EMPLOYMENT SCREENING RESOURCES (ESR) NEWS

House Passes Appropriations Bill that would Block Enforcement of New EEOC Guidance on Criminal Background Checks

Tom Ahearn, ESR News Editor — Fri, 18 May 2012 17:02:44 +0000

The U.S. House of Representatives recently passed an appropriations bill (H.R. 5326) that provides funding for several agencies including the allocation of $367 million the U.S. Equal Employment Opportunity Commission (EEOC) but also includes amendments that would block implementation and enforcement of several programs including the new EEOC guidance on the ‘Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964’ for employers using criminal background checks. The full text of H.R. 5326 is available at: http://www.govtrack.us/congress/bills/112/hr5326/text.

On April 25, 2012, the EEOC, the agency that enforces federal laws prohibiting employment discrimination, approved updated guidance for the use of criminal background checks since an employer’s use of an individual’s criminal history in making employment decisions may, in some instances, violate the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964 because arrest and conviction records disproportionately affect African-Americans and Hispanics. While H.R. 5326 allocates $367 million to the EEOC under ‘Equal Employment Opportunity – Salaries and Expenses,’ under ‘General Provisions – Spending Reduction Account,’ the bill reads:

Sec. 544. None of the funds made available by this Act may be used to implement, administer, or enforce the Equal Employment Opportunity Commission (EEOC) Enforcement Guidance Number 915.002 concerning ‘Consideration of arrest and conviction records in employment decisions’.

However, the Senate appropriations bill (S. 2323) approved by the Senate Appropriations Committee and now pending before the Senate to fund these same agencies does not include these amendments. Once S. 2323 has been approved the Senate bill will be moved to a conference committee where the differences between it and the House bill H.R. 5326 will be reconciled. The full text of S. 2323 is available at http://www.govtrack.us/congress/bills/112/s2323/text. The updated EEOC guidance on criminal records, which builds on longstanding court decisions and existing guidance documents the EEOC issued over twenty years ago, is available at http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm.

Attorney Lester Rosen, founder and CEO of background check firm Employment Screening Resources (ESR) and author of ‘The Safe Hiring Manual,’ recently submitted a letter of public comment to the EEOC regarding the updated guidance. Before entering the background screening industry, Rosen spent nearly 20 years practicing criminal law, the majority of time as a defense lawyer, where he represented a large number of people accused of criminal acts ranging from driving under the influence and petty theft all the way to sexual assaults, child molestation, and homicide. He had the opportunity to work with numerous offenders and their families very closely and often assisted offenders in gaining employment.

In his letter, Rosen fully embraces the EEOC objective of ensuring that ex-offenders are not the subject of unfair treatment: “America is a country of second chances, and if a person has committed a crime and done the time, he or she needs need a job in order to become a law abiding and a tax-paying citizen. As a society, we cannot afford to build more prisons then schools or hospitals. In fact, I have written a widely distributed article titled ‘Criminal Records and Getting Back into the Workforce: Six Critical Steps for Ex-offenders Trying to Get Back into the Workforce’ which is available at http://www.esrcheck.com/articles/Criminal-Records-and-Getting-Back-into-the-Workforce.php.”

However, Rosen writes that he has also seen “the devastating results first hand when the wrong person is put in the wrong job. I have been involved in cases, both as an attorney and an expert witness, where children have been molested, woman subjected to serious sexual assaults in their own homes, and people murdered in their own homes, all because appropriate due diligence was not exercised. I am a firm believer that there should be a job for everyone, but not everyone is entitled to every job.”

In his letter, Rosen finds the recently updated EEOC guidance is “very troubling” offers reasons why the EEOC should withdraw or modify the updated guidance.

The statistics cited in the EEOC guidance to show the number of Americans involved in the criminal justice system are overstated and inflated.
The EEOC guidance gives ex-offenders the status of a “protected group” similar to groups based on race, religion, or national origin.
The recidivism studies cited in the EEOC guidance are still in the early stage and should not be the basis of social policy.
The new EEOC guidance will create brand new industries of “professional litigants” and advisors on complex new rules.
The EEOC guidance limiting criminal inquiries only to “relevant criminal matters” to a job is nearly impossible for employers to carry out.
The EEOC guidance of employers limiting inquiries can have the unintended consequence of working against ex-offenders trying to get jobs.
The EEOC guidance of limiting inquiries on criminal records means employers cannot make informed decisions if they do not view actual court case files.

Rosen concludes by writing that the updated EEOC Guidance could have “unintended consequences.”

Essentially, the whole concept that an employer needs to somehow limit the criminal inquiry when made based upon on the job, ends up in the real world being harmful and detrimental to ex-offenders. This is an example of “the law of unintended consequences.”

Attorney Lester Rosen’s letter of public comment to the EEOC regarding the updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 is available at: http://www.esrcheck.com/Les-Rosen-Public-Comment-on-EEOC-Criminal-Guidance.php.

For more information about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS) – at http://www.esrcheck.com/ or call 415.898.0044.

Sources:
http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm
http://www.govtrack.us/congress/bills/112/hr5326/text
http://www.govtrack.us/congress/bills/112/hr5326
http://www.govtrack.us/congress/bills/112/s2323
http://www.govtrack.us/congress/bills/112/s2323/text
http://www.esrcheck.com/wordpress/2012/05/11/employment-screening-expert-reviews-eeoc-guidance-for-criminal-background-checks/
http://www.gpo.gov/fdsys/pkg/BILLS-112hr5326pcs/pdf/BILLS-112hr5326pcs.pdf
http://www.securitymanagement.com/news/house-passes-appropriations-bill-blocks-certain-programs-009843

About Employment Screening Resources (ESR):

Employment Screening Resources (ESR) – ‘The Background Check Authority^SM’– provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percentage of screening firms. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about Employment Screening Resources (ESR), visit http://www.esrcheck.com/ or call 415.898.0044 or 888.999.4474.

About ESR News:

The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at tahearn@esrcheck.com.

ACFE 2012 Report to the Nations Finds Fraud Costs Organizations Five Percent of Revenues Each Year

Tom Ahearn, ESR News Editor — Thu, 17 May 2012 15:37:27 +0000

The 2012 Report to the Nations on Occupational Fraud and Abuse from the Association of Certified Fraud Examiners (ACFE) estimates that the typical organization loses five percent of its revenues to occupational fraud each year and that this figure translates to a potential projected global fraud loss of more than $3.5 trillion applied to the estimated 2011 Gross World Product. The study also found that the median loss caused by the occupational fraud cases was $140,000, and more than one-fifth of these cases caused losses of at least $1 million. The ACFE 2012 Report to the Nations is available at: http://www.acfe.com/RTTN/.

“We are proud to say that the information contained in the original Report and its successors has become the most authoritative and widely quoted body of research on occupational fraud,” ACFE President & CEO James D. Ratley, Certified Fraud Examiner (CFE), wrote in an excerpt from a ‘Letter from the President & CEO’ in the report. “As in previous years, what is perhaps most striking about the data we gathered is how consistent the patterns of fraud are around the globe and over time. We believe this consistency reaffirms the value of our research efforts and the reliability of our findings as truly representative of the characteristics of occupational fraudsters and their schemes.”

Since the inception of the report in 1996, ACFE has released six updated editions – in 2002, 2004, 2006, 2008, 2010, and 2012 – based on detailed case information provided by Certified Fraud Examiners (CFEs). The ACFE 2012 Report to the Nations on Occupational Fraud and Abuse is based on data compiled from a study of 1,388 cases of occupational fraud that occurred worldwide between January 2010 and December 2011. The fraud cases in the study came from 94 nations — providing a truly global view into the plague of occupational fraud.

Some Key Findings and Highlights of the ACFE 2012 Report to the Nations include:

Fraud Detection: The frauds reported lasted a median of 18 months before being detected. Occupational fraud is more likely to be detected by a tip than by any other method, with the majority of tips reporting fraud come from employees of the victim organization.
Victims of Fraud: Small businesses suffered the largest median losses due to occupational fraud since they typically employ fewer anti-fraud controls than their larger counterparts, which increased their vulnerability to fraud. The industries most commonly victimized in our current study were the banking and financial services, government and public administration, and manufacturing sectors. Nearly half of victim organizations – 49 percent – do not recover any losses that they suffer due to fraud.
Perpetrators of Fraud by Age/Sex: Approximately 54% of all fraudsters were between the ages of 31 and 45. Fraud losses, however, tended to rise with the age of the perpetrator. For example, the 50–55 year range had a median loss of $600,000, nearly two-and-a-half times higher than the median loss in any other age range. Males tended to account for roughly two-thirds of all fraud cases, and male fraudsters tended to cause losses that were more than twice as high as the losses caused by females. In the 2012 study, the median loss in a scheme committed by a male was $200,000 while the median loss for a female was $91,000.
Perpetrators of Fraud by Length of Employment: Approximately 42 percent of occupational fraudsters had between one and ﬁve years of tenure at their organizations. Meanwhile fewer than 6 percent of perpetrators committed fraud within the ﬁrst year on the job. Tenure at a job has a strong correlation with fraud losses. Individuals who worked at an organization for a longer period of time often enjoy more trust from their supervisors and co-workers, which can mean less scrutiny over their actions. Their experience can also give them a better understanding of the organization’s internal controls, which enables them to more successfully carry out and conceal their fraud schemes.
Perpetrators of Fraud by Position/Department: Perpetrators of fraud with higher levels of authority tended to cause much larger losses. The median loss among frauds committed by owner/executives was $573,000, the median loss caused by managers was $180,000 and the median loss caused by employees was $60,000. More than three out of four fraud cases in the study – 77 percent – were committed by individuals working in one of six departments: accounting, operations, sales, executive/upper management, customer service and purchasing.
Perpetrators of Fraud by Past Criminal Record: Most occupational fraudsters are first-time offenders with clean employment histories, with 87 percent of occupational fraudsters having never been charged or convicted of a fraud-related offense and 84 percent having never been punished or terminated by an employer for fraud-related conduct.
“Red Flags” Indicating Fraud: In the majority of cases – 81 percent of cases – the fraudster displayed one or more behavioral red flags that are often associated with fraudulent conduct: living beyond means (36 percent of cases), financial difficulties (27 percent of cases), unusually close association with vendors or customers (19 percent of cases) and excessive control issues (18 percent of cases).

The ACFE 2012 Report to the Nations also includes Conclusions & Recommendations:

The nature and threat of occupational fraud is truly universal, as many trends and characteristics were similar regardless of where the fraud occurred around the globe.
Fraud reporting mechanisms, such as hotlines, should be set up to receive tips from both internal and external sources and should allow anonymity and confidentiality since providing individuals a means to report suspicious activity is a critical part of an anti-fraud program. Management should actively encourage employees to report suspicious activity.
External audits should not be relied upon as an organization’s primary fraud detection method, since the study found they detected only 3 percent of the frauds reported and their usefulness as a means of uncovering fraud is limited.
Targeted fraud awareness training for employees and managers is a critical component of a well-rounded program for preventing and detecting fraud since employee tips are the most common way occupational fraud is detected and our research shows organizations that have anti-fraud training programs experience lower losses and shorter frauds.
Small businesses are particularly vulnerable to fraud since these organizations typically have fewer resources than their larger counterparts, which translated to fewer and less-effective anti-fraud controls. In addition, because they have fewer resources, the losses experienced by small businesses tend to have a greater impact than they would in larger organizations.
Managers, employees, and auditors should be educated on the common “red flag” behavioral patterns and traits exhibited by most fraudsters and encouraged to consider them to help identify patterns that might indicate fraudulent activity.
Proactive measures to prevent fraud are critical since the cost of occupational fraud — both financially and to an organization’s reputation — can be damaging with nearly half of victim organizations were unable to recover their losses. Management should continually assess the organization’s specific fraud risks and evaluate its fraud prevention programs.

The ACFE 2012 Report to the Nations is available at: http://www.acfe.com/RTTN/. ACFE members should look for their free printed copy of the 2012 Report to the Nations in their July/August edition of Fraud Magazine (excludes electronic membership).

For information about uncovering potential fraud with the use of background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by The National Association of Professional Background Screeners (NAPBS®) – at http://www.esrcheck.com/ or call ESR at 415.898.0044.

Sources:
http://www.acfe.com/RTTN/
http://www.acfe.com/rttn-highlights.aspx
http://www.acfe.com/rttn-conclusions.aspx

About Employment Screening Resources (ESR):

About ESR News:

Safe Hiring Experts To Be Guests on The Proactive Employer Internet Talk Radio Program May 17

Tom Ahearn, ESR News Editor — Wed, 16 May 2012 18:06:05 +0000

Hiring safe employees is not as simple as some employers may think, and the topic of “safe hiring” will be discussed by two guests on this week’s episode of the Internet talk radio program ‘The Proactive Employer.’ Attorney Les Rosen, Founder and CEO of background check firm Employment Screening Resources (ESR), and Joel Passen, Co-Founder of Newton Smart Applicant Tracking Software, will join host Stephanie R. Thomas, Ph.D. to talk about the elements of a safe hiring plan, common questions and concerns employers have about hiring, and how to implement a Safe Hiring Program (SHP). The hour long show will air live on Thursday, May 17th at 3 PM Eastern / 12 PM Pacific on the VoiceAmerica™ Business Channel and on The Proactive Employer website.

In the first segment, Rosen, author of ‘The Safe Hiring Manual,’ the first comprehensive guide to employment screening, will discuss the following topics with Thomas:

“Warm Body Philosophy” and why it’s dangerous.
Safe hiring policies and procedures overview.
Legal Compliance practices – applicant screening “hotspots.”
New Equal Employment Opportunity Commission (EEOC) guidance on use of criminal histories.

In the second segment, Passen, who leads Sales and Marketing for Newton Software, will discuss the following topics with Thomas:

Four things employers need to do to stay Equal Employment Opportunity (EEO) compliant, including EEO identification, reasons why candidate not hired, continuously analyze this info in real time, compliance reporting.
Good Applicant Tracking Software (ATS) is one of the cornerstones of safe hiring. Why use formal ATS and not Excel, handwritten notes, etc., and how can it help safe hiring?
Aside from EEO information, integrated background screening – what’s the operational advantage of having everything in one place?

In the last half hour of the program, Rosen and Passen will answer questions and then offer some free evaluation tools and tips on several topics, including:

Application/consent forms.
Verification of Past Employment.
Interviews.
Criminal background checks.
Offer Letters.
How ATS maintains collected information comprehensively and consistently.
How ATS can equal and insurance policy for hiring.

Options for Listening to this week’s installment of ‘The Proactive Employer’ program include:

Listen live or on-demand at VoiceAmerica Business at: http://www.voiceamerica.com/show/2091/the-proactive-employer.
Listen live or on-demand at The Proactive Employer website at: http://www.theproactiveemployer.com/.

Listeners to the program may ask the guests questions using the following methods:

Call the Listener Line: 1-866-472-5790.
Email questions to sthomas@thomasecon.com.
Tweet questions with hashtag #TPE.

The show will be available for on-demand listening at The Proactive Employer website, on the VoiceAmerica Business Channel, and via iTunes following the broadcast.

The Proactive Employer is a source for the latest news and commentary on workplace issues, HR best practices, employment litigation risk management, and EEO compliance. The host, Stephanie R. Thomas, Ph.D., is a leading expert on the quantitative analysis of workplace practices, the author of the book ‘Statistical Analysis of Adverse Impact: A Practitioner’s Guide,’ and Founder and CEO of Thomas Econometrics Inc. For more information, visit: http://www.theproactiveemployer.com/ and http://www.thomasecon.com/.

Joel Passen is Co-Founder and Head of Sales and Marketing for Newton: Smart Applicant Tracking Software. For more information about Newton Software, visit: http://www.newtonsoftware.com/.

Attorney Les Rosen, Founder and CEO of Employment Screening Resources (ESR), is a frequent speaker nationwide on employment screening as part of the ‘ESR Speaks’ program. He was also the chairperson of the steering committee that founded the National Association of Professional Background Screeners (NAPBS), a professional trade organization for the background screening industry, and served as first co-chairman.

For more information about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the NAPBS – at http://www.esrcheck.com/ or call ESR at 415.898.0044 or Toll Free at 888-999-4474.

Sources:
http://www.voiceamerica.com/show/2091/the-proactive-employer
http://www.TheProactiveEmployer.com
http://www.thomasecon.com/tpe/blog.html

About Employment Screening Resources (ESR):

About ESR News:

Top 10 Trends for Background Checks in 2012 Reviewed in PIHRA Webinar on May 18

Tom Ahearn, ESR News Editor — Tue, 15 May 2012 16:42:26 +0000

To help Human Resources professionals understand the current trends, best practices, and legal developments affecting due diligence and hiring, Attorney Lester Rosen, CEO of Employment Screening Resources (ESR), will present a webinar titled ‘The Top 10 Trends for Background Checks in 2012’ for the Professionals In Human Resources Association (PIHRA) on Friday, May 18, 2012 from 12:00 PM to 1:00 PM Pacific Time. To register for this program, which is approved for 1.0 general recertification credit hours toward PHR, SPHR, and GPHR recertification through the HR Certification Institute, visit: PIHRA Webinar ‘The Top 10 Trends for Background Checks in 2012’.

“Many employee problems are caused by problem employees,” says Rosen, a background check expert and author of ‘The Safe Hiring Manual,’ the first comprehensive guide to employment screening. “This session will help HR professionals avoid bad hires in the first place by keeping current on trends, best practices, and legal developments affecting background checks and in their hiring programs.”

Participants in the webinar will learn legally complaint best practices to keep a business productive and out of court and steps a firm can take immediately to avoid a bad hire. This session will review the top ten trends and best practices for 2012 when it comes to background checks and safe hiring, including:

The use (and misuse) of social networking sites and social media for screening job applicants;
The Equal Employment Opportunity Commission (EEOC) approach to the use of criminal records and credit reports;
International background screening;
Resume fraud and degree/diploma mills;
Privacy and offshoring of personal data outside of U.S.;
Tools to protect against workplace violence; and
Other trends affecting background checks.

“Employers have long recognized that conducting due diligence on new hires is a mission critical task,” says Rosen, a frequent speaker nationwide as part of the ‘ESR Speaks’ background check training program. “Firms cannot afford to be sidetracked by employee problems such as workplace violence, theft, false resumes, embezzlement, harassment or trumped-up injury claims. Employers can be the subject of lawsuits for negligent hiring if they hire someone that they should have known, through the exercise of due diligence, was dangerous, unfit, dishonest or unqualified,” he adds.

The speaker, Attorney Lester Rosen, founded Employment Screening Resources (ESR), a nationwide background screening company located in the San Francisco, California-area, in 1997. ESR is an accredited firm under the National Association of Professional Background Screeners (NAPBS®) accreditation program. Rosen is a nationally recognized expert on safe hiring issues who was the chairperson of the steering committee that founded the NAPBS and served as the first co-chairman. He is a frequent presenter nationwide and his speaking appearances have included numerous national and statewide conferences.

The webinar ‘The Top 10 Trends for Background Checks in 2012’ requires a two-part registration. After registering on the PIHRA site, registrants should look for a link in the confirmation email to complete the second part of the registration and receive the link to access the webinar. Registration for the webinar closes on May 17, 2012.

A California nonprofit professional association, PIHRA is dedicated to the continuous enhancement of human resources through networking, learning and advocacy and serves all levels of human resource practitioners and providers. For more information, visit http://www.pihra.org/.

For more information about background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the NAPBS – at http://www.esrcheck.com/ or call ESR at 415.898.0044 or Toll Free at 888-999-4474.

Source: https://m360.pihra.org/event.aspx?eventID=49037&instance=0

About Employment Screening Resources (ESR):

About ESR News:

Yahoo CEO Leaves Company after Discrepancy in Academic Credentials Revealed

Tom Ahearn, ESR News Editor — Mon, 14 May 2012 16:18:12 +0000

On May 13, 2012, Yahoo! Inc. announced that Scott Thompson, the recently hired Chief Executive Officer who was revealed to have a discrepancy in his academic credentials included in online biographies and filings with the Securities and Exchange Commission, has left the company, and that the Board of Directors has named Ross Levinsohn as interim CEO to manage the day-to-day operations, effective immediately. The full text of the press release is available here: ‘Yahoo! Names Fred Amoroso Chairman and Appoints Ross Levinsohn Interim CEO’.

Sunnyvale, California-based digital media company Yahoo! also announced that its Board of Directors has named Fred Amoroso as Chairman of the Board of Directors and that the Board has reached an agreement with Third Point LLC to settle its pending proxy contest related to the Company’s 2012 annual meeting of shareholders. Under the Board’s settlement agreement with Third Point, which owns 5.8% of Yahoo! common stock, three Third Point nominees — Daniel S. Loeb, Harry J. Wilson, and Michael J. Wolf — will join the Yahoo! Board, effective May 16, 2012.

In a previous press release, Yahoo! announced that its Board of Directors had formed a special committee to conduct a thorough review of former CEO Thompson’s academic credentials, “as well as the facts and circumstances related to the review and disclosure of those credentials in connection with Thompson’s appointment as CEO.” The special committee was chaired by Amoroso, an independent director who joined the Board in February 2012. Yahoo! Inc. also announced that Patti Hart, the Chairwoman of the Search Committee that hired Thompson who was also revealed to have a possible discrepancy in her academic record, had decided not to seek re-election to the Board. Yahoo! appointed Thompson, the former President of PayPal, a division of eBay, as Chief Executive Officer in January 2012.

As reported in the ESR News blog ‘Yahoo CEO Education Record Mentioned in Biography Contained Discrepancy in Degree Awarded,’ Thompson was found to have a discrepancy in his educational record after a letter from Loeb, Chief Executive Officer of Third Point, to the Yahoo! Board of Directors revealed that while numerous biographies and securities filings claimed Thompson held a Bachelor’s degree in accounting and computer science, a “rudimentary Google search” revealed that his degree was in accounting only. The full text of the letter is available here: ‘Third Point LLC Letter To Yahoo! Board Of Directors Regarding Discovery Of Discrepancies In Educational Records Of CEO Scott Thompson And Director Patti Hart’.

The letter dated May, 3, 2012, from Loeb to the Yahoo! Board of Directors begins with the following:

According to the Yahoo! Form 10-K/A, filed with the Securities and Exchange Commission on April 27, 2012, newly-hired Chief Executive Officer, Scott Thompson, “holds a Bachelor’s degree in accounting and computer science” from Stonehill College. This assertion was repeated in the Company’s draft proxy statement, also filed with the SEC on April 27, 2012, as well as on the Company’s website.

A rudimentary Google search reveals a Stonehill College alumni announcement stating that Mr. Thompson’s degree is in accounting only. That announcement is consistent with other documents (including filings with the SEC) that reflect Mr. Thompson received a degree in accounting, but not computer science.

The letter also questioned the due diligence hiring process, including using education verification during background checks by which Thompson was selected as Yahoo! CEO:

Shareholders must also question how the Board of Directors, specifically the Search Committee chaired by Ms. Patti Hart, could permit the Company to hire a CEO with this discrepancy in the public record. We assumed previously that the Committee would have conducted a thorough background check on Mr. Thompson – and even if not thorough, the most basic of such checks would address Mr. Thompson’s education and degrees. Should our concerns about Mr. Thompson’s record be accurate, that would call into serious question whether the Board failed to exercise appropriate diligence and oversight in one of its most fundamental tasks – identifying and hiring the Chief Executive Officer.

While checking on Thompson’s academic credentials, the letter indicated that Third Point also “discovered another apparent discrepancy regarding the academic background of Ms. Hart”:

Specifically, Ms. Hart, we are told in various corporate filings (including the aforementioned Form 10-K/A), holds a “Bachelor’s degree in marketing and economics” from Illinois State University. However, we understand that Ms. Hart’s degree is in Business Administration. She received a degree in neither Marketing nor Economics, (although we understand that she may have taken a small number of courses – not enough for even a minor degree – in each).

ESR News reported that after the academic discrepancies came to light, Yahoo! issued an initial response saying that Thompson did not earn a degree in computer science and cited “an inadvertent error” for the inaccurate SEC filings and website biographies. Third Point sent a follow up letter to the Yahoo! Board of Directors calling the response “inadequate” and demanding action on the matter. The follow up letter is available here: ‘Third Point LLC Letter To Yahoo! Board Of Directors Regarding Company’s Inadequate Response To Discovery Of Discrepancies In Educational Records Of CEO Scott Thompson And Director Patti Hart And Demanding Action By May 7th’.

Whether an “an inadvertent error” or done on purpose, studies have found resume’ inflation in the highly competitive job market during the recent economic downturn is not uncommon. A 2009 white paper from payroll and HR outsourcing firm Automatic Data Processing, Inc. (ADP®) found that 46 percent of employment, education, and/or reference checks turned up discrepancies. The ADP white paper is available here: ‘Should Employers Consider Outsourcing Background Checks?’.

However, a 2010 survey from the Society for Human Resource Management (SHRM) revealed that while more than three out of four businesses polled – 76 percent – conducted general reference checks on all job candidates, less than half – 49 percent – always verified the degrees claimed by job applicants. The SHRM survey is available here: ‘Conducting Reference Background Checks’.

The Yahoo! case is the most recent example of the need for all businesses to conduct education verifications during background checks. For more information on how employers can verify the academic achievements of job applicants, read the article ‘The Basics of Education Verifications’ by Attorney Lester Rosen, founder and CEO of Employment Screening Resources (ESR) and author of ‘The Safe Hiring Manual,’ which is available at http://www.esrcheck.com/wordpress/2009/12/16/the-basics-of-education-verifications/.

For more information on pre-employment background checks as part of a Safe Hiring Program, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening firm accredited by the National Association of Professional Background Screeners (NAPBS®) – at http://www.esrcheck.com/ or call ESR at 415.898.0044.

Sources:
http://pressroom.yahoo.net/pr/ycorp/233946.aspx
http://pressroom.yahoo.net/pr/ycorp/233675.aspx
http://pressroom.yahoo.net/pr/ycorp/233689.aspx
http://pressroom.yahoo.net/pr/ycorp/221363.aspx
http://www.esrcheck.com/wordpress/2012/05/07/yahoo-ceo-education-record-mentioned-in-biography-contained-discrepancy-in-degree-awarded/
http://www.prnewswire.com/news-releases/third-point-llc-letter-to-yahoo-board-of-directors-regarding-discovery-of-discrepancies-in-educational-records-of-ceo-scott-thompson-and-director-patti-hart-150048865.html
http://www.prnewswire.com/news-releases/third-point-llc-letter-to-yahoo-board-of-directors-regarding-companys-inadequate-response-to-discovery-of-discrepancies-in-educational-records-of-ceo-scott-thompson-and-director-patti-hart-and-demanding-action-by-may-7th-150184055.html
http://www.adp.com/tools-and-resources/calculators-and-tools/~/media/PDF/ADP%202009%20Screening%20Index.ashx
http://www.shrm.org/Research/SurveyFindings/Articles/Pages/ConductingReferenceBackgroundChecks.aspx

About Employment Screening Resources (ESR):

About ESR News:

Employment Screening Expert Reviews EEOC Guidance for Criminal Background Checks

Tom Ahearn, ESR News Editor — Fri, 11 May 2012 20:45:15 +0000

Attorney Lester Rosen, founder and CEO of background check firm Employment Screening Resources (ESR), has submitted a letter of public comment to the U.S. Equal Employment Opportunity Commission (EEOC), the agency that enforces federal laws prohibiting employment discrimination, regarding the April 25, 2012 meeting where the EEOC voted 4-1 to approve updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964. The letter is available at: http://www.esrcheck.com/Les-Rosen-Public-Comment-on-EEOC-Criminal-Guidance.php.

In the letter, Rosen writes that as a founder and CEO of an accredited Consumer Reporting Agency, the chairperson of the committee that founded the National Association for Professional Background Screeners (NAPBS), and author of the first comprehensive book on background checks, ‘The Safe Hiring Manual,’ he believes he has a unique perspective on issues involved with criminal background checks. Rosen’s background before entering the screening industry also has given him a different perspective:

Before entering the background screening industry, I retired from a career as a criminal trial attorney. I spent nearly 20 years practicing criminal law, the majority of time as a defense lawyer, and approximately four years as a deputy District Attorney. For a number of years I was recognized by the State Bar of California as a certified specialist in criminal law. In my capacity as a defense attorney, I have represented a large number of people accused of criminal acts, ranging from misdemeanors such as driving under the influence and petty theft all the way to homicide, serious sexual assaults, child molestation and crimes of violence. My jury trials have also included complex federal drug cases, sex crimes, murder and death penalty cases and a wide variety of other cases associated with a criminal practice. I have had the opportunity to work with numerous offenders and their families very closely and often assisted offenders in gaining employment as part of an effort to present the best case at sentencing.

I fully embrace the EEOC objective of ensuring that ex-offenders are not the subject of unfair treatment. In my career, this is not an abstract concept but a goal that involves large numbers of people I have known and worked with personally and closely. America is a country of second chances, and if a person has committed a crime and done the time, he or she needs need a job in order to become a law abiding and a tax-paying citizen. As a society, we cannot afford to build more prisons then schools or hospitals. In fact, I have written a widely distributed article titled ‘Criminal Records and Getting Back into the Workforce: Six Critical Steps for Ex-offenders Trying to Get Back into the Workforce’ which is available at http://www.esrcheck.com/articles/Criminal-Records-and-Getting-Back-into-the-Workforce.php.

For those reasons, Rosen believes the recently updated EEOC Enforcement Guidance is “very troubling” and has, in his view, the unintended consequences of hurting ex-offenders and making it harder for millions for employers to provide jobs during this period of economic recovery. He offers reasons why the Commission should withdraw or modify the updated Enforcement Guidance.

The statistics cited in the EEOC Guidance to show the number of Americans involved in the criminal justice system are overstated and inflated. Rosen writes the difficulty with the figures cited by the EEOC showing a dramatic number of individuals in this country are the subject of the criminal justice system is that they include “probationers.” That means the statistics cited by the EEOC are seriously overstated and include practically all misdemeanor convictions.
The EEOC Guidance gives ex-offenders the status of a “protected group” similar to groups based on race, religion, or national origin. Rosen writes the EEOC Guidance “appears to have the impact of conferring upon ex-offenders the status of a protected group, similar to protections given on the basis of race, color, religion, sex or national origin” through Title VII of the Civil rights Act. With the very complex procedures outlined by the EEOC for consideration of criminal records, it can be argued that ex-offenders may even have more rights than groups protected by Title VII.
The recidivism studies cited in the EEOC Guidance are still in the early stage and should not be the basis of social policy. The EEOC cites studies that an ex-offender’s criminal past becomes irrelevant over time. However, Rosen writes that “the studies cited by the EEOC concerning recidivism, although useful and a good place to start, are in the very early stages of research and have not developed to the point where such studies can form the basis of a social policy” since “the science of judging rehabilitation over time is in its infancy.”
The new EEOC Guidance will create brand new industries of “professional litigants” and advisors on complex new rules. Another concern Rosen voices is that the sheer complexity of the new standards will create brand new industries of “professional litigants” consisting of ex-offenders assisted by plaintiffs lawyers who can simply apply to any possible employer just to try to set up a lawsuit and seek damages, as well as vast new opportunities for lawyers and other “experts” to advise employer’s on how to deal with this complex web of new rules.
The EEOC Guidance limiting criminal inquiries only to “relevant criminal matters” to a job is nearly impossible for employers to carry out. Another practical issue Rosen notes is “the near impossibility of an employment process that limits criminal inquires to relevant criminal matters as suggested by the EEOC.” While the EEOC suggested some “best practices” such as employers having a policy or limiting inquires or questions about past criminal acts that are relevant to the job in question, the Commission “has not provided any examples of how to carry that out.”
The EEOC Guidance of employers limiting inquiries can have the unintended consequence of working against ex-offenders trying to get jobs. Rosen writes that “there are a number of real world drawbacks with following the EEOC suggestion of only asking about relevant crimes” and that if employers attempt to limit their inquiries it could have “the unintended consequences in the real world of working against ex-offenders trying to get jobs” since “the applicant is being put into a position of having to make a very complicated legal and factual judgment of what is serious.”
The EEOC Guidance of limiting inquiries on criminal records means employers cannot make informed decisions if they do not view actual court case files. Rosen writes that it is important to understand that “there is no way for an employer to even make an informed judgment as to the nature and gravity of an offense unless the employer obtains some information from the actual court file.” The bottom line is that a court case must be reviewed first.

Rosen concludes by writing that the updated EEOC Guidance could have “unintended consequences.”

The U.S. Equal Employment Opportunity Commission (EEOC) Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 is available at http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm.

Attorney Lester Rosen’s letter of public comment to the Equal Employment Opportunity Commission (EEOC) regarding the April 25, 2012 meeting where the EEOC approved updated Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964 is available at: http://www.esrcheck.com/Les-Rosen-Public-Comment-on-EEOC-Criminal-Guidance.php.

About Employment Screening Resources (ESR):

About ESR News:

California Bill SB 1384 Would Authorize Consumers to Place Security Freezes on Consumer Reports

Tom Ahearn, ESR News Editor — Thu, 10 May 2012 17:12:46 +0000

While existing law allows California consumers to place security freezes on their credit files maintained by the three major credit reporting agencies Equifax, Experian, and TransUnion, new legislation – Senate Bill 1384 (SB 1384) ‘Consumer Reporting Agencies Act’ – would authorize consumers to place similar security freezes on certain other consumer reports containing private financial information. Introduced by State Senator Joe Simitian (D-Palo Alto), SB 1384 defines a “nationwide specialty consumer reporting agency” and “consumer file” for purposes of California law and authorizes consumers to place security freezes on consumer files compiled and maintained by nationwide specialty consumer reporting agencies. The full text of the bill is here: California SB 1384.

SB 1384 defines a “consumer credit reporting agency” as any person who “regularly engages in whole or in part in the business of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer credit reports to third parties.” Along with a consumer credit reporting agency, SB 1384 also defines “nationwide specialty consumer reporting agency” as a consumer reporting agency that compiles and maintains “consumer files” on a nationwide basis relating to the following:

Medical records or payments.
Residential or tenant history.
Check writing history.
Employment history.
Insurance claims.

If passed, SB 1384 would amend several sections of the Civil Code relating to consumer information privacy with, among other additions, the following:

Consumers may elect to place a “security freeze” on their consumer credit reports or consumer files by making a request in writing by mail to a consumer credit reporting agency or nationwide specialty consumer reporting agency. “Security freeze” means a notice placed in a consumer credit report or consumer file, at the request of the consumer, that prohibits the consumer credit reporting agency or nationwide specialty consumer reporting agency from releasing the consumer credit report or consumer file to a third party without the express authorization of the consumer.
A consumer credit reporting agency or nationwide specialty consumer reporting agency shall place a security freeze on a consumer credit report or consumer file no later than three business days after receiving a written request from the consumer.
The consumer credit reporting agency or nationwide specialty consumer reporting agency shall send a written confirmation of the security freeze to consumers within 10 business days and shall provide consumers with a unique personal identification number or password to be used by consumers when providing authorization for the release of their consumer credit report or consumer file information.
If consumers want to allow their credit reports or consumer files to be accessed while a freeze is in place, they can contact the consumer credit reporting agency or nationwide specialty consumer reporting agency and request that the freeze be temporarily lifted by providing proper identification or unique personal identification number or password provided by the consumer credit reporting agency or nationwide specialty consumer reporting agency.
A consumer credit reporting agency or nationwide specialty consumer reporting agency that receives a request from a consumer to temporarily lift a security freeze on a consumer credit report or consumer file, or to remove the security freeze entirely, must comply with the request no later than three business days after receiving the request.

In addition, SB 1384 would allow a third party who requests access to a consumer credit report or consumer file in connection with an application for credit or any other use to “treat the application as incomplete if a security freeze is in effect and the consumer does not allow his or her credit report or consumer file to be accessed for that specific party or period of time.”

By authorizing consumers to place a security freeze on “consumer files” compiled and maintained by “nationwide specialty consumer reporting agencies” relating to employment history, SB 1384 could potentially include background screening firms that maintain ongoing databases on the past employment history of job applicants. SB 1384 may also impact other firms that maintain “consumer files” as defined in the bill, such as tenant screening databases.

“The plain language of the bill does not appear to directly impact background screening firms that work directly with employers and only gather employment information on an applicant when a request for a background checks made,” according to background check expert Lester Rosen. “However, there can be an impact if a consumer freezes their past employment history file, which could potentially delay obtaining that information,” says Rosen, author of ‘The Safe Hiring Manual,’ a comprehensive guide to employment screening.

“The common denominator appears to be records that are related to an applicant’s financial condition,” adds Rosen, founder and CEO of San Francisco-area based background check firm Employment Screening Resources (ESR).

The full text of the Senate Bill 1384 (SB 1384) ‘Consumer Reporting Agencies Act’ is available at: http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_1351-1400/sb_1384_bill_20120224_introduced.pdf.

Sources:
http://www.senatorsimitian.com/entry/sb_1384_security_freeze_on_consumer_reports/
http://www.leginfo.ca.gov/pub/11-12/bill/sen/sb_1351-1400/sb_1384_bill_20120224_introduced.pdf

About Employment Screening Resources (ESR):

About ESR News:

News Reports about Bank Firing Employee for 40 Year Old Shoplifting Charge Do Not Tell Entire Story

Tom Ahearn, ESR News Editor — Wed, 09 May 2012 19:05:53 +0000

Recent news reports about how an employee of Wells Fargo in Milwaukee, Wisconsin was fired after a background check uncovered two 40-year-old shoplifting arrests from 1972 when she was 18 do not tell the entire story, according to one safe hiring expert, since there are two avenues that allow applicants and employees with minor offenses to work at banks. A Wells Fargo spokesman said the 58-year-old woman, who worked in customer service in the Home Mortgage department for five years and received numerous recognition awards, was terminated because Federal Deposit Insurance Corporation (FDIC) law prohibits the bank “from hiring or continuing the employment of any person who we know has a criminal record involving dishonesty or breach of trust.”

“The news reports have sensationalized this story about a woman who unfortunately lost her job at a bank because of a federal law while giving the false impression that there are no avenues for recourse by not mentioning the de minimis exclusion or the waiver process,” says Attorney and safe hiring expert Lester Rosen, the founder and CEO of background check firm Employment Screening Resources (ESR).

In a report from the Milwaukee Journal Sentinel, ‘Will your employer dig up your arrest 40 years ago?’, the woman admitted she stole clothing from a Milwaukee department store twice. She was fined $50 for the first incident and placed on one year of probation for the second, according to the report. When the woman first applied for the Wells Fargo job, she recalled being asked only if she had any felonies in her past. Her termination letter stated the background check results meant she was no longer eligible to work for Wells Fargo.

“Due to legal requirements and changes in the regulatory environment, Wells Fargo Home Mortgage has been performing a thorough background check on all mortgage team members that includes a fingerprint check with the Federal Bureau of Investigation since 2010 on new employees, and on existing employees since last year,” a Wells Fargo spokesman told the newspaper. “Because Wells Fargo is an insured depository institution, we are bound by federal law that generally prohibits us from hiring or continuing the employment of any person who we know has a criminal record involving dishonesty or breach of trust.”

According to the ‘FDIC STATEMENT OF POLICY FOR SECTION 19 OF THE FEDERAL DEPOSIT INSURANCE (FDI) ACT’:

Section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) prohibits, without the prior written consent of the Federal Deposit Insurance Corporation (FDIC), a person convicted of any criminal offense involving dishonesty or breach of trust or money laundering (covered offenses), or who has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense, from becoming or continuing as an institution-affiliated party, owning or controlling, directly or indirectly an insured depository institution (insured institution), or otherwise participating, directly or indirectly, in the conduct of the affairs of the insured institution. In addition, the law forbids an insured institution from permitting such a person to engage in any conduct or to continue any relationship prohibited by section 19. It imposes a ten-year ban against the FDIC’s consent for persons convicted of certain crimes enumerated in Title 18 of the United States Code, absent a motion by the FDIC and court approval.

According to Rosen, the author of ‘The Safe Hiring Manual,’ the first comprehensive guide to employment screening, under Section 19 d of the Federal Deposit Insurance (FDI) Act there is a de minimis exclusion and the ability to apply for a waiver. On the FDIC STATEMENT OF POLICY FOR SECTION 19 OF THE FDI ACT, the de mimimis exclusion is explained:

De minimis Offenses. Approval is automatically granted and an application will not be required where the covered offense is considered de minimis, because it meets all of the following criteria:

There is only one conviction or program entry of record for a covered offense;
The offense was punishable by imprisonment for a term of one year or less and/or a fine of $1,000 or less, and the individual did not serve time in jail;
The conviction or program was entered at least five years prior to the date an application would otherwise be required; and
The offense did not involve an insured depository institution or insured credit union.

A conviction or program entry of record based on the writing of a “bad” or insufficient funds check(s) shall be considered a de minimis offense under this provision even if it involved an insured depository institution or insured credit union if the following applies:

All other requirements of the de minimis offense provisions are met;
The aggregate total face value of the bad or insufficient funds check(s) cited in the conviction was $1000 or less; and
No insured depository institution or insured credit union was a payee on any of the bad or insufficient funds checks that were the basis of the conviction.

Any person who meets the foregoing criteria shall be covered by a fidelity bond to the same extent as others in similar positions, and shall disclose the presence of the conviction or program entry to all insured institutions in the affairs of which he or she intends to participate.

Rosen also notes that Section 19 d of the FDI Act also includes an opportunity to apply for a waiver:

SEC. 19. PENALTY FOR UNAUTHORIZED PARTICIPATION BY CONVICTED INDIVIDUAL.

(d) BANK HOLDING COMPANIES.–

(1) IN GENERAL.–Subsections (a) and (b) shall apply to any company (other than a foreign bank) that is a bank holding company and any organization organized and operated under section 25A of the Federal Reserve Act or operating under section 25 of the Federal Reserve Act, as if such bank holding company or organization were an insured depository institution, except that such subsections shall be applied for purposes of this subsection by substituting “Board of Governors of the Federal Reserve System” for “Corporation” each place that term appears in such subsections.

(2) AUTHORITY OF BOARD.–The Board of Governors of the Federal Reserve System may provide exemptions, by regulation or order, from the application of paragraph (1) if the exemption is consistent with the purposes of this subsection.

D. Adults and All Minors Convicted of Crimes

1. The Conviction of any adult or minor by a court of competent jurisdiction for any criminal offense involving dishonesty or breach of trust as defined in paragraph B above will require an application for consent prior to a bank’s employment of that person.

II. THE CORPORATION’S POLICY WITH RESPECT TO APPLICATIONS MADE UNDER SECTION 19

A. In considering any application made by an insured bank to employ a person who has been convicted of a criminal offense involving dishonesty or breach of trust, the factors to be considered will include but will not be limited to the following:

The specific nature of the offense involved and the circumstances surrounding it.
The evidence of rehabilitation of the person since the date of his conviction. (Parole, suspension of sentence, and reputation of the person since conviction will be given consideration. Participation by the person in programs on the national or state levels to hire and retrain the hardcore unemployed also will be given consideration.)
The age of the person at the time of his conviction.
The position to be held by the person in the bank.
The fidelity bond coverage applicable to the person.

As yet, there has been no indication that the woman who was fired from the bank or Wells Fargo have considered the de minimis exclusion or the ability to apply for a waiver under Section 19 d of the Federal Deposit Insurance (FDI) Act.

However, according to Rosen, the problem is that this is a complicated area of law and regulations, and emotion-based stories that leave false impressions do not help the general public understand these issues.

‘SEC. 19. PENALTY FOR UNAUTHORIZED PARTICIPATION BY CONVICTED INDIVIDUAL’ of the Federal Deposit Insurance Act is available at: http://www.fdic.gov/regulations/laws/rules/1000-2100.html#fdic1000sec19a.

The ‘FDIC STATEMENT OF POLICY FOR SECTION 19 OF THE FDI ACT’ is available at http://www.fdic.gov/regulations/laws/rules/5000-1300.html.

Sources:
http://www.jsonline.com/news/milwaukee/will-your-employer-dig-up-your-arrest-40-years-ago-0059578-150316185.html
http://www.fdic.gov/regulations/laws/rules/5000-1300.html
http://www.fdic.gov/regulations/laws/rules/1000-2100.html#fdic1000sec19a

About Employment Screening Resources (ESR):

About ESR News:

Background Screening Firm Criticized for Offshoring Jobs and Personal Data of Americans to Foreign Country

Tom Ahearn, ESR News Editor — Tue, 08 May 2012 15:47:04 +0000

A letter published on the Cleveland.com website criticizes a U.S.-based background screening firm for laying off local workers in the Ohio area in March of 2012 and “offshoring” both jobs and the personal data of American consumers collected for background checks outside of the country. The full text of the letter, written by Katharine Sarlog, a former employee of the company who was recently laid off, is available by clicking here: Katharine Sarlog letter.

In her letter, Sarlog begins by saying she is writing to express her “indignation” regarding the background screening company’s “decision to eliminate the majority of its work force in Ohio and send those positions to a thriving office in Mumbai, India, an office that currently employs 1,017 individuals.”

Sarlog continues: “On March 27, all employees received an e-mail directing them to a meeting at which we were informed that the majority of workers were receiving 60 days’ notice (myself being one of the casualties). A few new jobs are being added for which we can all compete in Darwinian fashion, but the processing jobs (which comprised a bulk of the employment) are gone.”

Sarlog goes on to say the fact that the background screening company “is growing and profiting by shipping jobs to Mumbai is reprehensible. And while the company may make the most profit from this decision, it is stripping away livelihoods with no thought to the ramifications to the country to which it claims citizenship.”

Sarlog emphasizes that her former employer, which she describes as one of the largest screening companies in the United States, “deals with confidential records containing Social Security numbers, birth dates, addresses, etc. that are now being processed by individuals in Mumbai. Most clients are probably unaware that these services are being done out of the country, and certainly most job applicants are unaware, although as an applicant desiring a job there is little option but to sign and allow a background check to be done.”

Sarlog concludes the letter by saying she harbors “no ill will toward Mumbai and those who are seeking to improve their standard of living, which is the only good that seems to have occurred” but that something should be done about the practice of offshoring. “Legislation needs to be passed to remove incentives for corporations to offshore and outsource jobs. More jobs need to be created here, not shifted elsewhere, for this country to thrive and allow its citizens to have hope for the future.”

As mentioned earlier in the ESR News blog ‘Larger Background Screening Companies Continue the Move to Offshore Processing of Background Check Reports,’ the Associated Press (AP) reported that another background check company, a Minneapolis, Minnesota-based Consumer Reporting Agency (CRA) that performs employment screening for businesses, will close two offices in South Dakota by the end of the year due to restructuring and move those jobs to new sites in Arizona, India, and the Philippines. The Associated Press story is available here: AP story.

However, along with the cheaper production and labor costs and increased profits for U.S. background screening companies that engage in offshoring, the practice potentially has negative side effects for both employers and consumers, according to a white paper released by Employment Screening Resources (ESR) titled ‘The Dangers of Offshoring Personally Identifiable Information (PII) Outside of United States’:

When a United States resident applies for a job, they are likely to undergo a pre-employment background check. A disclosure and consent form required by law is completed by the applicant where they provide among other things their name, date of birth, and Social Security number (“SSN”) — in other words, everything needed for identity theft. What job applicants do not know is that with some CRAs there is a substantial likelihood that their Personally Identifiable Information (“PII”) will end up outside the U.S. and its territories in a foreign call center or data processing location well beyond the protection of U.S. privacy laws through the process known as “offshoring” The practice of offshoring provides virtually no protection against identity theft.

It is not relevant where a firm’s servers are located. If an offshore worker is able to access PII, then the potential for Identity Theft exists. Nor is the formal legal relationship between the U.S. firm and the offshore worker relevant in the least. It does not matter if the offshore worker is an employee of the American firm, an employee of some legal subsidiary, an employee of a firm hired by the U.S. firm, or an independent contractor — once data goes offshore, U.S. legal protections vanish and there is strong historic evidence that there is a risk of identity theft.

The complimentary white paper ‘The Dangers of Offshoring Personally Identifiable Information (PII) Outside of United States’ available at http://www.ESRcheck.com/Download/ also details the following negative side effects of offshoring PII outside the country:

Once PII goes offshore, it is beyond the protections if U.S. privacy laws. An American who is the victim of identity theft as a result of offshoring cannot as a practical matter call foreign Police Departments and expect help.
Regardless of whether the information remains on the servers of the U.S. firm and is accessed abroad, or whether the foreign workers are technically on the payroll of the U.S. firm or a subsidiary, the problem is that a worker outside of the U.S. has access to PII.
Offshoring Information Technology (IT) jobs abroad can increase security risks. A survey of 350 IT Managers quoted in Security Management Magazine found that 69 percent of respondents said they thought outsourcing decreased network security while 61 percent said their company had experienced a data breach.
The American Transcription Association (ATA) is against the offshoring of transcription to workers outside of the United States because sending personal information outside of the country can lead to unsecured transfer of personal data and offshoring work also means U.S.-based transcriptionists are losing jobs.
Sensitive medical information can be compromised. For example, a California hospital outsourced its medical transcribing and the work ended up in Pakistan. A medical transcriber in Pakistan embroiled in a dispute with her employer about wages threatened to publish the medical records of thousands of Americans on the Internet. Needless to say, the hospital suffered a great deal of negative publicity and the confidentially of medical records for many Americans was endangered.
Generally, firms that offshore provide little or no disclosure to their clients or the client’s customers to avoid negative implications associated with the practice. California passed what appears to be the first law in the nation to address offshoring with Senate Bill 909 (SB 909), which took effect January 1, 2012. The California law does not prohibit or regulate offshoring, but amends the California Investigative Consumer Reporting Agencies Act (ICRA) that regulates background checks in California to require that background check firms doing business in the state disclose in their privacy policies whether a consumer’s PII will be sent outside the country. It also requires that employer place the privacy policy of their screening firm on the authorization and disclosure form needed for a background check and provides for damages if consumers are harmed by offshoring.

To alert employers and job seekers about the potential dangers caused by background check firms offshoring PII, a group of more than 170 like-minded Consumer Reporting Agencies formed the industry group ‘ConcernedCRAs’ that endorses and subscribes to a set of standards that opposes the processing of consumer reports outside of the United States. For more information, visit http://www.concernedcras.com/no_offshoring.htm.

As a member of ConcernedCRAs, Employment Screening Resources (ESR) does not offshore PII and all processing and preparation of background checks are performed exclusively in the United States, with the only exception being international verification using information outside the country. ESR was also the third background screening firm in the U.S. to become “Safe Harbor” Certified for data privacy protection.

For more information about the practice of offshoring, read ESR News blogs tagged ‘offshoring’ at http://www.esrcheck.com/wordpress/tag/offshoring/. For more information about Employment Screening Resources (ESR) – ‘The Background Check Authority’ and nationwide background screening company accredited by The National Association of Professional Background Screeners (NAPBS®) – visit http://www.esrcheck.com/ or call 415.898.0044.

Sources:
Katharine Sarlog letter.
http://www.cbsnews.com/8301-505245_162-57423199/mn-company-closing-2-offices-in-south-dakota/
http://www.esrcheck.com/wordpress/2012/05/02/larger-background-screening-companies-continue-the-move-to-offshore-processing-of-background-check-reports/
http://www.esrcheck.com/wordpress/2012/03/21/dangers-of-background-check-firms-offshoring-personal-data-of-americans-outside-of-us-revealed-in-whitepaper/
http://en.wikipedia.org/wiki/Personally_identifiable_information#Examples
http://www.leginfo.ca.gov/pub/09-10/bill/sen/sb_0901-0950/sb_909_bill_20100929_chaptered.pdf

About Employment Screening Resources (ESR):

About ESR News:

Yahoo CEO Education Record Mentioned in Biography Contained Discrepancy in Degree Awarded

Tom Ahearn, ESR News Editor — Mon, 07 May 2012 21:40:31 +0000

In a recent example of the need for businesses to conduct education verifications during background checks, the newly hired Chief Executive Officer of Yahoo!, Scott Thompson, was found to have discrepancies in his educational record after a letter from Third Point LLC, owners of close to 6 percent of Yahoo! shares, pointed out that while numerous biographies and securities filings claimed Thompson held a Bachelor’s degree in accounting and computer science, a “rudimentary Google search” revealed that his degree was in accounting only. The letter is available here: Third Point letter to Yahoo! (UPDATE: Yahoo! Board of Directors Forms Special Committee to Review CEO Academic Credentials).

The letter from Daniel S. Loeb, Chief Executive Officer of Third Point LLC, to the Yahoo! Board of Directors stated that:

While checking on Thompson’s academic credentials, the letter indicated that Third Point LLC also “discovered another apparent discrepancy regarding the academic background of Ms. Hart”:

The letter then referred to page 13 of the Yahoo! Code of Ethics that relates to Accurate Business Communications, Records and Contracts and sets forth a standard of conduct that “applies to all Yahoo! employees (including officers… and directors…),” which states:

“Disclosure in reports and documents filed with or submitted to the U.S. Securities and Exchange Commission and in other public communications made by Yahoo! must be full, fair, accurate, timely and understandable…. Make sure information we disclose about our company is clear, truthful and accurate.”

After Yahoo!, a multinational internet corporation headquartered in Sunnyvale, CA, issued an initial response saying that Thompson did not earn a degree in computer science and cited an “inadvertent error” for the inaccurate SEC filings and website biographies, Third Point LLC sent a follow up letter to the Yahoo! Board of Directors calling the response “inadequate” and demanding action on the matter by May 7. The follow up letter is available here: Third Point follow up letter.

Yahoo! revised the online biography of CEO Thompson but a cached version showing the former inaccuracy in academic credentials is available here: here. In addition, a 2009 radio interview has been unearthed where the Yahoo! CEO does not correct an interviewer who mentions that he has a computer science degree. The audio is available here.

Although it is not yet known if Thompson misrepresented his academic record on his job application to Yahoo!, resume’ inflation in the highly competitive job market during the recent economic downturn is not uncommon. A 2009 white paper from payroll and HR outsourcing firm ADP ‘Should Employers Consider Outsourcing Background Checks?’ found that 46 percent of employment, education, and/or reference checks turned up discrepancies. The white paper is available here.

However, a 2010 survey from the Society for Human Resource Management (SHRM) ‘Conducting Reference Background Checks’ revealed that while more than three out of four businesses polled – 76 percent – conducted general reference checks on all job candidates, less than half – 49 percent – always verified the degrees claimed by job applicants. The SHRM survey is available here.

For more information on how employers can verify the academic achievements of job applicants, read the article ‘The Basics of Education Verifications’ by Attorney Lester Rosen, founder and CEO of Employment Screening Resources (ESR) and author of ‘The Safe Hiring Manual,’ which is available at http://www.esrcheck.com/wordpress/2009/12/16/the-basics-of-education-verifications/.

Sources:
http://www.prnewswire.com/news-releases/third-point-llc-letter-to-yahoo-board-of-directors-regarding-discovery-of-discrepancies-in-educational-records-of-ceo-scott-thompson-and-director-patti-hart-150048865.html
http://www.prnewswire.com/news-releases/third-point-llc-letter-to-yahoo-board-of-directors-regarding-companys-inadequate-response-to-discovery-of-discrepancies-in-educational-records-of-ceo-scott-thompson-and-director-patti-hart-and-demanding-action-by-may-7th-150184055.html
http://allthingsd.com/20120503/yahoos-response-on-computer-science-resumegate-inadvertent-error/
http://cnnmoneytech.tumblr.com/post/22345279707/yahoo-updates-ceos-error-riddled-bio?iid=EL
http://allthingsd.com/20120503/in-2009-interview-yahoo-ceo-does-not-deny-he-has-a-cs-degree-and-calls-himself-an-engineer/
http://www.adp.com/tools-and-resources/calculators-and-tools/~/media/PDF/ADP%202009%20Screening%20Index.ashx
http://www.shrm.org/Research/SurveyFindings/Articles/Pages/ConductingReferenceBackgroundChecks.aspx

About Employment Screening Resources (ESR):

About ESR News: