Fraud is a growing concern across the U.S. business landscape, and the more a business can do to prepare for it, the better.
That was the bottom line among panelists at the recent NNBW Breakfast & Business event at the Atlantis Casino Resort Spa.
“Training is important. Be proactive,” Ronald Durkin, senior managing director of Durkin Forensic, Inc., told about 60 business leaders and others in the audience.
The panel advised having internal controls in place with a strong code of conduct and ongoing fraud training.
“Look at your positions. Accounting and finance is where the money is,” Durkin said of the most likely places in a business setting for fraud.
Also, he advised, be mindful of employees’ habits; if they reflect a sudden lavish spending lifestyle, take note.
“To have no fraud in your organization, you have to know fraud,” he said, and that includes educating yourself as to what the most popular fraud tactics are in your industry.
And don’t expect external auditors to catch fraud, he said, adding there’s an “expectation gap” in what auditors’ responsibilities are.
“If you’re an auditor, you’ve signed off on three audits before it’s detected. That’s important to know,” Durkin said.
It’s also crucial that any fraud prevention plan be comfortable for staff to accept, he said.
“You want a prevention program that works. If your employees feel comfortable going to someone to report something wrong, does management really want to talk?” he said.
To that end, he said, whistleblower hotlines, where an employee can report a potential fraud case without fear of retribution, is the most effective way to detect fraud.
And, “if you’re not getting any calls, something’s wrong,” Durkin said.
When an employee does come forward with a concern, “take the allegations seriously,” he said.
When that happens, the legal arena could be the next phase. In any case, be proactive by having access to an attorney.
Depending on the magnitude of the fraud or the nature of the business, police and regulatory officers could descend on a business.
Durkin and others on the panel said if that occurs, a business owner’s first call should be to his or her lawyer.
Investigators must show a search warrant to inspect the office, said panelist Carrie Parker, attorney in the commercial litigation department at Snell & Wilmer law firm.
Ask to see the search warrant; watch and listen carefully; ask what the nature of the investigation is, and if anyone is under arrest. Note everything that might be seized by authorities.
Also, do not obstruct them or volunteer any information, Parker said.
Panelist Nathan Kanute, an attorney colleague of Parker, said if you as a business owner are sued, do not ignore it.
“That’s the worst thing you can do. It’s not going away. Get your attorney involved,” he said.
Additionally, know there are deadlines for responding to a lawsuit — 20 to 30 days depending on the court — and most courts require that a business being sued be represented by an attorney.
And, if you’re sued or even likely to be, don’t put any papers into the shredder or delete electronic files. Repercussions for not preserving evidence include fines and judgments against the offending party, Kanute said.