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Bribery and corruption: Difficult frauds to find

Tracy L. Coenen

Tracy L. Coenen

When fraud happens within an organization’s accounting system, there is often a paper trail left behind. It’s unavoidable, as there is a record of something related to the fraud, whether it is a legitimate invoice that was later adjusted, an account balance that was changed, or a fake employee who was added to the payroll system.

Frauds involving bribery and corruption are different. They happen almost completely outside the accounting system, so they often don’t leave a paper trail. Management instead must rely on tips or other vague clues to the existence of such a fraud scheme.

Bribery and corruption typically arise out of relationships between people, so in order to detect them, management must often be aware of the personal relationships between employees and outside parties. That is clearly a difficult task, and often nearly impossible.

Bribery and Corruption Schemes

The most common types of bribery and corruption schemes involve kickbacks or other inducements to do business. The schemes aren’t limited to governmental entities, although those are the ones that consumers hear the most about. Bribery and corruption is at least as common in the private sector, and possibly occurs even more frequently than it does in the public sector.

Bribery schemes involve the giving of value in order to secure a contract or project. A kickback occurs when the cost of an item or service is secretly inflated, and some of the extra proceeds are given to a person involved in inflating the cost or covering up the scheme. Extortion occurs after the fact, with payment being demanded after work is done or a contract secured, in order to maintain a business relationship or conceal something about the relationship. Other fraud schemes can include inappropriate related-party transactions, undisclosed conflicts of interest, and bid rigging.

There are many types of off-books arrangements that could fall under the heading of bribery and corruption. Because they are often concealed so well, it’s impossible to accurately estimate how often these frauds are occurring or how much they are costing companies and consumers.

One study estimates that the typical bribery or corruption scheme costs a company $375,000. That may sound high, but it is certainly plausible given the size of contracts in industries that are prone these types of schemes.

Bribes don’t typically involve the issuance of a receipt. Whatever happens between parties is generally not written on a piece of paper, and many times cash is exchanged to prevent creating a paper trail. Sometimes criminals are kind enough to write contracts between themselves, but those looking for bribery and corruption can’t count on this bit of carelessness to uncover the schemes.

Finding the Fraud

Now that we’ve established that bribery and corruption schemes are extremely difficult to find, what can companies do to increase their chances of finding them? The key to finding corruption schemes is monitoring relationships and looking for other clues.

The most effective way to do this is to have a mechanism in place for reporting suspicions of fraud. Anonymous fraud hotlines are very effective in this regard. Employees are excellent watchdogs, and companies should take advantage of their willingness to help ferret out fraud by giving them a way to report their suspicions.

Hotlines should not be restricted to only employees. Customers and vendors should also be made aware that the company has a hotline and that they are encouraged to report anything suspicious. An employee with an “unusual” relationship with a vendor might not be discovered internally, but it’s possible that someone at the vendor’s location would be willing to report their suspicions if given a way to do so.

In addition to hotlines, companies are advised to rotate duties and account management between employees. By rotating responsibilities, employees will have a decreased chance of developing a close relationship with a supplier or customer who might suggest a fraud scheme.

Generally, management should be on the lookout for small clues that might point to a problem. Even though an off-books fraud is difficult to detect, often there may be other signs that indicate an issue. Maybe an employee is uncharacteristically agitated or has started working unusual hours. Possibly the cost of certain raw materials has fluctuated when otherwise the cost was very stable.

Although bribery and corruption happens outside the books and records of a company, there can still be side effects within the company that might offer a hint about inappropriate activity.

2 comments

  1. No honor Dallet:
    You cheated me, then you and your court reporter told multiple lies to cover it up. You both are an embarrassment. Then you have the nerve to state:
    “Our courts and our election system need to be held to the highest standard of independence,” said Judge Dallet. “We need a strong recusal rule, and we need judges who will ensure that bias is removed from the courtroom. It’s time for the era of special interest influence to end.”
    In order to try and hold, “Our courts to that highest standard”, and, “It’s time for the era of special interest influence”, that being: the Attorney General. The respondents Lawyer, the Attorney General, a not-see judge against, VS: a brain damaged complainant, his solid discrimination / abuse / fraud case, and his eighty-three year old Mother, there to read for him. It is now clear why you removed my Mother.
    After being in your court room, and watching you remove my 83 year old Mother, for no other reason than to be a bully to her and confuse me, then prove to me that you have zero respect for the many discriminatory challenges he disabled face evert day. Despite your personal beliefs, they do have rights. It is not an accommodation to provide more discrimination in the circuit court. It should be a place where equal justice exists for all. Not just those who put checks in your pocket.
    I feel it is my duty as a citizen to do everything that the law allows, so as to ensure you never get a chances to use a government position to bully anyone; especially those who historically have had difficulties getting any access to the court system.
    The U.S. Constitution guarantees me due process and fair trial.
    You used your position to nullify these rights.
    Now I must use the Truth to nullify your opportunities to cheat anybody else.
    I WILL NEVER BREAK ANY LAW IN DOING SO.
    You collected a check for cheated an almost blind, severely brain / cognitively damaged man.
    My civic duty is to make sure that you never defraud anyone else ever, ever again. The respondent in my case was an animal abuser who has state goons in her pocket to cover up her crimes. As she cheated me out of an educational opportunity, I also had to watch her bully, cheat, ignore, ridicule and isolate and defraud a profoundly deaf nineteen year olds woman. I assure that I have witnessed my share of despicable behavior in my life; I never had to witness a defenseless woman get her soul raped. Then watch as corrupt bribe searching scum turned their back so they could claim their state obligation to party with the NOT-SEES.
    I will make every one in the state aware of your boorish, childish, and petulant behavior, that you unashamedly displayed in the courtroom on November 21, 2016.
    I suggest you withdraw from the race. If it is a worthy challenge you seek, allow me to recommend that you apply for an opening at the local bowling alley, cleaning toilets, third shift. This opportunity seems much more in alignment with your temperament and capabilities.
    I would be willing to judge as reference for you in this most appropriate challenge befitting a person such as yourself and your obvious people skills.
    Copies of this letter will be going to Detective Larette, Justice Gableman, Attorney Burns, The Madison Times, The Milwaukee Journal

  2. WAS IN HER COURTROOM.
    HERE IS HER STANCE:
    If you have MONEY, she will dive – nose first, into your BACK pocket.

    Her courtroom has the efficiency and the efficacy of a1932 Stalinist show trial

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