Fraud Prevention Tip #45: Report to the Authorities

It comes up in almost every fraud case. Should we tell the police, prosecutors, regulators, licensing bureaus or other external authorities?

To be honest, there’s no clear-cut answer. But the issue can and should certainly be debated before a specific case is being pursued. That’s the best time for consideration of ‘what if’ scenarios, including the general criteria that will be used in deciding whether to refer fraud cases to the authorities.

Here are factors others have considered. How would you respond to each?

1. “It’s best not to.”

I’ve heard this opinion expressed dozens of times. But I have yet to hear any fact-based justification for taking this position. Let’s look at the cold-hearted facts. If fraud has occurred, you’ve been ripped off. Wouldn’t you call the authorities if someone broke into your home, stole your car, or cleaned out your accounts after stealing your identity? Why would it be any different just because it’s the business that got hit?

2. “They won’t do anything.”

This belief is just untrue. I’ve taken dozens of cases to the police at the local, state and national levels. All were dealt with in a professional manner. Some made it to trial; many more were settled when the accused entered a guilty plea. And yes, a few fell quietly by the wayside – usually because the evidence wasn’t sufficient or the case was weak for other reasons. The wheels of justice often turn very slowly, but they do turn. Be prepared to be supportive for as long as it takes.

3. “What if the fraud was perpetrated by senior management?”

Well, let’s face it. When the leaders cheat, it takes great courage to take them on and fully pursue the case to wherever it leads. This is exactly why the Board has to be ready to take control of any investigation involving executive management. But if we report fraud by lower level staff to the authorities, then we should report fraud by the top leaders as well.

4. “Confidential information will become public knowledge.”

I agree that this concern has some merit. Certainly no organization wants their product formulas, customer lists, marketing plans or other important data to become public knowledge through the discovery and trial process. So as with all issues surrounding the handling of fraud incidents, make sure you have the best legal advice you can find.

John J. Hall, CPA

John J. Hall, CPA, is an author, speaker and results expert who presents around the world at conventions, corporate meetings and association events. Throughout his 35-year career as a business consultant, corporate executive and professional speaker, John has helped organizations and individuals achieve measurable results. He inspires audience members in corporations, not-for-profit organizations and professional associations to step up, take action and “do what you can.”