Following what it says was a surge in misuse, Hy-Vee has shut down its employee discount program so it can be retooled.

The move comes after the West Des Moines-based supermarket chain's executive vice president, Georgia Van Gundy, told employees in a video late last week that the company was making "necessary changes" to the discount program after uncovering increased "fraud and abuse" by employees.

In the video, a partial copy of which was posted on a Reddit channel dedicated to Hy-Vee, Van Gundy said the program launched in 2019 was intended to provide discounted purchases to employees and one other member of their immediate household. The discounts ranged from 10%-40%, according to a Hy-Vee Facebook page.

"Unfortunately, as we've been monitoring the transactions, because we do monitor them closely, and based on feedback from our employees, we've noticed some very concerning transactions," Van Gundy said.

Recently, she said, one employee's Fuel Saver account was used in five states in one hour. Another employee made discount purchases that exceeded their paycheck, "and we're fairly certain that employee is reselling the merchandise at a profit for themselves."

In addition, she said, some individual employees' discounts were being shared among several households in different states. Hy-Vee employs more than 93,000 people, according to its website.

"Actions like this are just unacceptable," she said, indicating the employees involved could face discipline.

Hy-Vee hopes to restart program this summer, video says

Van Gundy said Hy-Vee was "stopping the employee discount program" Monday.

"Our executive team will be evaluating the program's structure over the coming months and hope to announce a new program this summer," she said in the video.

However, a company spokesperson, Nola Aigner Davis, contended Monday the discount is not being eliminated and "a new solution" will be "in place soon." She did not provide details.

Van Gundy spoke on the video of imposing necessary "checks and balances."

A link to a page on the Hy-Vee website describing the program was inoperative Monday.

Employee discounts are a widely offered benefit but can be a target for abuse.

In one recent case, a salesperson for a Stellantis (formerly Chrysler Corp.) dealership in suburban Detroit ― who led the company in car sales using employee discounts ― was charged with wire fraud in connection with allegedly trafficking illegally in the employee purchase control numbers used to identify those who are eligible for the markdowns.

Federal prosecutors said the salesperson had defrauded the company of about $8.7 million over several years.

Hy-Vee employee discount changes follow layoffs, new CEO announcements

The reworking of the employee discount program is the latest corporate change in a tumultuous period for Hy-Vee.

Last year, as Hy-Vee laid off more than 400 employees in marketing, communications and technology, CEO Randy Edeker said in a leaked internal video that the company's front office "does nothing."

He bemoaned that some of those whose jobs were being eliminated had declined reassignment to store positions, saying "some people just simply see it being beneath them to work at the retail stores. I think it's crazy, and I think that it's offensive."

The company in July announced Edeker was stepping down as CEO, while remaining board chair, and announced Aaron Wiese, then a vice chairman, would succeed him.

Less than a month later, Jeremy Gosch, the company’s then-co-chief operating officer and chief marketing officer, was named co-CEO.

The company said at the time that the announcements had been separated to give Wiese and Gosch "their own moment of recognition." But in December, it announced Gosch would be the sole CEO, while Wiese was named one of two company presidents under him.

Hy-Vee also is in the midst of an expansion into eastern markets, planning two stores in the Nashville, Tennessee, metro area, one in Knoxville, Tennessee, and one in Memphis.

In addition, Hy-Vee plans a distribution center in Nashville and stores in Huntsville, Alabama; Louisville, Kentucky; and Indianapolis.

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Philip Joens covers retail, real estate and RAGBRAI for the Des Moines Register. He can be reached at 515-284-8184, pjoens@registermedia.com or on Twitter @Philip_Joens.

This article originally appeared on Des Moines Register: Hy-Vee employee discounts to be revamped amid reports of fraud, abuse