A Focus on Fraud

By Jennifer Hopfinger
May 9, 2008 02:00 PM

Technology makes everyone’s life easier--even crooks. We all know individuals are at risk of identify theft, and as Fortune Small Business magazine reports in its May issue, businesses are also at risk of getting ripped off. The cover story “Who’s Stealing Your Business?” explores how criminals are using technology to steal money and ideas from companies--and what some victims have done to fight back.

The types of fraud that companies face include embezzlement, business identity theft, patent infringement and product counterfeiting. And such fraud is on the rise. The article reports that the median loss from embezzlement was $190,000 in 2006, up from $98,000 in 2004; that the number of patent-infringement lawsuits rose 6 percent last year; and that counterfeit goods account for an estimated 15 to 20 percent of all products manufactured in China.

So how do crooks do it? It isn’t hard. Just hack into a database and help yourself. “Given all the day-to-day challenges small-business owners face, most feel they don't have the time, patience, or money to protect themselves. This helps explain why small businesses are nearly twice as likely to be victims of fraud as are big corporations,” the article says.

The magazine offers some concrete tips to help small business owners, using some unfortunate real-life examples. The problem is, they aren’t very good examples. You know the safety net that wraps around the edge of nearly all trampolines sold in the U.S.? The company that invented it has less than 1 percent of the market share because competitors stole the idea. The article says inventors shouldn’t scrimp when it comes to investing in the best patent and licensing professionals--something the trampoline safety net company failed to do. The article gives other examples from knock-off fashion designers to unauthorized dealers selling products online at a discount, but it doesn’t elaborate much on how technology was involved, which would have been helpful for readers.

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism