Ethics deteriorating in recession?
Everyone from law firms to government agencies to insurance companies are dealing with higher instances of fraud. Lawyers are finding that embezzlement within their practices is on the increase. “The last thing you want is for a partner or employee to steal money from the cookie jar while you’re concentrating on representing your clients. Unfortunately, if you’re a small firm or solo attorney, it’s much more likely to happen to you than it is to a large or mid-size firm. There have been a number of recent news reports about employees embezzling funds from law firms. The obvious reason for the increase in embezzlement cases is the recession. “
At the same time, most insurers are now finding that over 30% of their claims involve some sort of fraud.
Many businesses large and small are seeing a huge increase in the amount of fraud by employees and customers alike.
“Figures have shown that not only has acts, such as employee embezzlement, risen but it has also stayed consistently high throughout the recent quarters.”
NPR reports that massive fraud like the Madoff and Sanford cases are indicative of thousands of smaller crimes, which may have gone unnoticed during boom times. As cash flow dries up, companies are more likely to notice shortfalls in accounts. “Crimes such as mortgage fraud, identity theft and, particularly, employee-related schemes appear to be on the rise, according to Orin Snyder, a former federal prosecutor who is now a litigation partner in the New York office of Gibson, Dunn and Crutcher. “There’s no question that during the past year and a half, companies are reporting as a result of the financial contraction a spike in the kind of low-level, garden-variety frauds that in the aggregate can be very significant to companies: things like credit card fraud, insurance fraud and employee embezzlement,” says Snyder.
While fraud is on the increase, enforcement may be harder to find. Municipal budge cuts are resulting in reductions of staffing for investigative and enforcement agencies, such as the mothballing of this ethics panel in Georgia, previously tasked with overseeing the ethical behavior of lawmakers. “State legislators this year hacked $550,000 from the commission’s budget, bringing it down to $1.2 million. “I think it’s fair to say it’s not functioning very well right now,” Bill Bozarth, executive director of the watchdog group Common Cause Georgia, said.
In the private sector, fraud investigations businesses are booming. Investigator Robert Frimet is a prime example. “In the past 18 months Frimet has seen a 25 percent increase in clients asking him to investigate employee embezzlement.”
“The increase may reflect an entirely different trend, Detective Ira Carter said — struggling business owners are monitoring their books more closely and finding fraud that goes back years.“When times are good, people tend to overlook things,” he said. “Now that everything is coming down to the penny, employers are starting to notice.”
Frimet has a harsh solution for businesses in preventing fraud: “It comes down to never trusting anyone,” he said, “including trusted employees.”
