When the Authorities Just Aren’t Interested

Sometimes stopping the fraud and terminating the employee are all you can do.  What do you do when the authorities are not interested in criminally prosecuting your internal fraud?

One of the easiest fraud cases I ever worked was also one of the most frustrating.  My team and I did good solid work and had iron-clad evidence, but we couldn’t convince the local authorities to do anything with the information. Unfortunately, it was one of those scenarios where the executives really wanted to prosecute and make a clear example of the situation.

As the chief audit executive, I reported to the general counsel for my organization.  It was a great arrangement in my opinion, and I enjoyed working for him.  We were a large international organization with operations in a lot of developing nations. Unfortunately, that also meant there was a lot of fraud.  My team was routinely involved in fraud investigations, often on multiple continents simultaneously.  But this fraud—this fraud was close to home.  Literally in the office next door.  The general counsel’s paralegal had been committing expense reimbursement fraud for 2 years, and the general counsel took it personally.  Wouldn’t you?

A very perceptive accounts payable clerk noticed some issues with the paralegal’s expenses and informed us of the inconsistencies. A little research, some data analytics, and very quickly we found tens of thousands of dollars in purchase card (pcard) and expense reimbursement fraud.  She had two major schemes.  First, she paid for things with her pcard and then listed them for cash reimbursement on her personal expenses.  She always had a receipt!  The opportunity had presented itself to her when she realized the general counsel did not closely review her expenses.  Second, she charged a considerable amount of personal items to her company pcard. I won’t get into details, but I do believe she had everything ever made by Victoria’s Secret.

Understandably, the general counsel felt a lot of things – angry, frustrated, betrayed, and a little foolish for trusting her and not reviewing her expenses in detail.  As a result, he wanted her charged criminally.  She was not getting special treatment—our normal process was to prosecute for internal fraud.  However, while there was approximately $30,000 in fraud, the local authorities were not interested in prosecuting.  Why?  Like most things in life, it was mostly about timing.  At that particular moment in time, the local authorities had bigger cases they were concerned with and did not believe they could spare the resources to deal with our fraudster.

The final outcomes of even successfully executed investigations can be very frustrating and less than satisfactory. So how can this be prevented?  Well it is always a potential problem, but if you do the following you are less likely to run into this issue.

  • Make sure your case is ready to hand over to the authorities, including ensuring that you have solid evidence that was properly handled. Use experts. Bring in external assistance if you do not have fraud investigation and examination experts in-house.
  • If the authorities feel they are too busy, remember you have time. Understand what the statute of limitations is for the crime. Ask the authorities if it would be acceptable to check in periodically to see if their schedules allow your case to be addressed at that time.
  • You can initiate a civil suit to recover losses.

Remember: Catching the fraudster and ending the fraud is a deterrent to other fraudsters, so do not allow yourself to get too frustrated. Stop fraud and carry on!

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