Media sources are constantly reporting on white-collar crimes that are taking place from local businesses to national corporations. In the past decade, there have been many high profile, white-collar crime cases.
Fraud cases have been around since the beginning of time because there are always people in the world who try to obtain money, contracts, or something of value by lying and deceiving, says Linda Pence, director for Sommer Barnard.
There is currently a heightened awareness and vigilance with white-collar crimes. The days when the CEOs of companies were thought of as untouchable or gods are gone.
Smart Business spoke with Pence about the increased awareness of such crimes, the steps to take to prevent such crimes and how to recover after being a victim.
What steps should business owners take to protect themselves against white-collar crime?
There are numerous forms of white-collar crimes. They are often considered paper or nonviolent crimes that usually involve illegally taking something of value. They can vary from selling inferior goods, embezzlement, bribery, receipt of kickbacks, securities fraud, price-fixing and antitrust violations. One needs to understand their business to protect themselves properly.
First do a risk assessment. What type of business is your company involved in, and what crimes are typical for such a business? For example, corporations may be at risk for embezzlement. It is hard to know what everyone is doing at all times. Therefore, such companies need to make sure there are financial controls in place to prevent such crime.
Second, set an ethical tone. Act in a manner which you expect others to act. Business owners lead by example. If you, as the head of the company, are misusing company funds, employees are going to notice. Then employees who would have never thought of acting unlawfully before begin to think, ‘Who cares? The boss is not being honest, why should I?’
Teach all employees integrity and develop compliance programs. Make sure employees understand the mission of the company.
It is important to bring in people who are reliable, dependable and honest. Controls should be put in place to ensure compliance. If employees know there are internal controls in place, honest management and ethical employees, they are less apt to commit a crime.
What warning signs can business owners look for to protect their company against such crimes?
It is crucial to trust your gut instinct. The people committing these crimes may be your partners and friends, but it is important to investigate every accusation to protect your company.
Crimes occur when responsibilities are given to trusted employees who then are not supervised. Given full reins, an employee can commit numerous crimes. It is important to design a type of checks or balances system to prevent such crimes.
Some people commit crimes to keep their business afloat. In desperate times, people may try to take a little from the company with the intention of paying it back later. This is never acceptable and typically cannot be paid back.
Why should they invest money in protection?
Investigation of wrong-doing is very disruptive and hurts businesses. Employees are questioned, files are audited, and lawyers and investigators are in and out of the office. These interruptions decrease production and make employees uneasy.
Investigations also entail substantial fines. Running the business ethically and investing in means to do so will pay off in the long term.
Business owners often do not learn of a criminal investigation until an investigator shows up asking questions of employees or a subpoena is served. Your entire company quickly becomes part of an investigation. Companies must hire attorneys and investigators.
As these processes take place, time, money and productivity is lost. Employees will be interviewed. This process often frightens employees and makes it difficult to focus on the needs of the business.
Investing money to prevent all of these losses not only saves money but may save your company.
How should a company respond if it is a victim of a white-collar crime?
If a company has been a victim of fraud, it should report the crime immediately. Many federal and state actions protect victims and recover monetary losses. If a corporation is the victim, it must make sure the media is reporting the story accordingly. You want people to know you were the victim.
LINDA PENCE is a director at Sommer Barnard PC. Reach her at firstname.lastname@example.org.