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.”

It’s every executive’s nightmare. There’s been a big fraud and the press is calling with questions. Efforts to contain the issue internally have obviously sprung a leak, and now the difficult decision has to be made about what to say to the press.

As with all decisions covering any organization information to make available to outsiders, developing guidelines and protocols on handling the press should be addressed during periods of calm when no fraud issue is being pursued.

Here are a few variables to consider as you develop your own plan.

1. Be clear about who is authorized to speak with the press.

2. Make just as certain that all other employees know that they are not authorized to do so. Everyone should know how to refer press inquiries to the correct leaders.

3. When speaking with the press, be explicit. If the decision is made to reveal details, then be very explicit and stick to the facts. Avoid being pulled into conjecture by experienced reporters who are highly skilled at pushing ‘what if’ and ‘what else’ questions during interviews.

4. Craft the basics of your message in advance. Creating the framework of your generic message helps with decisions made in the heat of the moment.

5. It’s OK to smile politely and walk away. To say nothing – not even “No comment” (which automatically sounds like you’re hiding something!)

Would your leaders be ready to talk to the press tomorrow if a fraud surfaced today? Would you?

If not, start the discussion now. Don’t wait until it’s an emergency.

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.”

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.”