Having the right experts in place can minimize damage

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By Paul Rodrigues
Director at The BERO Group

A client confides in you that a trusted employee is suspected of stealing and asks what should be done. Should the employee be fired or should law enforcement be called? Should the client’s banker and insurance agent be called?

The answer to all these questions is “yes” — but not yet. Because fraud is a highly emotional crime, the natural response is to confront the suspect, fire him or her, or call on law enforcement to start an investigation.

As well-intentioned as these responses may be, acting on impulse is rarely the best way to proceed. Terminating the suspect or contacting law enforcement too quickly could significantly impair the ability to build a case or identify the true nature and extent of the fraudulent activity.

For example, a terminated employee may rightly decline to assist in the investigation or otherwise invoke constitutional protections when law enforcement arrives. Accordingly, the urge to fire the suspect should be resisted and your concerns should be kept hidden from everyone within the organization.

Once fraudulent activity is suspected, the first course of action should be to contact a Certified Fraud Examiner who has expertise in investigating and litigating white-collar criminal matters. Responding to the specific allegations, an experienced examiner can work with counsel to develop the facts of the case and write a detailed report suitable for legal action and insurance recovery.

In fact, examiners are extraordinarily equipped to investigate fraud allegations and potentially obtain a confession from a suspect. Certified Fraud Examiners are trained to properly collect and secure evidence, document means and motive, identify conspirators and relate facts to the specific burden of proof to be met. Examiners are also skilled in analyzing the financial controls of an organization and are able to recommend specific anti-fraud controls to limit future losses.

Once a legal strategy has been established and the need for any additional work identified, the next call should be to the client’s insurance carrier. Failing to notify an insurance carrier in a timely manner or understand the nuances of policy provisions could significantly impair your client’s ability to recover damages and limit his or her ability to pursue civil remedies. Discuss the nature and extent of policy coverage, particularly as it relates to loss limitations, and whether the policy extends to fraud events occurring prior to the year in which the fraud was discovered.

Once the client’s insurance carrier has been contacted, the client’s bank should be notified of the suspected fraud. Failing to promptly notify the bank of suspect transactions could limit your client’s ability both to recover lost money and to hedge against future losses.

What’s more, failing to taking a hard stand against fraud merely invites more fraud. Failing to prosecute or not attempting to prosecute may prevent you from collecting insurance proceeds.

For these reasons, it’s essential to get in touch with law-enforcement officials, but this should be done only at the appropriate time.

Paul Rodrigues is a director at The BERO Group. He serves as an expert witness for forensic accounting, fraud and financial damage matters. Rodrigues can be contacted at [email protected].