White-collar crime in Germany has exploded in severity, the consulting firm PricewaterhouseCoopers (PwC) said Thursday, with over 60 percent of German companies reporting cases of industrial espionage, corruption and other offenses. Firms expect crime to worsen as a weak economy makes competition tougher and workers unhappier.

The average cost to a firm per incident has risen from 1.47 million euros four years ago to nearly 4.3 million euros today.

"The direct costs of crime are only the tip of the iceberg," said PwC partner and former prosecutor Steffem Salvenmoser. "Above all, the reputational damage to a firm in cases of corruption, data theft or price-fixing is often greater than the measurable financial losses."

The study's results are based on a survey of 500 large German companies conducted by PwC in spring of 2009, after the German economy sank into its deepest recession in over 60 years, propelled in part by the worldwide financial crisis.

Over 40 percent of the surveyed firms expect competitors to use espionage or anti-competitive practices such as cartels to gain an advantage in a tough economic climate. Over a third of the companies expected workers to steal from their employers as concerns about holding onto jobs mounts.

Crime from the corner office

Over 70 percent of the perpetrators were caught thanks to tipsters, the study said, despite increased investment in internal control measures designed to detect theft and fraud. Those results suggest that preventive measures have little effect according to Professor Kai Bussmann from the Martin Luther University in Halle, who worked on the study.

Further tainting a company's reputation is the finding that the perpetrators often come from the ranks of management. The study said 29 percent were executives from the very top of the company's leadership and 38 percent were middle managers. Many perpetrators were long time employees, 45 percent with more than ten years of tenure with the company and over 90 percent were men.

Strikingly, despite the size and nature of the crimes, firms pressed charges against malfeasant managers just 50 percent of the time, compared to 61 percent in the PwC's last survey in 2007. One fifth of the top managers who took part in crimes against their employers received no punishment whatsoever.

"Although the relative leniency against perpetrators from the leadership level can be explained by the particular legal and factual difficulties of individual cases this practice is extremely problematic from vantage point of the credibility and leadership of management," Salvenmoser said.


bn/AP/AFP
Editor: Andreas Illmer