New Survey Reveals Troubling Extent of Corporate Fraud

11/18/2013 // Whistleblower Law Firm // Keller Grover, LLP // (press release)

Finding a ‘significant surge’ in corporate fraud — a large portion of it involving senior- and mid-level managers — a recently released survey also highlighted an effective weapon in fighting it: whistleblowers.

The survey — the Global Fraud Report 2013/14 — was published in October by the risk management company Kroll, which conducted the review in collaboration with the Economist Intelligence Unit. Approximately 900 senior executives from across the globe took part.

• While fraud is an ongoing concern for both enterprises and government, the report adds to the mounting evidence of just how pervasive the problem is. Among the survey’s findings:

• 70 percent of respondents said their companies were affected by fraud in the past 12 months — up from 61 percent the previous year.

• While all categories of fraud were on the rise, spikes were seen in vendor, supplier, or procurement fraud.

• Most fraud is an “inside job,” according to the survey. Management-level employees — from junior to senior levels — are the perpetrators in the majority of cases.

Whistleblowers — insiders with knowledge of improper activities — brought the wrongdoing to light at 32 percent of the companies hit by fraud in the past year. Among fraud involving middle or senior management, whistleblowers exposed 42 percent of the cases.

“Fraud is clearly a hot topic — as this survey demonstrates – but more importantly fraud and whistleblowers are increasingly discussed hand in hand,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer. “People on the inside who have seen things that don’t quite look right are in the best position to sound the alarm — and set things straight. And the law has their back. There are some potent statutes, on the federal and state levels, that both incentivize and protect whistleblowers.”

Chief among those laws is the federal False Claims Act — the gold standard of whistleblower statutes. It applies to instances of fraud against the government — whether by a contractor, a financial institution, or other party. Insiders who sound the alarm on wrongdoing can receive a significant portion of any recovery ultimately obtained by the government, and are also protected from retaliation — such as job termination or demotion — for speaking out. Since the False Claims Act was substantially modified in the mid-1980’s it has spurred the recovery of more than $36 billion. It has also spurred more whistleblower initiatives. Today, government agencies including the Internal Revenue Service and the Securities and Exchange Commission have their own, increasingly successful, whistleblower programs.

The reality is that there probably has not been a massive surge in the amount of fraud out there. Fraud has been with us probably from the beginning of time. What the Kroll report highlights, though, is the growing role of whistleblowers in exposing misconduct that’s been there all along. That’s definitely a change says Keller who has been litigating fraud cases for more than 20 years and represents whistleblowers. .

“Surveys like this document the shifts in how we are fighting fraud. In many cases, the fraud directly involves the company, or specific managers within it,” says Keller, whose firm has offices in Los Angeles and San Francisco. “Too often, a report will not be acted upon, or an investigation will be delayed. But increasingly an insider acting as a whistleblower – together with a whistleblower lawyer, can make sure that the fraud is exposed, and leverage some powerful laws in doing it. This is a sea change that gives the whistleblower a real chance to speak out about fraud, but also help stamp it out.”

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