Not long after one of my supply chain fraud presentations I was informed that one of the attendees had gone back to her employer and reported “I think I (now) smell a rat”. The company owner was not able to schedule to attend my seminar so he sent someone in his place, and was quite thankful he did.
(Fortunately it was not the fraudster who the company owner sent to my seminar!)
Indeed a trusted employee had been perpetrating fraud for quite some time and to the tune of somewhere between $60,000 and $250,000. The company owner was quite upset that this employee, who had always been treated very well, had stolen through good times and bad. I told the company owner that fraudsters are rarely concerned about their employer’s fortunes because they are more concerned about their own, even if their frauds affect their co-workers and friends.
If the amount of loss seems a little vague it’s because the company owner made a critical mistake: he investigated the fraudulent activities himself and in doing so exposed the investigation to the fraudster. By performing this investigation himself he scuttled the ability to have caught the fraudster “in the act”, involve law enforcement, prosecute the fraudster criminally or civilly, truly understand how the fraud was perpetrated and the depth & breadth of the fraud itself.
Fraud investigations are not “do-it-yourself” projects to be undertaken by those without experience. I was quite surprised at the simplistic mistakes the company owner made which seemed to defy logic and common sense. These mistakes resulted in the fraudster being blatantly tipped-off that the company was on to him. So what did the fraudster immediately do? He stopped his activities and began to cover his tracks faster than the company owner could investigate. Thus we will never know the true amount of the fraud loss. Further I question whether the fraudster’s methodology was completely understood so that corrective measures could be implemented.
By tainting the investigation the company owner allowed a fraudster to walk away with no punishment. The fraudster was either fired or simply resigned, I cannot recall which. This fraudster is likely to just get a job at another company and perpetrate fraud again. The fraudster will certainly make up a reason for leaving his last company. And what of the reference check? The prior employer can make no mention of any suspected fraudulent activity as it was never properly investigated or proven.
(Laws may further restrict what an employer can and can’t say about an employee, current or previous. But one point is that by not investigating properly and pressing charges no public record of this employee’s misdeeds will ever be recorded. Granted no company wants it made public that they were the victim of fraud; however as word spreads that a company is a victim of fraud isn’t it better publicity to make it known that the fraudster is being prosecuted? Doesn’t this send a better message to employees, suppliers, and customers that fraud will not be tolerated? This is an unfortunate “passing of the buck” that allows fraudsters to move from one company to the next, perpetrating their frauds over again.)
Even on fictional police television shows the need for proper investigative techniques is written into the scripts. Evidence must be secured and analyzed. Leads must be followed-up. Analysis may lead to several different directions where reasoning and investigative techniques will be relied upon to eliminate unlikely roads. Sometimes suspects are allowed to continue their illegal activities to make it easier to trap them and catch them in the act.
You don’t want your accountant performing dental work on you, nor would you (typically) want an attorney fixing a problem on your vehicle. Always ensure you allow those best skilled, experienced, and credentialed to perform the tasks that they are qualified to do. And this includes your fraud investigations.