Fraud Prevention Tip #47: What to Say to Employees

A fraud incident has surfaced. The suspect is an experienced and respected senior manager. The rumor mill is in full operation. The internal grapevine is filled with wild assumptions about what happened and who was involved.

But all that’s available from senior leaders is silence. They are in bunker-mode hidden behind closed doors. No one is saying anything – so the conjecture runs without resistance or correction. Executives and employees are equally frustrated and confused about what to do.

A business associate once suggested that the most powerful word in the English language is ‘balance’. Balance is about restoring order. About looking at all issues in a tough situation and coming up with a solution that works best if not perfectly. And in the case of what to say or withhold from employees when a fraud has been found, balance needs to be the order of the day.

As you consider what to tell employees, here are some suggestions based on my own past experience.

Our first priority is protection of the innocent, including the important efforts you’ll certainly take to protect the reputation of suspected fraudsters.

But the employees deserve to learn from the experience so that it doesn’t happen again. So we need to find a time and place to release as many of the details as are needed to provide that learning experience. Emphasize what happened, what it looked like in the records, and the lessons learned from the experience. In many cases, all of that can be accomplished without actually saying the name of the person who committed the fraud.

In addition, every employee, supervisor and manager wants to believe that they work in an environment where those who violate the code of trust will be held accountable. They want their leaders to be fair but firm in dealing with those who commit wrongdoing. Honest employees should feel confident that investigative efforts are professional, fair and respectful. But they also want to see the perpetrators removed from the payroll without learning later that the thief or fraudster was given an incentive payment or other inducement to go away quietly. (Yes, it happens. Often.)

As any investigation gets underway, always be thinking about what can and should be told to other employees who have a right to know. Come up with a way to make sure that the lessons of fraud schemes can be used to educate all employees. That’s the way to enhance their anti-fraud efforts and reinforce their prevention behaviors.

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 38-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.”