Fraud could cost California businesses millions annually
Business fraud can take many forms, and it can be perpetrated by a number of different types and levels of employees, all the way from part-time bookkeepers to high-profile executives. Many businesses choose not to report fraud because the perpetrator was a friend or family member, because they signed a restitution agreement with the person in lieu of pressing charges or because they were ashamed to have been victimized by a trusted employee, so it can be difficult to get an accurate accounting of how many companies are the victims of fraud each year. That being said, however, the Association of Certified Fraud Examiners estimates that as many as 40 percent of small businesses have dealt with this issue in some form.
Types of business fraud
Business-related fraud and theft can take many forms, but generally covers a few broad areas, including billing fraud, corruption/kickbacks, wage-and-hour fraud, check tampering, improper reimbursement, and “skimming.” This can include:
- Over-purchasing (and taking the items for personal use or returning them and pocketing the refund)
- Overpayment (this can be done by writing two checks at the time bills or invoices are paid, one to the supplier of goods/services and the other to an individual)
- Undocumented overtime
- Real estate fraud
- Embezzlement of partnership or company funds for personal use
- Signing company contracts for personal gain, gratuities, payment or kickbacks (bribery)
- Incorrectly requesting and receiving reimbursement for personal expenses
- Using company credit cards or lines of credit for personal expenses
- Accepting improper gifts or kickbacks from current or potential clients in exchange for business relationships
Obviously, it can be difficult to detect such a wide range of activities, particularly if your company is small and doesn’t necessarily have the infrastructure in place to implement a system of checks-and-balances in regards to payroll, expenditures and reimbursements.
What should you do?
If your company has dealt with fraud, you’ll have some tough decisions to make, including:
- How you wish to handle the issue – Will you investigate internally and keep the results of your investigation private? Will you file a civil lawsuit against the offender? Will you be contacting law enforcement authorities to have him or her punished?
- How your company will move on – If the theft or fraud was significant, can you afford to keep the business afloat? Will you need to fire or layoff employees to save the company? Are there ways to improve cash flow without taking drastic steps?
- Whether you’ll be instituting new procedures moving forward to prevent a recurrence
- The extent to which you’ll investigate beyond the scope of the current situation into possible fraudulent or criminal activities being perpetrated by other employees or advisors
Another important decision you’ll need to make if your company has been involved in fraud or theft is the attorney you hire to help make your business whole again. Having an experienced business fraud litigator like those at Klein and Wilson at your side can statistically increase your chances of a successful outcome for both you and your business, something that can be critical for moving on after fraud. Contact the firm today by calling 949-478-0521 or or by sending an email to learn how their nearly 50 years of combined litigation experience can be put to work for you.
Mark Wilson, a trial attorney, has won nearly every case he has tried or arbitrated. He lost only one jury trial and obtained a complete reversal on appeal. Mr. Wilson represents clients in business litigation and legal malpractice cases and was named in the 2017 – 2020 SuperLawyers Top 50 Orange County lists. Mr. Wilson is a California State Bar certified specialist in Legal Malpractice Law and can be reached at 949-631-3300; [email protected]; https://www.kleinandwilson.com