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Don’t Walk Away from Money Lost to Employee Theft

A thorough fraud investigation is only the first step

Posted by Dawn Lomer on February 7th, 2013

It’s normal for victims of employee theft to feel hurt, ashamed and embarrassed. After all, it’s often a company’s most trusted employees who turn out to be the perpetrators and employers are left wondering how they missed the signs.

Perhaps you missed the red flags of fraud. Maybe you were in denial and let things go on too long. Your anti-fraud program may not have been up to snuff. But no matter what mistakes you may have made, don’t let that stop you from getting restitution.

Biggest Mistake

One of the biggest mistakes I see employers make when they’ve been victims of fraud is that they don’t pursue things civilly,” says lawyer Dean Davison, founder and president of the Vancouver-based Davison Law Group. “So they don’t have the mindset for putting the right package together because either they are embarrassed, or they are uncomfortable with people knowing what went wrong, what they didn’t do.”

Encouraging fraud victims to take the steps needed to pursue matters civilly is a challenge that Davison faces often in his practice. “It’s a natural progression many times. In fact people feel it’s a duty to go to the police, which it really isn’t,” he says. “But, … if the police can’t or don’t handle it, or don’t choose to handle it, they feel they shouldn’t go forward. And that’s probably the biggest mistake that companies and employers make.”

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There are several reasons for pursuing a case in civil court, says Davison. Firstly, it’s a great deterrent to others who might be thinking about defrauding the company. If someone seems to have gotten away with the proceeds of the crime, a civil suit can send the message to others that there’s more than one way to punish a fraudster.

Another reason employers don’t pursue a civil suit is that they think, or even know, that there isn’t any money for restitution. Either the fraudster has spent it all, or it’s well hidden.

“But sometimes there are toys,” says Davison, adding that judgments in British Columbia are good for ten years and can be renewed, so that money can be recovered from funds that the fraudster accumulates many years after the fraud.

Costs vs Recovery

“What I have seen employers do in the US depends largely on how much money is at stake,” says attorney Bill Nolan, Managing Partner in the Ohio office of Barnes & Thornburg LLP. “Certainly the employee fraud could in some circumstances be a criminal act that, if successfully prosecuted, would lead to restitution for the employer… But employers weigh the amount that can be recovered against the time, energy, and perhaps legal expense that will be needed to recover the funds.”

Nolan makes another good point: “If an employer has a work force it considers to have a lot of potential problems, it might pursue a relatively small amount civilly or criminally to send a message. But most of the time I think it is just a matter of weighing the costs and potential recovery of pursuing it.”

Dawn Lomer
Dawn Lomer

Manager of Communications

Dawn Lomer is the Manager of Communications at i-Sight Software and a Certified Fraud Examiner (CFE). She writes about topics related to workplace investigations, ethics and compliance, data security and e-discovery, and hosts i-Sight webinars.

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