Don't be caught by fraud

Fraud and embezzlement can hit a business hard. In fact, across the United States the average cost per business is $150,000. That’s one of the things the Jacksonville Exchange Club learned from last week’s guest speaker Phillip Noble, who is a certified fraud examiner with Forensic Consulting LLC.

In other words, he is a forensic accountant.

“Would you trust your friend, family member or co-worker with your life?” he asked. “Would you trust those same people with your money? In my line of work things like that come into play. The people closest to us often are the people who disappoint us the most.”

Noble said fraud is a subject many people don’t like to talk about because they feel it is an embarrassment to them and their company.

“I like to talk to groups to let everybody know it’s OK to talk about it,” he said. “It’s something we need to share so other people can be aware of what to expect and what to do.”

Noble said a certified fraud examiner is to a business what a certified public accountant is to taxes. He just deals with the legal side while a CPA deals with numbers.

Noble worked for a Birmingham fraud company for several years, and he found out that Calhoun County and the surrounding area, for the most part, had no one who specialized in fraud.

He showed the group an invoice that had several red flags to alert a company of possible fraud. He said the invoice was like many that were uncovered by his firm in Birmingham when it investigated possible fraud at the Alabama Fire College.

“False vendor invoices or shell vendors were the most prevalent,” he said. “Typical fraud is usually done from within a company, but it can be done by someone outside the company.”

He gave several rules of thumb if you believe there is fraud in your company.

“Our first reaction is to get upset and angry because a trust has been broken,” he said. “Our immediate reaction is to fire the person. Try not to do that. If an employee is working for you they have an obligation to comply with an investigation. If they don’t work there, they don’t.

“Call your attorney or find an attorney that deals with these type of matters. They will help guide you to a person who can help. You also want to lock an employee out of anything you have – cell phones, flash drives, computers – because all that will become evidence.

“Do not start rifling through files on your own. This is now a crime scene and evidence must be protected. Get an attorney who will probably direct you to someone like me.

“Determine early on if you are going to pursue legal action. You may be just satisfied to fire the person or persons. But I’ve found that most cases have the iceberg principle. There’s probably a lot more going on under the surface. A lot of money and assets could be at stake.

“Don’t destroy evidence even if it looks mundane. And understand from the beginning it could get really ugly.”

Noble also suggested companies use criminal and credit background checks before hiring someone.

“The number one way that fraud is detected is a tip, usually anonymous,” he said. “I have done an informal survey is Calhoun County and less than 25 percent of businesses have a tip line.”