The case of the disappearing printer ink

Despite futurists’ predictions, we don’t live in a paperless business world. Printer ink and toner are still an expensive necessity. Fraudsters depend on ink costing organizations more than caviar. Here’s how to prevent this asset misappropriation and possibly save millions.

Scores of people get taken to the cleaners in Las Vegas. It’s just that the one who ends up in the red usually isn’t the local government. But that happened to be the case when a municipal purchasing analyst managed to steal $6,715,531 in toner and ink cartridges from her employer within eight years. That’s an average of $746,170 in toner and ink per year!

The Las Vegas Valley Water District hired Jennifer J. McCain-Bray in 2001 and in late 2007 promoted her to be its purchasing analyst. She worked with department vendors and ordered supplies but also began stealing what eventually would amount to thousands of toner and ink cartridges. (See the U.S. Department of Justice release, Jan. 29, 2019.)

McCain-Bray’s fraud was simple. She’d order unneeded cartridges and then ship them under a fake vendor name using the water district’s shipping system to a company in New Jersey that purchased and sold toner and ink online. Her fake vendor enabled McCain-Bray to misuse the water district’s shipping system, so it even paid postage on the stolen cartridges.

Court records from McCain-Bray’s prosecution indicate that she also failed to report $2,339,156 in taxable income from cartridge sales between 2011 and 2015. That averages to $467,831 in stolen toner income per year in just those five years.

McCain-Bray used the extra cash to remodel her home; travel; and buy gifts for herself, friends and family. Her hot streak ended when a coworker became suspicious about a package addressed to the fake vendor. That led to a review of purchasing records, and McCain-Bray could read the laser printing on the wall. She resigned in December 2015. McCain-Bray was eventually sentenced to 51 months in federal prison and ordered to pay back the entire $6.7 million.

Employee theft is on the rise

The ACFE 2020 Report to the Nations shows that theft of noncash property, such as office supplies, rose from about 10% to 18% of fraud cases between 2002 and 2020. Those frauds had a nearly $80,000 median loss.

So, what causes employees to steal? They might have reduced hours, pay or benefits. And the ACFE notes that employees who exhibit “excessive control issues or unwillingness to share duties” might be a fraud risk. (See the ACFE Report to the Nations.)

Revenge or “seeking justice” can be a reason for stealing at work. Perhaps a fraudster has received a poor evaluation from management and is concerned about losing their job, or they see no opportunity for advancement, hence their revenge. Maybe they feel their hard work has gone unnoticed and underappreciated, hence their justice seeking.

However, simple greed and the opportunity of easy money often can be the determining factors at work. Based on the McCain-Bray story, fraudsters can make a lot of cash by selling stolen office supplies. Keeping these motives in mind, let’s focus on why one mundane and ubiquitous item — toner — seems to stand out in the supply cabinet as the jackpot of office supply theft.

Not all office supplies are equal in the eyes of a person looking to make an easy buck. Printer toner and ink are particularly prone to theft partially because of their relatively small size. Like all the other supplies an office consumes, printing supplies aren’t always looked after with the same level of scrutiny as the actual printers. This doesn’t make much sense when you think about it. After all, what’s easier to stuff in a backpack — a desk printer or a cartridge of ink?

Also, most employees’ only interaction with the printer and ink world is the five seconds it takes to make a copy or retrieve a document. So, fraudulent office-supply purchasing agents or others can excuse excessive toner use to their organizations by saying, “We just use a lot of ink.”

Printer toner and ink are also popular theft targets because of their high retail prices and ease of resale. They’re so expensive because many manufacturers sell their printers at cost or a loss with the hope of locking users into buying their toner or ink, which is how they make their profit. It’s not uncommon to spend more on toner after only a couple refills than on the printer that uses it.

Costly cartridge fun facts: According to PC World, ink can go for $22 per quarter ounce, which is pricier than Russian caviar; and a New York Times economist found that printer ink was priced at about $4,731 a gallon. The price-to-size ratio is great if you’re looking to steal from work. (See Why Printer Ink is the Other Black Gold, by Robert Siegel and Audie Cornish, NPR, May 24, 2012.)

Gone are the resale days of dark alleys and trench coats laden with stolen goods. The ease and ubiquity of e-commerce has resulted in new outlets for people to fence stolen items as easily as non-fraudsters perusing Amazon. Some grey market websites are dedicated to selling printer toner and ink. They provide instant offers and resell them at a markup that’s still well below the retail price of new toner and ink. The transaction is just a FedEx shipment and PayPal transfer away.

Disappearing ink happens more than you think

So, is employee toner theft just a Vegas problem because “what happens there only happens there?” Well, it turns out toner and ink cartridge theft occurs across the world. Where there’s an aggrieved employee and weak controls, toner theft can follow.

A municipal employee from San Diego County stole $360,000 in ink cartridges between 2007 and 2012 and sold them to an online ink and toner marketplace. For his efforts, he received a three-year jail sentence. (See County worker loses benefits for stealing, by Jeff McDonald, The San Diego Union-Tribune, Dec. 5, 2013.)

A former municipal Philadelphian mail room clerk received two years in prison for stealing $1,368,091 worth of ink and toner cartridges in six years. Like McCain-Bray, he managed to use the city’s UPS account to ship his stolen ink and toner to his co-conspirators. Records show he made $545,412 from the sales. That means he got just under 40% of retail value for his hot toner and ink. It seems like a steep discount, but then again, it was all profit. (See U.S. Department of Justice release, June 9, 2015.)

Owners of a Florida furniture store opened two ghost companies that leased Xerox printers. The leases came with seemingly unlimited toner replacement. The fraudsters would order more cartridges than the printers needed and then resell them. They eventually worked themselves up to at least 63 Xerox machines so they could order and resell toner in bulk.

They sold enough to receive about $11 million from one buyer in Miami. They were prosecuted for stealing approximately $24 million in toner from Xerox in a scheme that lasted from 2008 until 2013. If the $11 million is roughly their total gains from the sales, then these guys got an impressive 46% of retail value for their stolen toner. That’s a solid step up from the Philadelphia employee. (See Xerox scam nets Haynes Brothers furniture family members prison time, by Frank Fernandez, The Daytona Beach News-Journal, July 29, 2019.)

Guarding against toner and ink theft

How do you prevent your organization from being the next toner donor to an aspiring office supply dealer? We’ve identified several things you can do to lessen the chances your toner ends up on the internet.

We have two general recommendations before we get to the inky specifics. First, fight toner and all other types of fraud with a fraud-reporting hotline. As detailed in the Report to the Nations, 43% of workplace frauds are discovered through tips. That’s, by far, the largest method for discovering workplace frauds. Also, asset misappropriation is the most common workplace fraud — representing 86% of frauds. Add those up and a fraud hotline will help fight toner and ink theft.

Secondly, ensure your organization has adequate separation of duties. All the cited fraudsters took advantage of their authority for ordering and receiving of goods.

This is so simple, but likely none of the victimized entities took the time to compare their toner purchases with their paper purchases.

Toner, of course, is only used to print on paper, so anyone spending more money on toner should see a matching increase for paper. Search for a period in your purchase records when toner purchases increased. It’s time to investigate if you don’t see a matching pattern in paper purchases.

Take these next steps if you’ve found some evidence of suspicious purchasing. If your potential toner thief is as bold as some of those above, they might be using your entity’s shipping function to mail toner that was formerly yours. Review your shipping records for new addresses and new vendors.

If you’re concerned with purchasing records, you might need to start looking into the employee who orders the ink. Review physical entry records like badge-swipe data.

Employees who are over-purchasing and then stealing ink want to avoid attention as much as possible when they remove toner from the premises or ship it to their buyers. Look for the suspected employee arriving at work unusually early or staying late. Computer log-on records might also help you identify unusual working patterns if physical access records aren’t available.

Once you identify a subject employee, review their web-browser history and do a keyword search of their work emails. Look for terms like pre-owned, used, toner, ink, cartridge, the brand of printer you have, plus the names of ink and toner resellers. Review their browser history for resellers and marketplaces like eBay, craigslist and Facebook Marketplace.

Interview your warehouse staffers if they do the initial delivery intake. Ask if any employees like their packages handled in particular ways or are extra demanding. Ask about standard practices for receiving and delivering packages and if anyone has requested exceptions to those practices. It might even be helpful to ask those employees who receive the most packages.

Don’t cry over spilled ink

Who knew ink and toner could be such fertile soil for fraud? If you take some of the simple steps we’ve shared, it should meaningfully reduce the likelihood your toner will end up for sale somewhere on the internet. And if these steps lead you to catch a toner fraudster magenta-handed, don’t feel too cyan. You’re not alone, and you probably won’t be the last to find your ink disappearing.

Michael Yamma, CFE, is an investigator for the City of Austin, Texas, Office of the City Auditor. Contact him at Michael.yamma@austintexas.gov.

Brian Molloy, J.D., CFE, is chief of investigations for the City of Austin, Texas, Office of the City Auditor. Contact him at brian.molloy@austintexas.gov.