Strategic Considerations When Conducting an Internal Investigation

Workplace fraud falls into three general categories. “Asset misappropriation” includes fraudulent invoicing, payroll fraud, theft of trade secrets, confidential information and other intellectual property. “Corruption” is fraud that generally involves acceptance of a bribe, kickbacks through bid-rigging, or use of conflict of interest schemes to obtain an unlawful benefit. For example, where long-time and trusted employees retain favored third-party suppliers in return for kickbacks from those suppliers Falsification of “financial statements,” the third fraud category, consists of material falsehoods in financial statements, such as booking fictitious sales or taking expenses in the wrong period.

To be certain, workplace fraud schemes exist on a far larger and more complex scale than many employers anticipate. These schemes may persist for long periods of time before discovery, and result in huge losses. According to the 2008 ACFE Report to the Nation on Occupational Fraud and Abuse, the average fraudulent scheme costs an organization $500,000 in cases where two or more employees colluded, not including the cost of any litigation, remediation, and lost productivity.