ worth of merchandise and typically have a very large footprint or hundreds of thousands of square feet. They also operate 24/7. Ideally, they are near an airport or highway system, and in a location with access to a ready supply of economical labor. All of these needs imply an urban location with relatively lower real estate costs. Distribution centers can also experience relatively high turnover in labor and seasonal/temporary workers to handle increases in demand of goods during holidays. Given all of these factors, there are three risks that a physical security plan should seek to address proactively using distribution center security entrances.

Theft. The first and most obvious risk, of course, is theft. Relatively low wages and high-value merchandise present the constant pressure of temptation, with targets being small valuables, electronics or even food that can be hidden into clothing.

Violence. The second risk is violence, often originating from the employee population. There can be domestic violence in the workplace (a jilted boyfriend or husband seeking out a partner inside the facility) or ex-employees seeking retribution after being terminated. A violent event can disrupt continuity; you will have distraught employees and managers in the aftermath needing support. If the facility becomes a crime scene under investigation, you could have a shutdown of operations costing millions of dollars a day and negatively impacting loyal customers.

Bad PR. The last major risk worth mentioning is the bad PR that can result from violence. All too often, we see companies from all types of verticals getting an unwanted spotlight from shootings, smart mobs, protests and domestic violence entering the workplace.

Companies with distribution centers are not immune: just a few years ago, a well-known package delivery company experienced a shooting where several employees and guards were injured and killed. This made the news for weeks during the investigation, with pressure on the company to answer questions from the media. Top management wants answers and a management plan. It’s better to learn from the news now than be in the news tomorrow.

To effectively mitigate the above risks, a physical security plan should seek to proactively:

1) deter/prevent casual infiltration onto the premises from unauthorized individuals

2) deter/prevent theft of merchandise

3) deter/prevent carriage or knives/guns/weapons inside the premises

4) In general, create a safe environment and a culture of safety and security among the employee population.

Distribution centers are in many ways similar to the sterile concourses of today’s airports. (Some of these similarities will be addressed later in the post.) But one of the most important reasons that security entrances are being deployed today is to accurately control and monitor who is in the building, when are they in the building, and what they have on their person at all times. Only security entrances can control the passage of people through mitigating tailgating or piggybacking. Look at some best practices some of the biggest brands are deploying today: a combination of security entrances with manpower and technology to address the most prevalent risks.

Layers of Physical Security

The Perimeter. The fenceline perimeter should discourage casual infiltration from non-employees. Since higher security practices exist inside the building, the goal at the fenceline is to primarily deter and potentially respond if an incident occurs. Typically, a tall fence is deployed with guarded entrance gates for certain vehicles (security, management, and freight). Cameras are used to record any activities along the fenceline that may occur so they can be reported or investigated after the fact.

If there is parking for employees outside the fenceline, full height turnstiles are placed on the fenceline so that employees can use their credentials to unlock the turnstile and enter one at a time into the secure area.

Initial Entry, Divestment and Screening. As employees enter the building, they can divest their personal belongings, such as bags, purses, metal objects, phones, keys, etc. into lockers. Some facilities allow phones or keys inside the secure area. Then, employees approach a manned booth or window to pass any allowed metal belongings into a bowl to a guard who will give them to the employee on the secure side.

To enter the secure side, employees present their credentials to the access control system, walk through a metal detector doorway and a full-height turnstile. The turnstile unlocks when the credentials are valid; however it will re-lock if the detector senses a metal object. In that case, the user must back up, remove the object (put in their locker or give to the guard) and try again. The passageway and the turnstile display a red or green light to the user, telling them if they can proceed into the facility or clear the passageway and try again.

Employees enter a distribution center by badging credentials, passing through a metal detector, then a one-way full height turnstile. The area is manned in case of non-compliance.

Tracking Breaks and Lunches. When employees take a break or lunch during their shift, they can proceed to a snack/concession area with seating so they can eat and relax. To enter the concession area, they pass through waist-high, tripod turnstiles using their access control credentials. This setup enables data to be collected on who is on the floor or off the floor (in case of an incident) and for how long (in case of slippage).

End-of-Shift Theft Deterrence. The end of the shift is the prime opportunity to squelch theft. Some companies are using a technique used in airports on passengers: random pat-downs or scans with a wand. Employees must approach an array of two waist-high turnstiles: one turnstile leads to an exit and the other to a search/pat down area with a guard. The employee presses a button that initiates a program that randomly turns on a green or red light. If the light is red, the “exit” turnstile remains locked and the “search” turnstile unlocks; the user must proceed through to get a pat down or scan with a wand. If the light is green, the “exit” turnstile unlocks and the employee can pass through the other tripod turnstile and proceed to exit.

All exiting employees, whether patted down or not, proceed through a final, full-height turnstile to exit the floor. The turnstile is configured as a one-way turnstile to prevent “backflow” into the secure area and also enable the access control system to keep track of who has left the secure area for the day in case of any incidents. The employees can then access their initial divestment area, access their lockers, and exit the building.

When leaving work for the day, employees press a button and a random program indicates whether they must undergo a random pat-down search or can exit freely via one-way turnstiles.

The process described in this post uses security entrances that are relatively inexpensive and ideal for deterring theft or other unwanted behaviors. If you have a big rollout at multiple locations and a limited budget, this approach can be a great fit. If you manage a single location or can invest more up front, you can increase the ROI further by deploying a security revolving door instead of a full-height turnstile. The security revolving door uses sensor technology in the ceiling to scan compartments and outright prevent attempts at tailgating or piggybacking (two people sharing a compartment together); this means you can cut down on a guard at that entrance a create a payback in less than a year.


As you can see, security entrances work in conjunction with guards and technology at distribution centers to add an essential layer to a distribution center’s physical security plan. You can leave far less to chance or error compared to using just guards alone or swinging doors and access control. You can effectively deter and control access to the secure facility, track who is in the building 24/7, and minimize theft. In the end, security entrances enable an overall distribution center security plan that ensures maximized safety and risk mitigation.


When leaving work for the day, employees press a button and a random program indicates whether they must undergo a random pat-down search or can exit freely via one-way turnstiles.

The post Distribution Center Security: How Some of the Biggest Retail Companies Deter Theft and Crime appeared first on LPM.

Special Event Risk Assessment and Planning

Loss Prevention Media -

Retailers today are conducting more novel promotional events to lure customers away from their devices and into stores to shop. Making sure those special events go smoothly is a complicated matter, however. For example, the nation’s worst mass shooting, which left 58 dead at the Route 91 Harvest music festival in Las Vegas, put security planners on notice just how far a security perimeter may need to extend.

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It’s an area that has been notoriously difficult. With no routine to follow, special event security is chaotic by definition, and may demand protection personnel to pull together a team and a plan with little notice. Security questions that take years to answer from a corporate security standpoint must be addressed in a few weeks or months prior to a special event. A special event risk assessment could include questions such as:

  • What are the risks?
  • What amount of security manpower do we need?
  • What communication systems are appropriate?
  • Should we coordinate with local public safety officials and emergency services representatives?
  • What coordination with suppliers is necessary to ensure safety and security protocols are in place?
  • What is the evacuation plan in case of emergency?

Helpfully, special event security is a more commonplace consideration. Meeting planners have traditionally rejected a strong visible security presence, but many event planners now believe that visible security is beneficial to an event’s success because it allays attendee fears.

Special Event Risk Assessment and Planning Solutions

How can loss prevention pros manage the confusion that is inherent in special event security? A good contingency plan is central to effective change management for special events, according to Richard P. Werth, CPP, a past president of Event & Meeting Security Services.

Special events are fraught with last-minute changes. Contingency plans help ensure that these changes don’t create security holes that expose store associates, customers, and invitees to risks. Preparation also tamps down security costs. By planning for security up front and taking the time to consider what protective services you do—and do not—need, companies can resist wasting precious resources. Companies that fail to take a measured approach to event security needs may throw extra security at an event to compensate for poor planning.

Adequate preparation for a special event has numerous requirements. Three basic steps are (1) Soliciting the right information from event organizers. (2) Conducting sufficient research into your event’s security risk level. (3) Developing an adequate staffing plan.

1. Open the line of communication with event organizers. It’s a good idea to provide a written list of questions to the planners as early as possible in the process. Get clear on the type of event being planned, who will be there, how long the event will last, and how organizers envision the role of security. Have a “security issues” meeting with them as early in the event planning process as possible. The security mission is sure to evolve as planning progresses, but it’s good to know up front the goals of organizers. Finally, the store security team should ask to be copied on all memos that identify changes in the event program, scope, or list of attendees. Otherwise, protection professionals can find themselves overseeing security at a very different event than the one they planned for.

To get planning on the right track, it can help to write a short (two paragraphs or so) description of the security mission early in the event planning process. This will make sure that your expectation of the event and the LP team’s role in it matches the view of event organizers and other stakeholders. Details can be filled in later, such as how many officers will be in attendance and what type of communication devices they’ll use, but experts say it’s important to identify the scope of responsibilities that LP will perform. For example, will they help with crowd control? Monitor parking areas? Check bags?

2. Research potential problems. Once LP is clear what the event is, it can start assessing it for problems that may arise. Answers from event organizers will help, but you can’t rely on them, advise experts. Staff should evaluate current crime statistics for the area and reach out the local law enforcement to identify if or how they will support the security function. Also, for each possible event site, if your event includes high-profile attendees, find out what happened at other events they attended. Did protesters try to disrupt the event? Did boisterous fans show up? Research similar events and interview the LP managers who handled security. Ask them what unexpected problems they ran into relative to the type of event, crowd, or venue.

3. Develop a staffing plan. Once LP understands the event, done their research, and has performed the event risk assessment, and has been briefed on the logistics, managers must decide what it will take to get the job done. Do you have enough LP officers on hand? Do you need to use an outside firm to coordinate and provide all security for the event? Or do you just need a few contract guards to supplement in-house staff? A few security directors tell us they’ve been burned by waiting too long to make this decision, which can result in not having enough time to conduct background checks and scrambling at the last minute to find additional officers. LP also needs to develop a plan for when event security staff will get instructions and on what topics. Even if it’s just for a few hours the day before an event, supervisors need to measure all guards’ competency in the use of any special devices they will use during the event, such as communications equipment or wand metal detectors. Finally, because some officers may not show for assignment during the event, managers should cross-train as many officers as they can.

The post Special Event Risk Assessment and Planning appeared first on LPM.

Breaking News in the Industry: January 18, 2018

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Employee under-rang merchandise for two retail theft suspects

Police have charged a juvenile Walmart employee and a woman with retail theft following an investigation that began in November in Carlisle. Officers were dispatched to the store at 60 Noble Boulevard on Nov. 30 for a report of a retail theft. The investigation determined an employee had been under-ringing merchandise for two women over the course of a two-month period, according to police. Police said one of the women, identified as Candice Panell, also used the self-checkout registers and didn’t scan all of her merchandise on separate occasions. Police have charged Panell with two misdemeanor counts of retail theft, while a felony charge of retail theft was filed against the juvenile employee through Cumberland County Juvenile Probation. Police are trying to identify the other woman involved, and have provided a surveillance photo of her.  [Source: Penn Live]

Shoplifting suspect apprehended after chase in Kentucky

A Paducah, Kentucky, man was taken into custody after a resident helped police nab the suspect. According to the sheriff’s office, Christopher Fontana, 20, was accused of taking a soda and pocketknife from Pocket’s Gas Station in the 5100 block of Cairo Rd. Fontana was approached by an employee as he got into the passenger seat of a car outside. The employee tried to copy down the man’s license plate number when Fontana allegedly lunged at the employee and grabbed her wrist and pushed her. Chris Hardy witnessed the incident and came to the aid to the employee chasing Fontana after he jumped a fence near I-24. Hardy assisted deputies as they took Fontana into custody. Fontana faces shoplifting charges.  [Source: KSVF12 News]

Canadian man sentenced to more than five months for credit card fraud

A Penticton man who went on an unauthorized spending spree with someone else’s credit cards will spend a total of 167 days in prison for his crimes. Richard James Meier entered guilty pleas to fraud of $5,000 and under, possession of stolen property under $5,000, in Penticton court yesterday, Jan. 15. Crown Prosecutor John Swanson told court Penticton RCMP were called by a Penticton resident reporting her purse missing while at The Bay on July 10, 2016. Upon her return home she had telephone messages from Visa that someone was attempting to use her credit card. Her Mastercard was also reported to be in unauthorized use. Police investigating the matter discovered the Mastercard had been used for at least six different transactions at various locations, totaling around $700. The Visa card was used for around $100 in charges.

Swanson asked Judge Gale Sinclair for a sentence of five months for the frauds, in addition to 45 days for two Surrey-based probation breaches. Defence lawyer Michael Patterson said his client’s long criminal history was all drug related. He said Meier had been in and out of drug treatment facilities, but wanted to try once again. Judge Sinclair pronounced a sentence totaling 152 days for the counts of fraud and possession of stolen property, along with an additional 15 days for the Surrey breaches. With credit for enhanced time served, Meier has 21 days left in his jail sentence, after which he will face a two year probationary period where he will not be allowed to consume drugs or alcohol, or have in his possession any credit cards other than his own. He is also expected to make restitution totaling $801.82 to Visa and Mastercard. [Source: INFOnews]

Shoplifter pulls knife on officer, Good Samaritan comes to aid

A concerned citizen came to the aid of police after a shoplifter pulled a knife on an Oak Creek, Wisconsin, police officer during a physical struggle. Oak Creek police responded to the Woodman’s at 8131 S. Howell Ave. just before 5 p.m. on Jan. 6 on a report of a man in the store who had stolen items in the past. According to reports, the man, described as a man in his late 20s with a brown Carhartt jacket entered the store and was recognized by the store’s loss prevention manager from theft incidents from Jan. 2 and Jan. 5. Reports indicate that the loss prevention associate watched the man walk through the store, placing items into a cart while also hiding more items in his coat. He walked out of the store and tried running away… only to be caught by an Oak Creek police officer who was waiting inside the store. Reports state that the man resisted arrest, and the officer took the man to the ground. During the ensuing struggle, police say the man pulled out a pocket knife on the officer, only to drop it during the struggle. A concerned citizen then ran up and kicked the knife away from him. According to reports, the officer pulled out his taser and trained it on the man, at which point he calmed down and allowed himself to be arrested. During the course of the arrest, officers say they found tools on the man that were used for cooking and injecting heroin. The total amount of the theft was $126.47, according to reports. Police say they are going to seek three charges of retail theft, disorderly conduct while armed and resisting an officer. [Source: Oak Creek Patch]

Suspects in shoplifting case face three felony charges after wild car chase

Two shoplifting suspects who fled Sunday from police were charged with three felonies, according to the Belton Police Department. Travon Green, 21, and Erica L. Foster, 28, allegedly stole nearly $2,700 in merchandise from Kohl’s in Belton, Missouri, shortly before 2 p.m. then led police on a wild chase. that ended in the 6000 block of East 86th Street in Kansas City, Mo. According to a probable-cause statement from Belton police, a loss-prevention employee at Kohl’s called police, anticipating an attempted theft as Green and Foster loaded carts with merchandise — including a hoverboard, Nike hats and shoes, baby clothes and assorted other items that were recovered from the car after the chase. Most of the stolen items were abandoned in carts in the Kohl’s parking lot after responding officers attempted to stop Green and Foster, as they entered a tan 2002 Ford Focus in the parking lot after leaving the store without paying for the two filled carts. A Belton police officer ordered Green, who was already in the car, to put up his hands and opened the car door to take him into custody. Instead, Green turned on the ignition and put the car into gear as the officer grabbed him in an attempt to prevent him from fleeing. Green then accelerated, forcing the officer to let go of the suspect before being dragged or pinned between the patrol car and the fleeing vehicle. Green later admitted to having an outstanding warrant for missing a court appearance in a domestic assault that involved Foster, citing that as the reason he fled, according to court records. Attempting to elude Belton police, Green, with Foster also in the car, drove north on Interstate 49 at speeds reaching nearly 90 mph.

The suspects then took Freemont Avenue north to East 86th Street, which dead ends in both directions. The suspects tried to cut through some yards before they stopped and were taken into custody. Police recovered more than $775 worth of merchandise from the suspect’s vehicle. There was an additional $885 in merchandise in Green’s cart and nearly $1,030 in stolen goods in Foster’s cart, both of which were recovered in the Kohl’s parking lot. Belton police announced Monday that Green and Foster, both from Kansas City, Mo., each were charged in Cass County Circuit Court with one count of stealing (more than $750), a class D felony; one count of second-degree assault of a special victim (the Belton police officer), a class B felony; and one count of resisting arrest by fleeing (creating a substantial risk of serious injury or death), a class E felony. Both Green and Foster remained in Cass County Jail as of Tuesday afternoon.  [Source: The Kansas City Star]

The post Breaking News in the Industry: January 18, 2018 appeared first on LPM.

Organized Retail Crime News Updates 2018

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The Loss Prevention Research Council (LPRC) proposed the term “organized retail crime” in the early 2000s. Since that time, the problem has only become more pervasive. Law enforcement and retailers work hard to stay abreast of emerging issues in ORC, as schemes and techniques tend to change over time.

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Get the facts about shoplifting in our FREE Special Report,Tips on How to Stop Shoplifting:   What You Can Learn from Shoplifting Statistics, Organized Retail Crime Facts & Shoplifting Stories right now!

LPRC experts Stuart Strome, PhD, Read Hayes, PhD, Mike Giblin, and Stephanie Lin consider the latest organized retail crime news updates and issues in an article for the December 2018 issue of LPM Online. The “diversification” of ORC groups into supply chain and cyber crimes are presenting new problems for loss prevention and asset protection professionals. From the article, just one example:

Social Engineering Schemes. These schemes involve getting unsuspecting individuals to provide personal information (social security numbers or credit card information) for fraudulent purposes (Youngblood 2015, 103‐105). Once obtained, organized retail criminals use this fraudulent personal information to take out loans or make large purchases. Some fraudsters may contact retailers pretending to be government or educational institutions, using emails that look official but lack “.gov” or “.edu” extensions. They will make large purchases from retailers, which will be charged to the official institution’s account. They will then contact the institution claiming that the shipment was made in error, providing an address (usually a drop house) for the institution to reship the products.

Read what the experts have to say on other recent ORC schemes, such as cargo theft and online fencing, in “An Update on Emerging Issues in ORC.”

If you’ve missed any of our previous LPM Online editions, go to the Archives page at the end of the edition to see what you’ve missed. Be sure to be an LPM digital subscriber so you are the first to know when new issues are available. If you haven’t already, sign up on the SUBSCRIBE NOW link. (Note: if you’re already subscribed, the previous link will take you to the current issue of the print magazine.)

The post Organized Retail Crime News Updates 2018 appeared first on LPM.

Georgia Woman Sentenced for Shoplifting; Dragging Officer with Car

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A Marietta, Georgia, woman was sentenced to a year in custody after pleading guilty to shoplifting from a Woodstock department store and then dragging a police officer with her car as he tried to stop her, according to court documents. Amy Ridge was arrested after police received a call about 2:15 p.m. on Oct. 4 in the parking lot of the Kohl’s along Ga. Highway 92 in Woodstock, according to Officer Brittany Page, Woodstock Police spokeswoman. “When the officer attempted to make contact with the woman who was already in her vehicle, the driver took off,” Page previously told the Cherokee Tribune, the MDJ’s sister publication. Ridge dragged the officer about 75 feet through the parking lot. She was arrested after being stopped by Marietta police near Barnes Mill and Merritt roads. The officer suffered minor injuries, but was treated at the scene and released, police said. The incident was captured on the department store’s surveillance footage.

Ridge was arrested without incident and charged with one count each of shoplifting, obstruction of an officer, aggravated assault, fleeing and eluding, driving with an expired tag, reckless driving and drug possession. She accepted a negotiated plea, as a repeat offender, to one count each of theft by shoplifting, obstruction of an officer, aggravated assault on a peace officer, interference with government property, fleeing or attempting to elude a police officer and possession of methamphetamine. She was sentenced in Cherokee County Superior Court on Friday to one year in custody and nine years on probation so long as she adheres to the conditions of her sentence, according to court documents. Special conditions of her probation include: performing 120 hours of community service; receiving substance abuse treatment; having no contact or entering the premises of Kohl’s; not consuming alcohol or illegal drugs; not associating with anyone who uses or possesses illegal drugs; not occupying a residence or vehicle where alcohol or illegal drugs are present; and refraining from drinking and driving.  [Source: Marietta Daily Journal]

The post Georgia Woman Sentenced for Shoplifting; Dragging Officer with Car appeared first on LPM.


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