Corporate crime is growing in volume and variety. The perpetrators of corporate crimes are more numerous and more skillful. Unfortunately, the 2008 recession has only aggravated these realities. A careful understanding of corporate crimes may help you to avoid them, or failing that, to solve them.
Here are a few corporate crimes -- breach of fiduciary duty, bribery, embezzlement, accounting fraud, employee theft, and corporate espionage. Here are a few of the ways you can deal with these kinds of crimes -- (1) Set up your own internal security organization, (2) Retain outside security resources, (3) Investigate after the crime, and (4) Litigate after the crime.
The most typical “episodic” way to deal with a corporate crime is through retaining a business investigator, such as a former FBI agent, a forensic MBA, or a forensic CPA. The discussion below focuses on one of these choices, the forensic MBA.
When do you need a forensic MBA ? When you need a business expert to find out what happened, and why it happened. You don’t have to be a “movie star” to have a big “studio” short you on the money they owe you. You are more likely to want to find out why someone close to home did something they should not have done with your money. Organizations often need to know “Are my financial statements right ?“ and also “Why are they not right ? “
Why a forensic MBA, and not a forensic CPA ? CPAs are much more focused on accounting and the rules of accounting. Many CPAs are almost Ph.D.s in their fields. A forensic MBA has a much broader focus and a broader set of experiences. An MBA with business experience has often had to be responsible for actually producing results, not just financial statements.
But clever interviewing is the real skill that separates the CPAs from the MBAs. Just like television’s Detective Columbo, asking disarming questions is the first step in finding out what really happened in a potential corporate crime. The interviewing is almost always pointed at getting the “suspect” to either lie, or to tell the truth, about their own documents. By either course of action, the “suspect” ultimately points out the real facts of the situation, and thus a very close version of the truth. The case study method used in many business schools seems to produce MBAs who are better prepared as interviewers.
In our document intensive society and culture, a real villain usually forgets to “cook the books” from the very beginning. Sometimes, he even forgets to go back and “doctor” the financial statements as needed. Financial statements are now so extensive that changing all the relevant information is hard to do. Accounting software is usually so “integrated” that even several changes to key numbers may not hide the criminal’s trail. When perceptive interviewing is applied to documentation, the clues of every impropriety almost always rise to the surface.
You may need a Forensic MBA in the following situations –
- Estimating losses and economic damages
- Uncovering fraud in your organization or family
- Finding weaknesses in your own position, or your own case in litigation
- Using opposition research on opponents, competitors and malefactors
Cost control is a critical part of every corporate or family investigation. You should never be asked to make long-term commitments, and you should consider buying time in hourly blocks, with evaluations at regular intervals. In some cases, a retainer may better meet your needs. If you can jointly develop a clear “spec” sheet, you may want to pay a fixed, not-to-exceed cost for the corporate crime investigation.
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