5 min read

Does Your New Employee Have A Shady Past?

Online service Rapsheets takes some of the pain out of background checks.
Hiring managers, recruiters, landlords, property managers, and even nosy neighbors can now go online for criminal background checks. A Web site called is expanding its subscription service to allow access to occasional, nonbusiness users, making information available to anyone who wants the dirt on someone else--as long as they promise they're using it legally.

The service is available to anyone. Those using it for a business purpose, such as tenant or employee screening, are required by the Fair Credit Reporting Act to get that person's consent. But the act doesn't apply to individuals, so anyone with a valid credit card can use the service.

Subscribers pay $15 a month and get individual searches at a discount price of $3 per record; casual users pay $5.95 per search. However, the low fee can be deceptive: If the person being checked has an alias, different married name, or varied name spellings, each search on each name results in a separate charge.

Rapsheets has access to about four dozen databases, covering part or all of 31 states, and each database requires a separate search. For example, the only search available in California is for Los Angeles: The state doesn't have a statewide repository of court records. The service may never be available on a nationwide basis because some states, such as Louisiana, Massachusetts, and Pennsylvania, prohibit dissemination of court records to the general public.

The company receives regular updates of court records on CDs and a variety of computer tape formats and transfers that data into a SQL database. "We can convert from any source." says Peter Schutt, president of Rapsheets, who says he has six IT staffers maintaining the system.

Background Checks

Security experts say businesses can reduce losses due to fraud by running background checks on potential employees.

  • Companies that ran background checks report losses on average of $90,000 because of fraud, while those that didn't run checks suffer losses on average of $130,000

  • Around 5% of job applicants had a criminal record in the last seven years, and nearly a quarter misrepresented their education or work backgrounds on resumés.

  • The most effective ways to prevent fraud include strong internal controls, detailed background checks on new employees, and regular fraud audits.

  • Data: Association of Certified Fraud Examiners and Avert

    Rapsheet is a division of the Daily News Publishing Co. in Memphis, which publishes a newspaper that tracks real-estate transfers and a variety of other business and civil transactions, including court records.

    "Since we were capturing the information on computer anyway, we decided to put it on a Web site and charge a small monthly fee to do research," Schutt says.

    Most Rapsheets customers are property-management companies, investigators, and third-party screening businesses. One customer, which Schutt declines to identify but describes as a regional fast-food chain based in Memphis, ran a check on 1,000 employees--500 from its lowest-performing outlets and 500 from the most profitable restaurants.

    Among the weakest stores, 30% of all employees had criminal records. But at the top-performing outlets, only about 5% had criminal records. As a result, the chain now plans to screen all future employees, Schutt says.

    That may explain why background checks are growing in importance, says retired police officer Jim Horton, who makes his living running investigations for the company he bought two years ago, the Delphic Group in Denver.

    Horton's main line of work is employment background screening for property-management and hiring companies; the subjects range from high-tech workers to the groundskeeper at an apartment complex. Each job calls for searching different types of records. Sometimes it's merely a credit check, but Horton says most companies want him to dig deeper into the backgrounds of job candidates because of liability issues.

    One apartment complex in Horton's area faced legal problems after a maintenance worker assaulted several women, he says. The worker had a complete set of keys and knew the comings and goings of residents in the complex. A thorough background check would have revealed that he was a convicted sex offender, Horton says.

    Many companies don't want to devote the time and expense required for conventional background screening, so going online offers an inexpensive, if incomplete, option. "The dollar speaks with the loudest voice," Horton says. "Most companies close their eyes and hope to hell it will run smooth. That's a big risk nowadays."

    Searching criminal records to screen job applicants may not eliminate the source of the greatest financial losses, experts say. The typical occupational fraud perpetrator is a first-time offender--only 7% were known to have prior convictions, according to a study released in April by the Association of Certified Fraud Examiners.

    The report concludes that U.S. companies lose more than $600 billion annually to fraud. Men commit nearly 75% of the offenses; the profile of the typical perpetrator is a college-educated white male, the report says. Retailers report an aggregate loss of $14 billion a year from employee theft.

    Online background checks are useful, but they'll never take the place of an in-depth search, Horton says. "There's nothing better than a beat-the-bushes background check where you talk with people and find out what kind of person you're dealing with and how he treats people."