THE RESEARCH DATA WERE COLLECTED FROM NINE BRANCH STORES OF ONE OF AMERICA'S LARGEST RETAIL ORGANIZATIONS DURING THE SPRING, SUMMER, AND FALL OF 1974. THE POPULATION FOR STUDY WAS 6,750 EMPLOYEES (OF WHICH 40 PERCENT WERE MALES AND 60 PERCENT WERE FEMALES). MOST OF THE EMPLOYEES WERE AGE 29-34 (21 PERCENT) OR OVER 46 (21 PERCENT). THE STUDY INVOLVED ALL 'DISHONEST EMPLOYEES' WHO WERE INVOLVED IN THEFT OF CASH OR MERCHANDISE OR MISUSE OF ORGANIZATIONAL EQUIPMENT. THE PRIMARY DATA SOURCE WAS AN EXAMINATION OF RECORDS OF KNOWN THEFT BY EMPLOYEES OVER A PERIOD OF 7 YEARS (1967-1973). RECORDS IN THE PERSONNEL DIVISION WERE ALSO EXAMINED IN ORDER TO OBTAIN INFORMATION ON 'LENGTH OF EMPLOYMENT,' WHICH WAS LACKING FROM THE SECURITY FILES OF SOME 'DISHONEST EMPLOYEES.' DATA FROM DOCUMENTS AND RECORDS WERE SUPPLEMENTED BY EXTENSIVE INTERVIEWS WITH KEY PERSONNEL IN THE ORGANIZATION. VARIABLES INCLUDED IN THE STUDY WERE INTERNAL THEFT, DEMOGRAPHIC FACTORS, ORGANIZATIONAL POSITION OF EMPLOYEE THIEVES, AND CAREER PATTERNS OF THESE THIEVES. THE STUDY CONCLUDES THAT THE EXTENT OF INTERNAL THEFT IS A RESPONSE TO THE INTERACTION BETWEEN EMPLOYEE LOYALTY AND ORGANIZATIONAL CONTROL. ALSO, THE NATURE OF THE THEFT IS CONTINGENT UPON THE OPPORTUNITY WHICH EMPLOYEES HAVE TO ENGAGE IN THEFT. THE USE OF AN INTERNAL SECURITY SYSTEM TO DISCOURAGE DISHONESTY BY MONITORING THE BEHAVIOR OF EMPLOYEES IS ONLY A PARTIAL SOLUTION. A PREVENTIVE STRATEGY SHOULD ATTEMPT TO CREATE A WORK ENVIRONMENT WHICH REINFORCES LAWFUL BEHAVIOR AND REMOVES REWARDS FOR UNLAWFUL BEHAVIOR. DATA SUGGEST THAT THEFT BECOMES HIGHLY PROBABLE WHEN AN INDIVIDUAL IS HIRED UNDER CONDITIONS OF INITIAL FINANCIAL DIFFICULTY. ALSO, THE YOUNGER THE EMPLOYEE, AND THE SHORTER THE TIME OF EMPLOYMENT, THE MORE LIKELY THAT THE EMPLOYEE WILL COMMIT THEFT. PREVENTIVE MANAGEMENT IS ADVOCATED RATHER THAN CORRECTIVE MEASURES. STATISTICAL TABLES ARE INCLUDED IN THE TEXT. AN APPENDIX INCLUDES SAMPLE FORMS, TABLES OF DEMOGRAPHIC FACTORS, AND ABOUT 35 REFERENCES. (MFE)