If you are the victim of a fraud within your business you will likely be very angry. The immediate reaction is…. to react! This can sometimes make the problem worse. You can’t simply sack a suspect employee, march round to their house and search through the contents of their home study in the hope of finding where the stolen money has gone! If you did this you might easily find yourself on the wrong end of a suit for trespass or constructive dismissal (likely both).
If you have lost money invested in what turns out to be a fraud, or in a company that has entered insolvency under suspicious circumstances, you may find yourself disadvantaged while others appear to prosper. It is important that you pursue asset recovery procedures appropriate for the situation in a robust and measured fashion – to enhance your chance of success and prevent wasteful costs being incurred.
It is important to decide your priorities in any fraud investigation. These may include securing a criminal prosecution of the culprit as an example to others, protecting your reputation in the market place or allowing the fraudster to be safely dismissed. Recovering lost assets is likely to be high on, if not top of, your list. Asset tracing and recovery is one outcome that benefits from an organised approach right from the start. Any heavy handed or inappropriate action may cause the trail to the fraud losses to dissappear – evidence is destroyed and the stolen money can be transferred beyond easy reach.
Every case is different and it is important from the outset to understand the risks and rewards of each different course of action that might be available:
- Is an initial fraud investigation required before or after a suspect is confronted?
- Should initial fraud investigation work be carried out covertly?
- Should the police be informed of the fraud at the outset – can you be sure they will not decide to investigate themselves potentially compromising your business?
- What specialist legal fraud advice do you need?
- How can you best utilise your own resources to obtain the most cost effective outcome?
Here are a few examples where Mark Jenner has successfully assisted with recovering misappropriated assets.
A ‘whistle blower’ in a large motor services company revealed a widespread practice of submitting forged claims. The work included comparing customers’ signatures on thousands of claims documents to identify forgeries. As a result it was possible to quantify the level of false claims made over a period of five years and recover a substantial seven figure sum on behalf of a number of insurance companies.
Acquisition of subsidiary
A mortgage and insurance broker company traded with another financial services company on a regular basis. Over a period of time it lent money to this company on an informal basis and also allowed its debtor balance to increase substantially. As a result it commenced negotiations to acquire ownership of the other as a means of repayment of money owed. It was possible to trace the monies originally provided and identify reasons for the debtor company’s poor performance. The work showed financial irregularities perpetrated by the subsidiary’s director and quantified significant levels of personal spending – thus assisting with negotiations and recovery of value for the parent company client.
Multiple invoicing by motor trader
A number of credit finance companies required the activities of a motor retailer to be investigated over a ten year trading period. The work showed that the business owners had been regularly executing multiple finance agreements on the same vehicle. The reason that the fraud had not been discovered for so many years was the teaming and lading of funding for one vehicle being used to discharge outstanding amounts on another. Although some £100 million of fraudulent transactions had taken place, which was of interest to the police, the amounts owing to the credit companies had only accumulated to about £2 million by the time of the investigation. The work involved working alongside the police quantifying losses and identifying the assets acquired by the motor trader thus allowing recovery of value for the creditors.
Tax evasion by caravan company owner
A caravan company collapsed in a competitive market place and entered insolvency proceedings. Investigations on behalf of the liquidator revealed that the owner and director of the company had been living a hedonistic lifestyle at the expense of the company. Much expenditure on various girlfriends and high living had been put through the books as caravan manufacturing costs. By a series of interviews with former employees, it was possible to build a picture of activity that allowed a meaningful examination of the books and records. Evidence of around £500,000 false invoices was found and the director agreed to repay this money for the benefit of the disadvantaged creditors when presented with the facts.