Sutton Hague Law Corporation’s April Webinar provided employers with practical insight and guidance from guest speakers Fausto Hinojosa and Rocky Pipkin.  Mr. Hinojosa is the managing partner at Price Paige and Company and has been a certified public accountant for approximately 24 years in addition to being a certified fraud examiner.  Mr. Pipkin is the CEO of Pipkin Detective Agency and a licensed private investigator with approximately 28 years of experience in the field.

Insights of the Experts

Employee fraud and theft is not something to be taken lightly. By underestimating the creativity and wit necessary to perpetrate some of these frauds, employers make themselves vulnerable. Here’s just a snapshot of what types of fraud are out there:
– Credit card fraud: A superintendent at a Christian school was embezzling funds for several years by listing his personal expenses along with business expenses for reimbursement from the school’s funds. As a result, he was reimbursed from school funds for personal expenses including remodeling his home.
– Theft of personal property: An employee at a car dealership was stealing money and other items out of customers’ cars when they were brought in for repairs. The employee was caught through a sting operation where cameras were wired into the car to film the employee stealing cash that was left out for him as bait.
– Embezzlement: The employee most likely to embezzle or steal is the one that the employer trusts the most and therefore gives the most responsibility.

The Fraud Triangle

3 things that are present when fraud is committed: 1) opportunity; 2) outside pressure on the employee; and 3) rationalization to commit fraud.

– Most preventative measures are intended to reduce the opportunity to commit fraud.
– Employers are limited in how much they can prevent outside pressures or rationalization.

Red Flags for the Employer

Employers should know certain “red flags” and be aware of their presence in the workplace. Some key red flags are:

– Addictions such as gambling or drugs might lead to fraud of theft.
– Employees living beyond their means.
– Employees being over controlling of their personal workspace which might be the result of attempting to conceal evidence of fraud or theft.
– Disorganized financial records might be a sign of intentional confusion intended to conceal fraud or theft.

Prevention Tips

Prevention measures taken by the employer before any fraud or theft is suspected can save the employer time and money in the end. Taking some of these steps can reduce costs if and when an investigation is necessary.

– Train employees about fraud and theft. Employees will be the employer’s best eyes and ears in the day-to-day operations of a business.
– Inform employees how fraud and theft hurts the business and, as a result, their paychecks.
– Develop a system for employees to anonymously report suspected theft or fraud.
– Cross-check business checking accounts with actual expenses to ensure that there are no fraudulent expenditures.
– Surprise targeted auditing.
– Use data analytics to cross-check employees with vendors.
– Job rotation to ensure that it is not just one employee in control of all financials.
– Background checks of employees.
– Make it clear through employee handbooks and company policies that employees have no right of privacy in their personal work areas, work computers, emails, etc.

Investigation

Investigations can be costly and burdensome on an employer and so it is better avoided through preventative measures whenever possible. However, if an investigation is necessary, an employer should keep a few things in mind:
– If an employee is suspected of theft or fraud, do not tip him or her off. If possible, conduct the investigation behind the scenes until enough evidence is present to appropriately confront the employee.
– Evidence should be gathered by forensic computer experts, private investigators, and others in the field to ensure quality and fairness.
– Carefully document the investigative process to aid in future prosecution of the employee and to protect against potential future lawsuits.

Other Topics Covered

– Violence in the workplace/ workplace-related domestic violence prevention
– Use of information contained in mail to perpetrate theft or fraud
– Paralleling the business to perpetrate fraud or theft
– Phony invoices

CD’s and MP3 recordings of the webinars are available for purchase for $30! For more information you can email Yvette@suttonhague.com.