With fraud now the fastest
growing industry in the UK and losses overtaking traditional bad
debt write offs, it’s
highly likely that a number of your clients will have suffered a
loss in recent times. That could lead to a serious situation when
business confidence, in a benign economy, is at a low.
Business proprietors tend to get very little
guidance from any of their professional or trade bodies to enable them
to manage a fraud problem
- and unless the sums are very substantial, the police appear to be
under resourced to be able to provide practical, on the spot assistance.
Research tells us that when a fraud is discovered the last person to
be told is often the accountant, much less the local trade association
or their competitors. It’s almost as if business proprietors
are ashamed at being caught out!
Apart from the physical loss there are other considerations; regulated
advisors, such as accountants and banks, have a legal duty to report
any criminal activity or fraud to the National Criminal Intelligence
Service (NCIS) as soon as it comes to their attention. If the 'incident'
is managed under a lawyer's 'cloak of legal privilege', it would enable
the investigation to be carried out in an orderly manner with controlled
exposure of the case to the media and the Law Enforcement Agencies.
This is particularly important if there are elements of non-compliance
of regulations or personnel disciplinary issues that are likely to
confront the business proprietors.
However, not all lawyers are qualified to deal
with issues in respect of fraud or money laundering. A call to P&A
Investigations by the proprietors will enable us to ascertain
whether the client's lawyers are suitable - if not, we will make recommendations.
P&A
Investigations will lead the detailed investigation, using the
businesses accountants to carry out the financial forensic work if
they have the capability. This joint approach enables the case to come
to a satisfactory conclusion.
Laurie Beagle, an accomplished consultant
in process strategy and development
heads up this specialised division of P&A
and is supported by Fred Parr. Both are very experienced
consultants in the field of fraud prevention and detection - both
have considerable commercial experience - Fred spent 16 years as
a senior detective in the commercial fraud section of New Scotland
Yard, and has many years experience of commercial fraud investigation
in the private sector. They are available to give lectures at client
events, to provide on site training for key personnel of client firms
and, of course, to respond to requests for assistance or to review
current policies.
The Division has a comprehensive schedule of capabilities from practical
pre-emptive reviews at one end of the spectrum, to very detailed
investigations and support where serious loss is revealed. There
is a schedule of capabilities at www.pandareceivables.com/investigations-capabilities.html.
Some examples of recent cases are attached and demonstrate the wide
remit of this division.
If you would like us to support a client seminar, provide training
or have a client with a fraud problem, speak to Laurie Beagle or
Fred Parr on 0114 278 8868 or email investigations@pandareceivables.com.
Example Cases:
Employee (Expenses) Theft
A Borough Councillor and former mayor was charged with 16 counts
of falsifying his expense claims. The charges were brought following
a lengthy investigation of the Borough Council. We were instructed
by the defence team to investigate the evidence gathered by the police
and also to examine the Council's systems and procedures in respect
of Councillors' expenses.
Our investigation revealed a number of discrepancies
in respect of the various charges together with shortcomings in the
Council's systems.
Following our report the majority of charges were subsequently dropped.
The former Councillor pleaded guilty to a small number of charges totalling
around £1,500 and received a suspended sentence.
Employee Theft - Investigation
A physical stock take at a branch of a DIY
Company revealed significant shortfalls against the Company’s
stock records. The manager of the branch was questioned but claimed
that the difference was due to
spoilt stock and replacements not recorded on the computer.
Our investigations revealed that in addition to the missing stock significant
amounts of cash had also been stolen, and to conceal the theft, the suspect
was making up the daily shortfalls from the following days' takings.
The branch manager was subsequently charged with 7 counts of theft and
false accounting.
Bribery
A small family owned computer consumable company tendered and won
a large contract for supply of consumables to a large national Company
operating a chain of department stores. For several years, the Company
was successful in retaining the contract despite intense competition
from its larger rivals.
Following a family dispute, one of the directors
left the Company and subsequently sent copies of the Company's tenders
and correspondence
to the Department store. We discovered the Company had provided the Store’s
buyer with a luxury car, free of charge, for a number of years and had
also made significant payments to the buyer. Correspondence revealed
that the buyer who was in sole charge of this contract was opening the
competitors’ tenders early and tipping off the Company with their
prices.
Further, the Department Store used sample testing of certain key items
to evaluate contracts.
The Company was informed in advance of these items and ensured
that its prices were below its competitors. The prices for the remaining
items were then proportionately increased.
The Department Store decided not to prosecute but instead dismissed
the buyer and brought a large civil claim against the Company. This
claim was initially resisted but subsequently settled for a large sum.
Breach of fiduciary duties (and ineffective
investigation)
The managing director ("MD") of
a UK subsidiary of a large American Company was suspected of impropriety
and breach of
his fiduciary duties. Following a brief internal review, it was decided
to dismiss the MD for gross misconduct. The MD was summoned to the
area director's office and summarily dismissed.
Following his dismissal, the former MD went
to his office and removed the Company's desk top computer, carried
this to his car and drove
off. Upon discovery, the directors sent a messenger to his house to
collect the computer but discovered that its hard disk had been completely
erased. Further investigation revealed that the MD had also over ridden
the Company’s back up procedures and his files had not been backed
up by the Company. The former MD brought a large claim against the
Company for unfair dismissal. Despite enlisting computer specialists,
the Company was unable to recover the contents of the MD’s computer.
Our investigation revealed that the Company[s internal review had not
been conducted properly and adequate supporting documentation had not
been gathered prior to dismissal.
The investigation did however reveal some breaches by the former MD,
although, gross misconduct could not be conclusively proved. The claim
was subsequently settled.
Computer Forensics
Identified anomalies in user activity that ultimately revealed bogus
employees were engaged in acquiring intelligence on behalf of competitors.
The true identity of the recipients were revealed, tracked down and
the misappropriated propriety information
was retrieved and their system secure against future breaches
Employees Screening
A major firm of Insurance brokers was approached
by a lady seeking employment and offering to bring with her business
which would attract
at least £1 million in commissions. Although the department head
was anxious to employ her, we were asked to investigate and check her
employment history.
It was immediately discovered that the details provided by the subject
could not be verified and when her previous maiden name was ascertained
from research sources, a new and more sinister picture emerged. It was
revealed that the applicant had three previous convictions for major
fraud and her last court appearance had resulted in a 4 year prison sentence.
Media coverage reported that the Judge on that occasion had been extremely
critical of her employer for not having carried out sufficient checks
into her previous employment history.
Our client's offer of employment to the applicant was withdrawn.
Investigations
A UK based company was contacted by an offshore
organisation with a view to commencing to trade and setting up
a credit account. The
UK company decided that they would trade and set up a small credit
account of about £3,000. However the first order received was
in excess of £13,000. To accommodate their new customer the UK
Company agreed to accept bankers drafts in payment for their goods
prior to shipping the same. In a two-month period goods were supplied
to value of about £100,000. However on being banked the UK Company
discovered that they had not received Bankers Drafts, but cheques and
these were returned unpaid as they were forged.
The UK Company thought that they had covered all the possibilities in
trying to prevent this from happening; however it can be seen that they
had not. This company had an extremely experienced Credit Control Department.
Do not think that it cannot happen to you.
These few case studies are
just a small example of the varied help and support we are able to
give to your clients.
We believe we can add value to your client relationship by giving you
support and assistance in promoting awareness of an increasing problem
that businesses undoubtedly face. There is more information about the
capabilities of P&A Investigations at www.pandareceivables.com
July 2005
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