FRAUDS IN HOTEL INDUSTRY

TARUN MATHUR

IN PARTIAL COMPLETITION OF 3 YEAR

B.Sc IN H. & H.A.
 ACKNOWLEDGEMENT

I would like to express my deep gratitude to Mr. R.K. Saxena, principal, Institute

of Hotel Management, Catering Technology & Applied Nutrition, Mumbai for granting

me the privilege to work on my project.

My sincere thanks to my technical guide Mr. Sanjeev Kacker with out whose

guidance the study would have not been completed.

I would also like to express my deep gratitude to the security officers of the

respective hotels for helping me for the project.

 CONTENTS

1. INTRODUCTION

2. REVIEW OF LITRATURE

3. RESEARCH DESIGN

4. SMALL TIME FRAUDS

5. DATA ANALYSIS AND INTERPRETATION

6. SUMMARY AND CONCLUSION

7. BIBLIOGRAPHY

8. CERTIFICATE
 INTRODUCTION

Movies, both Hollywood and Bollywood have long since dished out thrillers

where in suave stylish protagonists swindle banks, hotel casinos etc of there millions

from right under their noses. These movies have portrayed these heists as ingenious plots

the bad guys always get away with.

This project is an attempt at finding out where the line is drawn between facts and

fiction. This research will unravel the loopholes through which these masterminds spin

their webs. It will also look at it from the organization’s point of view and what security

measures they can take in order to safeguard against such schemers by studying previous

happenings and the fallouts on the part of these organizations.

REVIEW OF

LITERATURE
 REVIEW OF LITERATURE

DEFINITION OF FRAUD

In a broad strokes definition, fraud is a deliberate misrepresentation, which causes

another Person to suffer damages, usually monetary losses. Most people consider the

act of lying to be fraud, but in a legal sense lying is only one small element of actual

fraud. A Salesman may lie about his name, eye color, place of birth and family, but as

long as he remains truthful about the product he sells, he will not be found guilty of

fraud. There must be a deliberate misrepresentation of the product's condition and

actual monetary damages must occur.

Many fraud cases involve complicated financial transactions conducted by 'white

collar criminals', business professionals with specialized knowledge and criminal

intent. An unscrupulous investment broker may present clients with an opportunity to

purchase shares in precious metal repositories, for example. His status as a

professional investor gives him credibility, which can lead to a justified believability

among potential clients.

Those who believe the opportunity to be legitimate contribute substantial amounts of

cash and receive authentic-looking bonds in return. If the investment broker knew

that no such repositories existed and still received payments for worthless bonds, then

victims may sue him for fraud.

Fraud is not easily proven in a court of law. Laws concerning fraud may vary from

state to state, but in general several different conditions must be met. One of the most

important things to prove is a deliberate misrepresentation of the facts. Did the seller

know beforehand that the product was defective or the investment was worthless?

Some employees of a large company may sell a product or offer a service without

personal knowledge of a deception. The account representative who sold a fraudulent

insurance policy on behalf of an unscrupulous employer may not have known the
policy was bogus at the time of the sale. In order to prove fraud, the accuser must

demonstrate that the accused had prior knowledge and voluntarily misrepresented the

facts.

Another important element to prove in a fraud case is justifiable or actual reliance on

the expertise of the accused. If a stranger approached you and asked for ten thousand

dollars to invest in a vending machine business, you would most likely walk away.

But if a well-dressed man held an investment seminar and mentioned his success in

the vending machine world, you might rely on his expertise and perceived success to

decide to invest in his proposal. After a few months have elapsed without further

contact or delivery of the vending machines, you might reasonably assume fraud has

occurred. In court, you would have to testify that your investment decision was

partially based on a reliance on his expertise and experience.

The element of fraud which tends to stymie successful prosecution is the obligation to

investigate. It falls on potential investors or customers to fully investigate a proposal

before any money exchanges hands. Failure to take appropriate measures at the time

of the proposal can seriously weaken a fraud case in court later. The accused can

claim that the alleged victim had every opportunity to discover the potential for fraud

and failed to investigate the matter thoroughly. Once a party enters into a legally

binding contract, remorse over the terms of the deal is not the same as fraud.

If you suspect you are a victim of fraud, consult a legal professional and collect all

tangible evidence of damages. Keep in mind that fraud is not easily proven in a court

of law, although the court of public opinion may be squarely on your side.
 SOME CASE STUDIES OF HOTEL FRAUDS

Tempus In A Pee Pot

We were called by Tempus Resort Vacations about the vacation of a lifetime! A

Disney hotel, discounts to attractions, and the hotel of our choice in Daytona Beach.

All we needed to do was check into the Vacation Station in Ormond Beach Fl. and we

could pick which hotel we wanted to stay in.

We purchased the vacation package on September 27th 2001 and when we confirmed

our reservation were asked, if for $100, we would like to update to a hotel with a

water park/slide for the kids, which we did.

Upon arrival, we sat through 3 hours timeshare presentations and tour for the Palms

Resort condos, instead of the stated 90 minutes. Apparently you could only spend
one week a year there, with up to $900 more to stay at a different one.

After we told them we didn't care to buy because of the restrictions, three different

"managers" still tried very high pressure to sell us and got angry when we still said

no.

In fact, when we went to get our hotel voucher signed, the girl was told flat out that

we weren’t to receive any of the discounts for attractions, which we thought would

include Disney and Seaworld, but didn't. The coupons, which were supposed to be

worth $500, were the same ones we found in any booklet you could find at stores.

When we arrived in Daytona Beach and went to the Vacation Station we were told

that the only hotel we could have was Howard Johnson. Though we were told when

we purchased the package, as well as by Judy Collins of Tempus, we could have a

choice of hotels, they were somehow now all booked but one, unless we took in

another 3 hour tour and sales presentation.

The kids were tired and fussy so we took the rooms though found out later that most

every hotel had vacancies. There was a pool, but no added cost waterpark/slide that

my grandkids were all excited about.

The hotel was horrid. Bathtub had to be wiped out before I could even take a shower,

then the water took an hour to go down. The sink was also full of scum and plugged

up. The handle on the toilet had to be held down so it would flush. The mirror was

dirty from scum and the carpet was filthy. My husband took pictures of my socks

after I walked across the room, they were so filthy I had to throw them out.

The sheets on the bed were dirty, frayed and torn. In fact, there was sand in the bed.

The door to our room could not be closed unless you picked it up and slammed it. The

stove was full of grease and the burners didn't even fit. Dirty cabinets and counter

tops. My husband received an electric shock when he tried to turn on a light.

Windows were so dirty you couldn't see out them. I went to turn on the air

conditioner and it was full of mold and mildew. The elevator was full of muck and

water, walls were dirty with who knows what on them and there was masking tape

holding the rear door handle on. Broken glass outside of the room. Exit lights were

not working. Our room phone did not work.

When my son and his family, experiencing the same service, called to inform them

about our phone, they tried our room and said "Yes, I suppose you are right, it doesn't

work" and that was it.

This was an upgraded room! I suppose if we had bought a condo things would have

been different. On top of this we found out that this horrid place had a AAA rating!
 SOME CASINO FRAUD CASE STUDIES

The man in the cross hairs of the surveillance camera looked more like someone's

grandfather than like a slot machine cheat.

But Harrah's East Chicago Casino had stealthily tracked the 72-year-old retired

marketing executive for hours as he had played almost every slot on the boat until he

settled in front of a $1 machine and began dropping in 50-cent tokens.

The elderly slot jockey had in fact found four machines so out of adjustment they

accepted smaller tokens.

He was getting two plays for the price of one and had won $7,000 through the

scheme, said Gary Scott, a state police investigator assigned to probe casino fraud in

Northwest Indiana.
He kept a low profile, obtaining tokens from an automatic moneychanger so he didn't

have to interact with the casino staff. But after he jammed a slot machine with a bad

token, security officials focused the unblinking eyes of a million dollar video

surveillance system on him.

He didn't even know he was being watched until security officers wrapped up their

case and tapped him on the shoulder.

While security officials on the five Lake Michigan casinos are reluctant to discuss

exactly how comprehensive their surveillance and security network is, a few details

are known:

--The Empress in Hammond employs 237 security officers. Ron Matonovich, the casino's

security director, commented, "That's bigger than the Hammond city police force I came

from."

-- Together, the five boats employ a force that rivals that of the 1,050-officer

Indianapolis Police
Department.

-- Harrah's trains 400 closed-circuit video cameras on customers and staff within the

confines of its 49,000-square-foot gaming space. Many of the cameras can tilt, pan and

zoom in on the closest detail of any suspicious activity.

-- Each boat has spent as much as $1 million in hardware and pays out $1.25 million a

year in security

force salaries, estimates Terry Reader, owner of a Scottsdale, Ariz., firm supplying

most surveillance and security systems on Indiana's casinos.

Is all this vigilance necessary?

Little crime Except for a few domestic squabbles or bar room arguments that turned

physical before security personnel intervened, the boats have been essentially free of

violent crime.

"I am amazed at the lack of crime here. It is not nearly as much as I anticipated when

I came on," said

Scott, the state police investigator with the responsibility to put together cases against

the most serious crimes committed by the hoard of gamblers who made more than 21

million visits to the Lake Michigan vessels last year.

Indiana State Police Sgt. Bob Miller said, "The casinos have done much to overcome

the stigma of Gary."

About 98 percent of the crime committed on the boats involves patrons trying to pass

off stolen credit cards, phony checks or counterfeit money in order to play for free.

Security specialists insist the crime rate is relatively low only because of their blanket

presence. They can call on the resources of the state police laboratory and stable of

handwriting, polygraph and evidence experts to investigate any crime committed on

the boats.

"If someone was going to cash a bad check, why would they do it here instead of
some mall where municipal police generally don't go to those lengths?" Scott said.

Many frauds originate in Chicago, but a few have had international ties.

Scott caught one of a team of Nigerians who had stolen Discover credit cards from

the manufacturing plant in Texas and fanned out to scam a number of businesses.

"This man claimed British citizenship," Scott recalled. "I contacted the British

consulate and London actually took over the case."

A Jordanian flew into Chicago recently, established a fake business as a cover in

River Grove, Ill., and obtained credit with casinos and banks. "He took the banks for

$250,000 and the casino for $14,000," Scott said. "He wrote as many checks and stole

as much as he could and flew out again."

Security required

The State of Indiana demands a high level of security.

"The Indiana Gaming Commission is charged with making sure it's a clean operation

that promotes fair play," said Jennifer Arnold of the Indiana Gaming Commission.

Employee theft undermines public trust and robs the state as well as casinos of

revenues. Indiana collects 20 percent of the winnings off the top.

Arnold said the commission requires cameras and other safeguards to ensure the

money is properly counted.

"Employee theft would impact the wagering tax as well as the integrity of the

operation," Arnold said.

"State police run background checks for everyone on the vessel. The law requires that

we don't license anyone who has a felony conviction."

Scott said that, of thousands of casino employees who have worked for the boats over

the past four years, only about a dozen have been prosecuted for theft or fraud.

Employee thefts investigated by state police are usually committed by single parents

of limited resources.

"These people make $10 per hour and are handling hundreds of thousands of dollars,"

Scott said. "One woman said she had a son going to high school, and they didn't have

enough money to get him the clothes he wanted."

Usually those nabbed have an excuse ready.

"One said she didn't want her parents to find out she was behind on bill payments, so

she took this money," recalled Miller. "What do you think her parents said when she

got arrested for stealing?"

Investigators said some customers try to buy a dealer's favor. "We've not seen that

here," Scott said. "These more sophisticated scams are in Vegas, but we are watching

for them."

Amassa Colby, security director for Trump Hotel Casino at Gary's Buffington

Harbor, agreed that investigators have to be aware of potential schemes. "One thing

necessary for surveillance is, you have to know the game," she said. "For a lay person

to go in and watch, you would miss a lot."

Intuitive matter

"You pick up a sixth sense," said Sam Adair, a security consultant from Colorado

with 25 years experience, some in Vegas. "Everybody who (cheats), tells on

themselves. If a person sitting at a machine is getting ready to do something, I can

guarantee you he will look both ways before he does it."

Adair recalled a woman working in a casino as a slot machine technician who stole

coins out of jammed machines. "She came in with raggedy blue jeans," he said, "and

wound up with a 50,000-acre ranch, five Cadillacs, diamonds and furs."

He caught her with a surveillance system that activated a camera over any machine

being opened for repair.

She opened so many machines she became a prime suspect.

Casino employees involved in misconduct either forget they are being watched or

hope the surveillance officer has his head turned. But, Colby said, accounting checks
and balances usually catch cash or chip shortages, and a replay of the video tape

usually shows the employee in the act.

Surveillance makes it easy for state police to make a case against a casino thief.

About 90 percent of all investigations end in confessions, charges and guilty pleas,

once police show the suspect the video tape of what they were doing.

However, sometimes a cheater can avoid even those odds. That's what happened with

the 72-year-old marketing executive who played dollar slots with 50-cent tokens.

Scott said they hesitated to prosecute the man who claimed it wasn't his fault the

machines malfunctioned and did him a favor. Would the jury side with Gramps or the

one-armed bandit?

Harrah's agreed not to press charges if he returned most of the winnings and never set

foot on the boat again.

Each Indiana casino has a banned customer list as well as a national catalog of known

cheaters. Police said casinos in Illinois have also refused entry to players banned in

Indiana.

That can be the worst kind of punishment.

Scott said, "I've had people I've arrested ask me not when they were going to get out

of jail, but when they could get back on the boat."

SHOE SPARKS CASINO PROBE

A Battered shoe worn by a Hungarian tourist in Australia has sparked an investigation

into a syndicate accused of cheating the top casinos of Europe.

Two Belgian police officers will fly to Sydney this month to study the shoe design,

which they suspect could be behind a multi-million dollar European fraud.

Four years ago detectives arrested Hungarian tourist Laszlo Sendor Kovacs after he

won large bets at a Sydney's casino playing roulette wheel. Casino security became

suspicious of the 59-year-old gambler tapping his right foot under table 9.

Police questioned Mr. Kovacs and found a Maxwell Smart-style microcomputer

hidden in the sole of his scuffed shoe.

With a toe tap, a computer in the shoe sent a voice-synthesised message to an

earpiece telling him the wheel's speed. This allegedly helped calculate the number.

Police found $74,184 in cash and chips on Mr. Kovacs, including $10,000 in his

underpants.

Belgian and Sydney police are assisting an inquiry into casino frauds they suspect

involves shoes Mr. Kovacs designed.

The Sydney shoe is the only one of its kind found.

Mr. Kovacs, a professional gambler, was deported from Australia in 2001 for "using a

device" to defraud the Star City casino.

European police believe he is the gadgets man and may have helped a well-known

European criminal gang perfect the shoe technology.

STOLEN MONEY ORDERS

In February 2001, hotels in Hinckley, MN became the targets of a fraud/theft scam.

Stolen Western Union money orders were being used to rent rooms at local hotels.

The money orders were in the amounts of $200-250. The object of the scam was to

get change back from the money orders. The suspect had stolen over 400 money

orders and usually hit 2-3 hotels in the same area. He had been active for one year,

hitting different hotels as he traveled across the upper Midwest. Sometimes he was
dressed as a clergyman or claimed to be affiliated with a religious organization.

The Pine County Sheriff's Department issued a crime alert shortly after two hotels in

their area were hit.

The alert included a brief description of the suspect and the vehicle and license plates

of the car he was driving.

After reading the alert, a hotel, that had experienced a similar scam, contacted the

police department, providing additional information, which helped in identifying the

suspect. The information was then forwarded to the FBI in Ohio who are currently

handling the case.

EMAIL BOOKING SCAM

A number of reports have been made to the www.hotline.ie service about unsolicited

emails which have been widely distributed recently to hospitality businesses. These
emails attempt to "hook" unwary proprietors on what appears to be a lucrative

booking for their establishment but leads to financial transactions which result in the

proprieter being defrauded of significant sums of money.

The scam starts as an apparently normal email enquiry for accommodation, typically

a block booking for delegates to attend some event they claim to be organising in

your general location. You are not being singled out, the addresses are simply taken

from web-sites where your business is advertised and they will send the email to

hundreds of similar providers of accommodation.

Naturally, you should reply to potential business, as it may indeed be quite legitimate

BUT be vigilant.

In the case of these scams, all will seem to be legitimate until it comes to payment

which is freely offered up front.

In this "con" the fraudsters will request to pay by a bankers draft that is made out for

an amount of money, that is FAR in excess of the charges you have quoted (usaully

about double). They will ask that you to deduct the excess to make payment to some

plausible additional service that the party they are booking for will use during their

stay (e.g. car hire), and they will give instructions to make the transfer as soon as

possible (usually by Western Union money transfer). Often an added incentive is that

they offer a handling fee to you of a few hundred Euro.

The problem is that the "payment" posted to you is made out on a forged bank draft.

Your bank may not be able to tell that it is a forgery and will accept it. It can take 5

working days and more to clear foreign drafts.

After which time the draft will be rejected by your bank as a forgery.

The fraudsters aim is to pressure you into transferring the additional sum to the bogus

other service, from your bank account, as a matter of urgency, on the basis of the
false comfort of believing you already have their payment. By the time the draft is

found to be a forgery, they have your money and you have a worthless forged draft.

The Hotline advises that you should not make any outward payment on the basis of a

bank draft until it has been confirmed as successfully cleared by your bank.
 SOME SECURITY TIPS FO HOTELS, MOTELS, RESORTS AND CASINO

From the earliest times, thieves and robbers often subjected travelers to attacks.

Outside of walled cities and castles travelers could find shelter and protection only in

wayside inns. From this practice grew the principle that innkeepers were responsible

for providing their guests not only food and lodging, but also security and protection

against criminal attack.

While the duty of innkeepers to protect their guests is not quite as ironclad today as it

once was, lodgings, including gaming casinos with attached hotels, still owe a

responsibility to their guests and other invitees. And guests continue to be at risk

today!

Criminals often look at lodgings as attractive targets filled with unsuspecting

potential victims, most of whom will leave town soon after being robbed or

victimized.
In most states the legal responsibility owed to their guests by lodging management

requires the operator to "exercise reasonable care" in identifying potential crime risks,

and to take reasonable measures to prevent those crimes, or to warn his or her guests

against them. In general, the greater the likelihood of future crime or injury, the

greater the innkeeper's responsibility to defend or warn against it. In other words, the

innkeeper is likely to be found negligent and liable for a criminal attack on a guest,

when: (1) the criminal act was reasonably foreseeable; and (2) the innkeeper's

response, in light of that foreseeability of crime is unreason-able and not consistent

with prudence and care.

FORESEE ABILITY

Determining what crime is "reasonably foreseeable" requires a thorough review of the

facts in each particular case. Some states use the "prior similar crimes" test, which

analyzes previous crimes on the property. How similar the crimes and how recent the

prior occurrences, are matters usually determined by the judge in each case.

Other states use the "totality of the circumstances" standard, which examines other

factors in addition to any prior similar crimes on the property. Such factors can

include:

Nature and operation of the facility: For example, gaming casinos, which by

their nature invite guests to bring large amounts of cash, and hotels catering

to conventions and trade shows are more likely to attract criminals than is a

family-oriented motel or a bed-and-breakfast facility. A resort facility that

attracts more affluent vacationers than the traditional roadside motel is more

likely to be the target of some types of criminals.

Location of the lodging facility: Some cities have higher crime rates than

others, and within most all cities some areas have higher crime rates than the

average for that city. Being located in or near one of those "high crime" areas

may increase the crime risk to a specific lodging.

Actual past crimes on the property: These are frequently one of the best

means of predicting future crimes, since what has occurred already is likely to

recur if changes in security haven't been made.

Security problems created by the facility's design or layout: For example,

"blind spots," where criminals may loiter or hide, and broken lines of sight that
reduce visibility. Both problems may increase specific crime risks.

Shrubs, bushes and low-hanging trees also offer hiding places when not

trimmed. Shrubs should be not higher than 30 inches above ground, and tree

branches trimmed so that they hang not less than eight feet above the ground.

Alcoholic beverage service on the property: Alcohol not only tends to reduce

inhibitions, it also reduces alertness and wariness - a situation many criminals

like to exploit.

Crimes at similar nearby properties. While properties generally compete

against each other for business, they should be cooperating in the fight against

crime. The type of crime that occurs on one property usually occurs or impacts

on all similar nearby properties.

Many other factors may also be applicable to assessing crime foreseeability, and

many are specific to a given property and its unique operation, or to its surrounding

area. A professional security consultant can help management identify them.

REASONABLE SECURITY

Almost any lodging facility, depending on its location and the nature of its operation,

should utilize some or all of the following security measures:

Screening and background checks of employees: This is a basic step for all

lodging security. Many lodging employees have some access to guestrooms

and belongings, or to confidential information about the guests or about inn

security. If the staff is untrustworthy, most other security measures will fail.

Adequate doors and locking hardware: The most basic of precautions. If the

guest room door, its frame and its hardware are insufficient to resist

moderate force; all guests are at risk. Likewise, providing appropriate

locking devices is crucial. The standard, especially in larger lodgings, is

evolving toward the use of electronic locks that can (and should) be
changed immediately when a guest departs, or a key is reported lost.

Where traditional metal keys are used, an effective key control and

monitoring program is essential.

All guestroom entry doors should be equipped with a minimum of two locks,

one of them a dead bolt, and a wide-angle peephole viewer in the door. A

window adjacent to the door that permits viewing of visitors before opening

the door will serve the same purpose. Sliding balcony-type doors should be

equipped with a second locking device, such as a "charley bar" or through-

the-door pin.
Appropriate levels of lighting for all areas of risk, including parking lots: Many

criminals prefer to commit their crimes in darkness, thus avoiding detection

and possible identification. Appropriate levels of lighting are very important

in deterring crime in such risk areas as stairwells, hallways, exterior

walkways, and parking areas and garages. Interior spaces should be

illuminated 24-hours per day as sufficient sunlight seldom, if ever, enters

such interior areas. For surface parking lots I recommend that lighting should be a

minimum of 3-foot candles (measured both vertically and horizontally). While

this is a somewhat higher lighting level than some others recommend, in real life

non-working lights and dirty lighting fixture covers frequently reduce actual
lighting levels to below any acceptable standards. A small excess margin in this

area can really pay dividends later. Covered and underground garages should have

a minimum of 6-foot candles of illumination (measured both vertically and

horizontally). See related article: Security for Parking Lots and Garages

Appropriate security equipment, such as cameras and alarms: Depending

on their size, layout, staffing and crime risk, properties may utilize security

equipment to supplement manpower. Management should not only select

and install appropriate equipment for the tasks, it must maintain it and

promptly repair it if it fails. To have a guest rely on visible, but non-working

security equipment, and then be attacked is almost to invite a jury to award

damages.
Appropriate staffing for security duties: In small properties, a night clerk

monitoring the lobby and front desk may be all that is necessary; although,

some locations may require bullet-resistant materials for protection,

depending on the risk of armed robbery. In larger or more spread-out

properties, or those with certain crime histories or risks, patrols by in-house

or contract security officers may be required to monitor activities. By their

observable, uniformed presence, such officers also act to deter criminal

offenders. Note that doors leading to the interior of lodgings should usually

be locked and/or monitored to control access during hours of darkness.

Appropriate training for staff: Security is the responsibility of all staff

members; however, they can't perform that duty unless they are trained and

made individually responsible for it. This is especially true of those who

have specific daily security duties, such as front-desk clerks, bellhops and

security personnel. But maids, maintenance personnel, servers and others

should have clear reporting or other security duties spelled out in their job

descriptions. It is important that such duties be spelled out not only in the

individual's job description, but, most importantly, in their performance

evaluation. That which is monitored and graded tends to get done!

Record-keeping: Maintaining records reflecting adherence to security

procedures is critical for management to detect deviations from

procedures, make corrections, and defend against future claims of

negligent security. As one federal agency is fond of saying about safety, "If

it wasn't documented, it didn't occur." Security incidents should always be

documented so that management can review the issues and take

appropriate corrective actions.

Periodic risk assessments by management: To know its risks and effectively

plan to manage them, management of any facility should periodically

assess not only its own crime experience, but that of similar nearby lodgings

(or casinos, or resorts), and any actual or potential changes impacting its
 operation. For example, is the property attracting more female business

travelers or airline flight crews, either of which may be attractive targets for

thieves or sexual predators? Or, is the property planning to host a jewelry

trade show, or is it hosting increasing numbers of foreign visitors who may

be unfamiliar with the local area, its customs, language, and its crime? All

these factors and more can change both the crime risk and the potential

liability for a lodging facility.

Gaming Casinos

Casinos often appear to have dozens or even hundreds of cameras protecting their

guests; however, in many cases the majority of those cameras are utilized (by law)

only to ensure the integrity of the games, not for general security purposes. As a
result some customers may be lulled into a false sense of security. To be effective,

and reasonable, a casino property must provide security for both the games and its

invitees .

Because of the actual or perceived availability of "easy money," casinos pose special

security risks. Additionally, the availability and consumption of large amounts of

alcoholic beverages, which in many cases are "free," increases those risks. Not only

do alcoholic beverages tend to reduce inhibitions in some people, they also tend to

lessen their alertness and their awareness of potential crime or assault. Being in

strange surroundings away from a familiar environment, they are more likely to

become crime victims.

Casino management should devote adequate attention to securing all areas of the

casino, and its services. For example, garages and parking lots are favorite stalking

areas for robbers, rapists and car-jackers. See related article: Security for Parking Lots

and Garages Dimly lit walkways to remote housing, and isolated unmonitored

hallways are also favored stalking locations.

Because of the heightened risks and the many venues in which they will have to
operate, security officers and guard forces should be screened and trained to a much

higher level then most security personnel. They should be certified on any weapons

they are permitted to carry or use; should be trained in non-lethal force; trained in

customer relations; and trained in techniques for verbally defusing situations before

they become violent.

Casinos, by their very nature, tend to attract criminals. Because of their increased

crime risk, guard staffing should be higher in casinos than in stand-alone hotels or

nightclubs.

Prepared management, coupled with sufficient visible security personnel, can help

casinos from becoming a "crime hot spot."

This article cannot hope to cover all aspects of retail lodging and casino security. It

was written to provide the reader with a starting point in assessing crime risks to his

or her lodging property. It also provides an overview of those basic security measures

needed to counter such risks and reduce potential liabilities. Those desiring additional

information in a specific area should contact a professional with hotel, motel, resort,
condo or casino security expertise for assistance, and property owners and managers

should always consult with their attorneys.

RESEARCH
 DESIGN

REASERCH DESIGN

The research project titles “ A study of Frauds & Heists in the hospitality

industry” has been undertaken with the following objectives:

1. To identify the number of high profile heists.

2. To study the stances and measures taken by those organization and other in

the wake of those heists.

3. To identify the latest security trends and measures employed in the hotels

around the world.

4. To determine the security measures adopted by the Indian hotels as opposed to

the ones abroad.

5. To look at the small tome frauds, hotels face on a comparatively more regular

basis.

METHODS OF PRIMARY DATA COLLECTION

In order to achieve the proposed aims and objectives the requisite

information will be collected by: -

1. OBSERVATION METHOD: - The action taken in various situations by

the security officers in the leading hotels in the city will be observed and

documented.

2. SURVEY METHOD: - The security managers will further be given

QUESTIONNAIRES to which they would respond and hence help gain an insight

into the nuances of their work.

 THE SAMPLE DESIGN

Leading 5 star hotels of the city will be contacted for the first hand

information and this information will be further documented and hence help

achieve the proposed objectives.

TOOLS FOR DATA COLLECTION

A Questionnaire will be presented to the security managers of the 5 star hotels of

the city.
 SMALL TIME FRAUDS

Bar Pilferage

Bar is one area, which is prone to maximum pilferage. This happens because bar

is stacked up with a lot of expensive items. So even a small amount here and there will

make a lot of money for the person.

The methods of thefts or frauds in a bar are:

1. Under pouring:

Under pouring simply means pouring alcohol less than what is required.

Examples of it will be-

If a bar man under pours around 2 to 5 ml rum every time he makes Pinacolada he

will have around 20 to 50 ml rum left at the end of the day if he sells 10

Pinacolada on that particular day. The barman can now resell it or drink it.
2. Using Personal Measures:

In this case the barman uses his own peg measures. So if every time he pours 25

ml instead of 30 ml, he will save a lot of alcohol and resell it.

3. Diluting

4. Bringing in liquor:

The barman brings in his own alcohol bottles sell them before selling the hotel’s

stock. By doing this person makes a lot of money.

5. In few hotels the inventories is in accordance to the full bottles and not to pegs

sold. So in this case the person behind the bar does not record individual sale but

records full bottles sale.

6. Every hotel has a house brand, house brand of particular alcohol is those brands

which that are cheaper than other brands and are used in the hotel. Take for e.g. –

Pinacolada cocktail, white rum goes in it. Bar A always uses Smirnoff as a house

brand now a guest comes and asks the barman to use Romanov. The barman in

this case can always replace Romanov with Smirnoff after the first order has been

placed.
7. A barman can also sell extra drinks by showing spillages.

8. A major fraud can also be done when a group has come in the bar. Barman can

charge for a more number of drinks rather than charging them for the actual

number of drinks rather than charging them for the actual number of drinks

actually consumed. As in if the guest has ordered for twenty drinks he can be

charged for twenty-five drinks in cases like these guests generally don’t

remember how many drinks had they ordered for.

9. Over pouring:

Over pouring is generally done to earn tips by the guest. Normally the alcohol,

which the barman saves from under pouring, is sold here. The barman sells the

extra alcohol to a favorite guest and tells him that he has given him extra alcohol.

10. Reusing checks:

This is very common fraud done in all the major f&b outlets (restraints & bars). If

the guest pays in cash and doesn’t signs the check, this particular check can be

used again when another guest walks in and order for the same items, by doing

this the steward can pocket the cash from the previous order without anybody

coming to know about it.

11. Bringing empty bottles exchange & sell.

12. Recording sale of lower price item – for instance a guest walks in and order for a

peg of red label and barman sells black label at the same price to him. He tells this

to the guest and earns tips.

13. Not recording straight soft drinks – for instance a couple walks in the bar. The

gentleman orders for a rum with coke and the lady orders for a coke. The barman

dispenses the order and makes the beverage order ticket for only one coke. The

guest pays in cash and the money made by selling one extra-aerated drink bottle.

14. Breaking empty bottles.

15. Short pouring in cocktails.

Above were the few methods of thefts, which occur in a bar. There is a checking

system, control system & inventory system which are done periodically to control these

thefts.
Kitchen Pilferage

Kitchen irrespective of the star category of any hotel is a very important

department. Because of the vastness of the materials involved in food production it is

very difficult to control the activities in this department. But generally the kitchen staff

does not pilfer a lot of things out of the hotel. They don’t cheat the hotel directly. Kitchen

staff eats the food, which they prepare which is not exactly pilferage, because when they

do this they don’t thieve any item.

But kitchen staff can also be a part of frauds when they collaborate with the food

and beverage staff. As kitchen staff does not come in direct contact of the guest, they

can’t pilfer on their own they shake hands with departments like food and beverage and

get share of the amount made by them.

Given below is an example which will clearly explain the above statements:-

If suppose a table is JG table. JC (total grain) means a complimentary table. In

almost the hotels a complimentary guest is not presented with the bill for instance a

complimentary guest orders for a starter and a main course. The steward makes the KOT

for a starter, a soup, a main course and a dessert.

Housekeeping Pilferage:

Pilferages in housekeeping department are done majority by two sources. One

being the guest and the other is staff. Though contract workers can take things away also

but I will concentrate largely on the pilferages done by guest & staff.

1. Pilferage by guest:

Generally guest tends to take small items with hotel’s logo as souvenirs. These

small items are kept as memories with them. This is the normal tendency of guests and

they cannot be stopped also.

Items, which a guest generally tends to take with him, are – the amenities kept in

the room to make his stay comfortable. These amenities are:-

a) Soaps

b) Shampoo
 c) Body lotions

d) Talcum powders

e) Shower caps

f) Tissue

g) Dutch wife

h) Hand towels

i) Face towels

j) Hangers

k) Service directory

l) City maps

2. Pilferage by staff:

Housekeeping staff is always unobserved as the staff is generally on the floors

allotted to them. Staff also like guest also takes away guests complimentary. They also

take away used guest amenities as in if a guest has used little shampoo they take away the

left over bottle.

Housekeeping staff can also pilfer mini bar items after the guest has checked out

and left the hotel. These discrepancies go in the city ledger and are accounted in the

hotel’s account. The room boys can take away things from the mini bar when they go to

clean departure room, as the guest has already checked out. Nobody can be questioned.

Things like aerated drinks and chocolates are eaten in the hotel itself.
 Staff can also lay their hands on the lost and found items by not submitting them

to the department. Again, eatables are consumed in the hotel itself but few expensive

items can also be taken out.

DATA ANALYSIS AND

INTERPRETATION
 DATA ANALYSIS AND INTERPRETATION

HOW MANY YEARS HAVE YOU BEEN WORKING WITH THIS

ORGANISATION?

LESS THAN 2 YEARS 20%

2 TO 3 YEARS 40%
3 TO 5 YEARS 20%
MORE THAN 5 YEARS 20%
 40%
35%
LESS THAN 2
30% YEARS
25% 2 TO 3 YEARS
20%
3 TO 5 YEARS
15%
10% MORE THAN 5
YEARS
5%
0%

The sample size was asked that for how many years they have been working for

the organization, 20 % of the sample size said that they have been working for less than 2

years. Further it was found that another 40% of the sample size had been working in that

organization for 2 to 3 years. 20% of the sample size is working for the hotel for 3 to 5

years and the last 20% said that they are with the organization for more than 5 years.

Hence it clearly shows that majority of the sample size is working for 2 to 3 years

in their organization.
NAME THE TYPES OF FRAUDS / HEISTS THAT OCCURRED IN YOUR HOTEL.

CREDIT CARD FRAUDS 20%

SKIPPERS 20%
FAKE CURRENCY 40%
OTHERS 20%

40%
35% CREDIT CARD
30% FRAUDS
25% SKIPPERS
20%
FAKE CURRENCY
15%
10% OTHERS
5%
0%
 The sample size was asked the types of frauds/heists that occurred in the hotels,

20% i.e. one hotel representative said that credit card frauds are common, another 20% of

the sample size said that skippers are very common in their hotel, whereas 40% of the

sample size said that FAKE CURRENCY was the most common fraud occurring in their

hotel. According to 20% of the sample size there were many other small time frauds

occurring in the hotel.

Hence it clearly shows that majority of the frauds occurring in hotels are of fake

currency.
THE NATURE OF MAXIMUM SECURITY COMPLAINTS

SERIOUS 20%

MEDIOCRE 20%

SMALL TIME 60%

60%

50%

40%
SERIOUS
30% MEDIOCRE
SMALL TIME
20%

10%

0%

NATURE OF THE CRIME

CRIMINAL 60%
CORPORATE 40%
 60%

50%

40%
CRIMINAL
30%
CORPORATE
20%

10%

0%

It was seen that majority of the hotels vouched for the fact that most of the crimes

reported are small time frauds and fallouts. Whereas they said that the percentage of

serious and mediocre crimes were equally distributed.

This goes to show that the nature of the heists and crimes as peculated by taking

up the research were as expected.

While surveying the nature of these crimes, 60% vouched for them being of a

criminal nature, whereas 40% of the crimes reported were of the corporate nature.
THE MAXIMUM NUMBER OF DEFAULTERS IN A YEAR ON AN

AVERAGE.WERE

EMPLOYEES 60%
GUESTS 20%
OUTSIDERS 10%
OTHERS 10%
 60%

50%

40% EMPLOYEES
GUESTS
30%
OUTSIDERS
20% OTHERS
10%

0%

The maximum number of defaulters according to 60% i.e. three of the hotels

interviewed were employees from within the organization, whereas 20% i.e. one hotel

said that guests were the maximum defaulters, whereas another one hotel vouched for

outsiders in terms of clients of guests or shoppers in the shopping arcade.

They also said that another lot of defaulters on a small scale were people who

came in as contracted labor or employees of shops in the shopping arcade who did not

form part of the hotel employee payroll.

HOW MANY STAFF ARE THERE ON A SHIFT IN A FIVE STAR HOTEL?

10 TO 15 PER SHIFT 40%

16 TO 25 PER SHIFT 60%
 60%

50%

40% 10 TO 15 PER
SHIFT
30%
16 TO 25 PER
20% SHIFT

10%

0%

40% of the managers questioned i.e. 2 managers said that approximately 10 to 15

staff were called in on a shift. This constituted of entire security workforce in terms of

officers on a particular shift. This they termed was the requisite number of people, any

more would result in overstaffing and any less would leave areas uncovered and

vulnerable.

16 to 25 were thought of as the optimum number of officers needed for any one

particular shift by 60% i.e. 3 managers interviewed.

 It should be noted that the size of all hotels was very similar hence not affecting

the workforce per shift.

DEALING WITH DEFAULTERS

EMPLOYEES
HAND THEM OVER TO POLICE 10%
DEAL WITH THEM THROUGH HR 40%

DEPARTMENT
CUT RENUMERATION 20%
FIRE THEM 20%
OTHERS 10%
 HAND THEM
OVER TO
40%
POLICE
35%
DEAL WITH
30% THEM
25% THROUGH HR
DEPARTMENT
20% CUT
RENUMERATI
15%
ON
10%
FIRE THEM
5%

0%

OTHERS

It was found when talking about employees, 10% said that the best way to deal

with the defaulters was to hand them over to police. This was not really recommended

since going to the police meant defamation of the hotel’s reputation in more than one

ways.

While 40% supported the idea of dealing with them through the HR department

another 20% suggested cutting remuneration as a penalty. Another 10% of the sample

size refused to take a stand saying that the course of action was primarily determined by

the intensity of the crime.

 GUESTS
HAND THEM OVER TO THE POLICE 20%
DEAL WITH THEM INTERNALLY BY 40%

DETENTION etc
OTHERS 40%
 HAND THEM
40% OVER TO THE
POLICE
35%
30%
DEAL WITH
25%
THEM
20% INTERNALLY
BY DETENTION
15%
etc
10% OTHERS
5%
0%

While dealing with the guests the response received was more decisive because

20% said handing defaulters over to the police was the best possible solution. 40% of the

sample i.e. 2 managers said they preferred dealing with them internally by detention in

order to maintain the reputation of the hotel through secrecy and avoiding the media eye.
 Another 40% said they would charge them a penalty or arrive any other

conclusion depending on the situation.

OUTSIDERS
HAND THEM OVER TO THE POLICE 75%
USE PHYSICAL FORCE INTERNALLY 20%

TO EXTRACT INFORMATION
OTHERS 5%
 HAND THEM
OVER TO THE
80% POLICE
70%
60%
USE
50% PHYSICAL
40% FORCE
INTERNALLY
30% TO EXTRACT
INFORMATION
20% OTHERS
10%
0%

When it comes to outsider’s majority of the sample size i.e. 75% said that handing

the outsiders to the police was the best possible solution, while 20% of them said that

using internal force would help the situation and the reputation of the hotel will also be

maintained as the media will not get a chance. Whereas only 5% of them were in the

favor of going in for litigation.

HAVE THERE BEEN ANY HIGH PROFILE HEISTS OR FRAUDS THAT A

MANAGER HAVE COME ACROSS DURING HIS TENURE?

YES 10%
NO 90%
 90%
80%
70%
60%
50% YES
40% NO
30%
20%
10%
0%

The above chart and the data clearly shows that majority of the sample size said

that there have never been any high profile heists or frauds during there tenure.
 THE MOST CHALLENGING EXPERIENCE

When this question was asked to the sample size there were very different which

are as follows:

1. One of the manager said that he was on his shift when he was reported that

there is a problem on the 7th floor of the hotel, when the manager reported

there he found that his best friend who was working, as a housekeeping

supervisor in the hotel was caught red handed stealing liquor from the mini-
 bar of the room. According to the manager this was the most challenging

experience of his life, as at that time he had to choose his profession over his

friendship.

2. According to one of the manager the most challenging situation of his

professional life was when he had to stop a PAGE 3 personality from entering

the hotel as a prostitute accompanied him.

3. Bomb threat, according to another manager was a challenging situation. He

said that once there was a call at the security stating that there was a bomb in

the hotel’s main lobby, it was to be located and diffused in a short span of

time without letting the guests know about it as there could be a panicky

situation there.

4. One of them told that once there was a drunk, misbehaving, influential

bureaucrat who was totally out of his senses and was creating problems with

the front office staff and was not ready to leave the hotel premises as he

needed a room for the night where he could call a prostitute. He was told

repeatedly to leave the premises but he kept on arguing and threatening the

staff that he will make them leave their jobs if they don’t give him a room

then and there.

5. According to one of the security manager the most challenging situation of his

professional life was, once when fire broke out in his hotel and he had to

evacuate the entire hotel within a very short span of time.

 ANY CHANGE IN THE JOB

The security managers were asked whether there was any thing that they would

like to change about there job and the answers were as follows:

1. One among the sample size said that if given a chance he would change the

shift timings and reduces it to 7 hours from standard 9 hours.

2. One of them said that the pay was very low and if given a chance he would

increase the salary to at least one and a half times.

 3. Technology was one more thing to change as he wanted to introduce the latest

C.C.T.V. (close circuit television) as they can rotate and zoom to a higher

extent.

4. According to one of them, adequate recruitment policies were to be introduce

in the procedure of recruitment as there should be high standards to be

expected from the fresher in the security team.

5. Better facilities for fitness can be introduced like gymnasium for regular

exercise of the security staff for their fitness was also suggested by one of the

managers.

Summary and Conclusion

The sample size was asked that for how many years they have been working for

the organization, 20 % of the sample size said that they have been working for less than 2

years. Further it was found that another 40% of the sample size had been working in that

organization for 2 to 3 years. 20% of the sample size is working for the hotel for 3 to 5

years and the last 20% said that they are with the organization for more than 5 years.
 Hence it clearly shows that majority of the sample size is working for 2 to 3 years

in their organization.

The sample size was asked the types of frauds/heists that occurred in the hotels, 20% i.e.

one hotel representative said that credit card frauds are common, another 20% of the

sample size said that skippers are very common in their hotel, whereas 40% of the sample

size said that FAKE CURRENCY was the most common fraud occurring in their hotel.

According to 20% of the sample size there were many other small time frauds occurring

in the hotel.

Hence it clearly shows that majority of the frauds occurring in hotels are of fake

currency.

It was seen that majority of the hotels vouched for the fact that most of the crimes

reported are small time frauds and fallouts. Whereas they said that the percentage of

serious and mediocre crimes were equally distributed.

This goes to show that the nature of the heists and crimes as peculated by taking

up the research were as expected.

While surveying the nature of these crimes, 60% vouched for them being of a

criminal nature, whereas 40% of the crimes reported were of the corporate nature.
The maximum number of defaulters according to 60% i.e. three of the hotels interviewed

were employees from within the organization, whereas 20% i.e. one hotel said that guests

were the maximum defaulters, whereas another one hotel vouched for outsiders in terms

of clients of guests or shoppers in the shopping arcade.

They also said that another lot of defaulters on a small scale were people who

came in as contracted labor or employees of shops in the shopping arcade who did not

form part of the hotel employee payroll.

40% of the managers questioned i.e. 2 managers said that approximately 10 to 15 staff

were called in on a shift. This constituted of entire security workforce in terms of officers

on a particular shift. This they termed was the requisite number of people, any more

would result in overstaffing and any less would leave areas uncovered and vulnerable.

16 to 25 were thought of as the optimum number of officers needed for any one

particular shift by 60% i.e. 3 managers interviewed.

It should be noted that the size of all hotels was very similar hence not affecting

the workforce per shift.

It was found when talking about employees, 10% said that the best way to deal with the

defaulters was to hand them over to police. This was not really recommended since going

to the police meant defamation of the hotel’s reputation in more than one ways.
 While 40% supported the idea of dealing with them through the HR department

another 20% suggested cutting remuneration as a penalty. Another 10% of the sample

size refused to take a stand saying that the course of action was primarily determined by

the intensity of the crime.

While dealing with the guests the response received was more decisive because

20% said handing defaulters over to the police was the best possible solution. 40% of the

sample i.e. 2 managers said they preferred dealing with them internally by detention in

order to maintain the reputation of the hotel through secrecy and avoiding the media eye.

Another 40% said they would charge them a penalty or arrive any other

conclusion depending on the situation.

When it comes to outsider’s majority of the sample size i.e. 75% said that handing the

outsiders to the police was the best possible solution, while 20% of them said that using

internal force would help the situation and the reputation of the hotel will also be

maintained, as the media will not get a chance. Whereas only 5% of them were in the

favor of going in for litigation.

The above chart and the data clearly shows that majority of the sample size said that there

have never been any high profile heists or frauds during there tenure.
 QUESTIONNAIRE

NAME: __________________________________________________

DESIGNATION: __________________________________________________

NAME OF THE ORGANISATION: ______________________________________

____________________________________________________________________

1. HOW MANY YEARS YOU HAVE BEEN WORKING WITH THIS

ORGANISATION?

 LESS THAN 2 YEARS

 2 TO 3 YEARS
  3 TO 5 YEARS
 MORE THAN 5 YEARS

2. NAME THE TYPES OF FRAUDS / HEISTS THAT OCCURRED IN YOUR

HOTEL.

 CREDIT CARD FRAUDS

 SKIPPERS
 FAKE CURRENCY
 OTHERS

IF OTHERS PLEASE SPECIFY

_______________________________________________________________________
___________________________________________________________________

3. WHAT HAVE BEEN THE NATURE OF MAXIMUM SECURITY

COMPLAINTS THAT HAVE BEEN REPORTED?

 SERIOUS
 MEDIOCRE
 SMALL TIME

 CRIMINAL
 CORPORATE

4. THE MAXIMUM NUMBER OF DEFAULTERS IN A YEAR ON AN

AVERAGE IS: -

 EMPLOYEES
 GUESTS
 OUTSIDERS
 OTHERS

IF OTHERS PLEASE SPECIFY _____________________________________________

5. THE BREAK UP OF DEFAULTERS ON AN AVERAGE IS: -

EMPLOYEES GUESTS OUTSIDERS
 20%  20%  20%
 4O%  4O%  4O%
 60%  60%  60%
 80%  80%  80%

IF OTHERS, PLEASE SPECIFY ____________________________________________

6. HOW MANY OFFICERS ARE THERE ON A SHIFT?

 10 TO 15 PER SHIFT
 16 TO 25 PER SHIFT

7. HOW DO YOU DEAL WITH THE DEFAULTERS OF FRAUDS ONCE

REPORTED?

A) EMPLOYEES
 HAND THEM OVER TO THE POLICE
 DEAL WITH THEM THROUGH HUMAN RESOURCE
DEPARTMENT
 CUT RENUMERATION
 OTHERS
PLEASE SPECIFY ___________________________________________

B) GUESTS
 HAND THEM OVER TO THE POLICE
 DEAL WITH THEM INTERNALLY BY DETENTION etc
 OTHERS
PLEASE SPECIFY ___________________________________________

C) OUTSIDERS
 HAND THEM OVER TO THE POLICE
 USE PHYSICAL FORCE INTERNALLY TO EXTRACT
INFORMATION
 OTHERS
PLEASE SPECIFY ___________________________________________

8. HAVE THERE BEEN ANY HIGH PROFILE HEISTS OR FRAUDS THAT

YOU HAVE COME ACROSS DURING YOUR TENURE?

 YES

 NO
 9. WHAT HAS BEEN THE MOST CHALLENGING EXPERIENCE OF
YOUR PROFESSIONAL LIFE?

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

10. IF GIVEN THE OPPURTUNITY WHAT WOULD YOU LIKE TO

CHANGE ABOUT YOUR JOB?

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

BIBLIOGRAPHY

1. www.crimedoctors.com

2. www.google.com

3. www.hotelinteractive.com
 CERTIFICATE

This is to certify that this research “FRAUDS IN HOTEL INDUSTRY” is a bonafide

work of Mr. TARUN MATHUR, third year student of Institute of Hotel

Management, Catering Technology and Applied Nutrition, Mumbai. This research

was submitted in partial completion of the third year of B.Sc in Hospitality and Hotel

Administration.
Place :

Date : Mr. Sanjeev Kacker

(Technical Guide)