By Benjamin R. David, D.A.
A jaw-dropping one out of every $20 is lost to white-collar crime every year. Even more surprising? Forty-four percent of all companies do not investigate their worst incident of fraud, and nine out of 10 companies do not report fraud to authorities when the crime is uncovered.
Why? According to hundreds of accountants and auditors I have asked, there are two erroneous assumptions that prevent victims from coming forward: 1) Restitution is not likely to be recovered; and 2) Companies do not want to air their dirty laundry in public because customer confidence will be lost. Filing criminal charges addresses both problems.
First, prosecutors are the only lawyers who can send people to jail. Defendants get motivated very quickly to find restitution they claim does not exist when faced with the prospect of incarceration. Negotiation is about leverage and timing. Being able to forgive at least part of the sentence for repayment of stolen funds is a big hammer that does not exist for corporate counsel.
Second, less than 2% of all felony cases go to a jury trial. The vast majority end up pleading guilty. In contrast, when civil attorneys file a lawsuit, usually against a disgraced former employee, they inevitably get hit with a countersuit. The best defense is a good offense. “This is a conspiracy,” the thief says. “I am a whistleblower and they are trying to silence me.”
These tactics make costs go up as litigation is protracted. Civil cases are dismissed to stop the bleeding. The fraudster goes down the road to reinvent themselves somewhere else and continue victimizing others. In contrast, prosecutors enjoy sovereign immunity and cannot be sued. We can keep our focus on holding defendants accountable rather than defending against their feckless claims. This leads to more convictions and restitution today and fewer victims down the road tomorrow.
For far too long, fraud has been written off as the cost of doing business. It is happening in your company. The message must be that crime does not pay. Look for it and when you find it, report it to the authorities.
A North Carolina lawyer, Benjamin David has served as an elected district attorney since 2004. He is a past president of the North Carolina Conference of District Attorneys and currently holds executive office in the National District Attorneys Association.
WANT MORE INFORMATION FROM BEN?
Check out his on-demand course from the Institute of Internal Auditors: “Why Internal Auditors Should Think Like a Prosecutor” (5 CPE credits).
Once an accountant or auditor uncovers a financial crime, the work of convincing a prosecutor to devote time and resources to take a case to trial begins. By learning to think like a prosecutor, auditors and accountants will be more effective at catching white-collar criminals, more likely to receive restitution for their clients, and more confident of a conviction.
Register for the course at theiia.org.