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Retailers Track Employee Thefts in Vast Databases

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Facing a wave of employee theft, retailers across the country have helped amass vast databases of workers accused of stealing and are using that information to keep employees from working again in the industry.

The repositories of information, like First Advantage Corporation's Esteem database, often contain scant details about suspected thefts and routinely do not involve criminal charges. Still, the information can be enough to scuttle a job candidate's chances.

Some of the employees, who submit written statements after being questioned by store security officers, have no idea that they admitted committing a theft or that the information will remain in databases, according to interviews with consumer lawyers, regulators and employees.

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The databases, which have tens of thousands of subscribers and are used by major retailers like Target, CVS and Family Dollar, are aimed at combating employee theft, which accounts for a large swath of missing merchandise. The latest figures available, from 2011, put the loss at about 44 percent of missing merchandise, valued at about $15 billion, according to a trade group, the National Retail Federation.

Retailers "don't want to take a chance on hiring somebody that they might have a problem with," said Richard Mellor, the federation's vice president for loss prevention.

But the databases, which are legal, are facing scrutiny from labor lawyers and federal regulators, who worry they are so sweeping that innocent employees can be harmed. The lawyers say workers are often coerced into confessing, sometimes when they have done nothing wrong, without understanding that they will be branded as thieves.

The Federal Trade Commission has fielded complaints about the databases and is examining whether they comply with the Fair Credit Reporting Act, a federal law aimed at curbing inaccurate consumer information and giving consumers more control, said Anthony Rodriguez, a staff lawyer at the agency.

Screening for suspected episodes of shoplifting is one part of a background check, as companies scour for evidence of criminal convictions or sex-offender registration. Almost all retailers perform background checks, according to a 2011 survey from the federation. But some background-check companies are wary of the theft admissions, which retailers submit to the databases.

"That is not a product that we sell, because I think it's a product fraught with risk and inefficiency," said William Greenblatt, the chief executive of the background-check company Sterling Infosystems.

Federal authorities have zeroed in on background-check data. Last summer, the F.T.C. settled charges with HireRight, which provides a retail-theft database along with other types of screenings. Among the accusations, the agency said that some records were inaccurate and that the firm made it too difficult for consumers to dispute claims.

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LexisNexis agreed last week to pay $13.5 million to settle a class-action suit on behalf of 31,000 people that accused the firm of violating consumer protection laws by selling background checks to debt collectors. The company did not admit wrongdoing.

As the economic recovery limps forward, consumer lawyers say, the consequences of the retail theft databases can be particularly devastating. With so many job applicants, employers have little incentive to hire someone with a tarnished background.

Since the recession, lawsuits have proliferated against the companies that operate retail theft databases, like LexisNexis, which owned Esteem until this year, HireRight and GIS, according to a review of court records. In the last year, the nature of the lawsuits has changed, too, as lawyers try to build class-action cases. HireRight did not return calls for comment, and the other firms declined to comment.

Stores carefully train loss-prevention officers to ensure the admissions are accurate, Mr. Mellor said, and the databases reverify information. But with an inaccurate statement, he said, "your options for getting it out of a database are slim." Some retailers are moving away from the databases. Home Depot, which just stopped using Esteem, said the decision followed a general review of "systems and services."

For Keesha Goode, $34.97 in missing merchandise was enough to destroy her future in retailing.

Ms. Goode, 28, was a clerk at the discount store Forman Mills in 2008, when she was accused of not ringing up a former employee's purchases. During a nearly two-hour examination, Ms. Goode, who maintains her innocence, said she had agreed to write out a statement because she worried she would be sent to jail.

In looping cursive, she said her accusers were trying to make her out as a liar, adding, "I was just doing my job." Ms. Goode was immediately fired, and was asked to pay back the $34.97. She had no idea, she said, that the statement would go into a shared database.

She received a letter from Dollar General alerting her that she had been turned down for a job partly because of her listing in Esteem, and a copy of the report showed that she had a "verified admission" for "theft of merchandise." She wrote LexisNexis, "I was accused of not reporting on a former employee who was stealing merchandise, but I did not steal anything myself."

The company responded that it had reinvestigated and "verified" the accuracy of the information. Ms. Goode, who now works at a halfway house, has a lawsuit pending against LexisNexis, accusing the company of violating the Fair Credit Reporting Act. Forman Mills and Dollar General did not respond to requests for comment. LexisNexis has moved to toss out the lawsuit, arguing that the company abided by the law, according to court filings.

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As in Ms. Goode's case, the admission statements are typically obtained by a store's security force. Employees are often willing to say anything to ward off what can feel like an interrogation, the lawyers say. Another problem: the employee is informally accused and ultimately deprived of the protections, like due process, that a suspect would receive in a police precinct, for example. Lawyers also say that admission forms do not typically warn employees that it will go on their record.

"We're not talking about a criminal record, which either is there or is not there—it's an admission statement which is being provided by an employer," said Irv Ackelsberg, a lawyer at Langer, Grogan & Diver who represents Ms. Goode.

Such statements may contain no outright admission of guilt, like one submitted after Kyra Moore, then a CVS employee, was accused of stealing: "picked up socks left them at the checkout and never came back to buy them," it read. When Ms. Moore later applied for a job at Rite Aid, she was deemed "noncompetitive." She is suing Esteem.

CVS, noting that it is not a defendant in this lawsuit, said that many retail companies used Esteem "to report and share information about employees who have admitted to theft from their employers," and that CVS only sent written theft admissions to Esteem.

Still, lawyers say those admissions can be problematic. The database is "a secret blacklist," Mr. Ackelsberg said. "The employees don't know about it until they have already been hurt."

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