14 May Your Attorney’s Role in a Fraud Investigation
Hypothetically, say you suspect that your purchasing manager is embezzling from the company. He seems to live well above his means, drives a luxury car, and buys expensive jewelry for his wife. He also acts cagey and defensive when asked about purchase order discrepancies. Yet you have not been able to prove anything.
This is a financial problem — but it also is a legal one that requires your attorney’s expertise.
Protecting work from discovery
Your instinct may be to call your accountant to investigate. There is some logic to that, but if there is a chance you will take the employee to court or involve the police, call your attorney first. While you will need a forensic accountant, let your attorney hire the expert. That way, any of the accountant’s work obtained for litigation purposes likely will be protected under the work product doctrine — making it at least partially immune from discovery.
You will have to reveal your fraud investigator’s findings to pursue litigation. The advantage to immunity, however, is that you are required to disclose only facts. You do not have to reveal your accountant’s opinions, beliefs, and strategies unless your legal counsel thinks it will help you.
Whether or not you end up in court, the fraud investigation is likely to proceed along certain lines. A forensic accountant will analyze available data to develop a theory, revise it as required and, ultimately, confirm it. While investigating fraud suspicions, forensic experts usually:
- Interview employees
- Examine internal controls
- Scrutinize financial records & transactions
- Retrieve & copy electronic files
A review of your purchasing manager’s emails, for example, could reveal that he has been using realistic-looking, but phony, invoices to keep his fraudulent activities out of sight of the accounts payable department.
None of this is information you are likely to mind sharing with the employee’s defense attorney. But a fraud investigation also will include more sensitive issues. For example, if your accountant believes you were lax in establishing or enforcing fraud prevention policies, you do npt want that opinion to go public. By letting your attorney hire the accountant, you may be able to keep such opinions from hurting you in either a court of law or the court of public opinion.
It takes a team
The rules of evidence are strict and complex, and once broken, cannot be repaired. That is why it is important to work with a team of both legal and accounting professionals.