Workplace Fraud Embezzlement Let the Party Begin!
The crisis - you've discovered workplace fraud, now what? For the small business owner, most first call their attorney, CPA, a trusted advisor or perhaps the police. The advice you get can vary. The action taken can over complicate matters, send professional fees into the stratosphere, void an otherwise successful criminal prosecution or impede civil recovery. Lets examine some of the parties who may be involved.
You may need one, but not all are created equal. They have different specialties, and may recommend a course of action which prevents an optimum outcome. Results may include: the fraudster fails to cooperate, retains an attorney of their own, destroys evidence, hides assets, skips town or files a frivolous civil lawsuit against you. Depending on the complexity of your loss, you may have two or more attorneys involved.
Generally good to deal with, but they can fairly or unfairly become a pariah. Anger may set in as your long-time CPA failed to detect the fraud in your annual review (Hint: CPAs typically dont look for fraud). Your CPA may refer you to a forensic accountant, a great resource. Enter another party into the mix.
Law Enforcement & Prosecuting Attorneys
Law enforcement officers do a fine job, but their resources are limited and zeal for your case can be a fantasy. Justice can move slowly. Assume you choose to confront an employee who committed embezzlement and the employee agrees to repay the money. Surprise, the employee reneges on the agreement. Another surprise, the local district attorney may refuse to prosecute your case because of a perceived civil arrangement.
Like attorneys, they have differing skills. They can greatly aid in a criminal prosecution, civil recovery efforts, work with law enforcement, your attorney, and be a total game changer or not. A private investigative agency may over-promise, not produce, and all the while the meter is running.
Thankfully you have crime insurance in your business policy not so fast. Like any other claim, it needs to be examined. The insurance carrier will likely first require a forensic audit. Your time and total cooperation is required. If you previously elected not to involve law enforcement, most claims will be denied or delayed until you do so. In fact, a microscopic failure of the policy-holder may negate your claim. Also, crime insurance policies typically only cover a small portion of your total loss.
Lets say youre a seasoned business owner and youve seen this movie before. You want to avoid any outsiders, so you handle the incident internally. The results can range from relative success to total catastrophe. Many migraines are rooted in an employer mishandling an embezzlement case.
Consider engaging a Certified Fraud Examiner (CFE) early in the process. CFEs are trained in the review of financial transactions, investigations, law, criminology, and can eliminate the need for certain parties and work with those who are necessary. Some CFEs are skilled in interviewing and interrogations and are licensed private investigators. Unlike most forensic accountants they can confront the employee suspected of embezzlement. This can reduce your overall costs, provide efficiencies and help you get back to normal quicker.
Workplace fraud and dealing with the aftermath is ugly and painful. Consistent reports indicate 5% of annual gross revenues are lost due to occupational fraud, with the average incident at $145,000. Having a CFE nearby is crucial. A real out of the box thought have a CFE conduct a Fraud Risk Assessment. Then, perhaps you can avoid the party altogether?
About the Author - Zane Kinney has spent his entire adult life in the protection field. His background exceeds 25 years in Law Enforcement, Loss Prevention, Corporate Investigations, Physical Security, Private Investigations & Forensics. He is a Certified Fraud Examiner (CFE), Licensed Private Investigator in the State of Georgia, and the Principle Consultant for Astinel Security & Forensics. Zane sits on the board of the Atlanta Chapter of Certified Fraud Examiners and frequently speaks on Fraud Prevention in the Workplace.
Testimonial - Zane and I had the responsibility of representing an office condo association that suffered a theft of nearly $80,000 at the hands of the associations treasurer. Zane was instrumental in formulating our plan of action. He also forensically calculated the associations losses through numerous bank accounts and hundreds of transactions (many of which were fraudulent), including applicable lost interest on the misappropriated funds. Zane was able to successfully confront the treasurer, have him resign his position and sign a confession. Im happy to report that all of the associations money was successfully recovered outside of court inclusive of interest, Zanes costs (which were incredibly reasonable), and attorneys fees. I fully recommend Zane Kinney and Astinel Security & Forensics.
Alex Kaufman, ESQ
Kaufman, Miller & Forman, P.C.