InfoCheck, Inc. Employment Screening

Many companies are well aware of how tempting their assets are to their employees, and they institute policies to ward off internal fraud, but breaches in security still occur because these policies often have lax enforcement.

Employee fraud can occur at any level within an organization, and the motivations can be as wide ranging as the methods used. A low-income clerical worker living beyond his or her means may be the first suspect that investigators question when assets go missing, but it is often the respected senior executive who makes off with the most money. Fraud investigators can't take anything for granted. Neither can companies that want to protect their wares. To defeat fraudsters, companies must establish strict policies and procedures, supplement them with employee awareness programs, and enforce them consistently.

Set policies. Perhaps the single greatest weapon in a companies arsenal to prevent fraud is a set of detailed policies that strictly regulate all behaviors that can give way to fraud. Companies may want to have legal counsel review the policies, which will be enforces by security and used as grounds for dismissal should any violation occur. One of the best defenses a company can have is a strong pre-employment screening policy that screens out candidates with a criminal history or other past clues to future trouble. Poor hiring policies, conversely, increase the likelihood of insider fraud. In one case I handled as a private investigator, the CEO of a client company was found to have diverted money from the companies accounts to his own. The company had hired him approximately two years before and had recently made him a junior partner. However, after noticing funds being wired out of the corporate account to unknown accounts in Europe, our client became suspicious. Unfortunately, it was only then that the company began to do some serious investigation into his background. What we found was that a former employer (not originally mentioned in the employment application) had filed a lawsuit against him for embezzlement. In that case, he was charged with falsifying expense accounts and creating a bogus company to which fees were paid. Prior to that, he worked for the employer he had named as his most recent prior workplace, but he has worked there only for a short time, not the eight years claimed.

During the investigation, our agency found not only that he was sued by his former employer but also that the attorney generals in fourteen states, along with the postal inspectors, had filed lawsuits against him for deceptive trade practices, mail fraud, and fraudulent solicitation. Had our client had a policy of conducting background checks on potential business associates, and employees, this employees troublesome past would have clearly indicated that he was not the right person to entrust with corporate funds.

Companies should also have a policy of interviewing employees at the time their employment is terminated. For example, exit interviews at another company I worked with would have revealed that one particular employee was creating problems that were causing good workers to resign. However, the company didn't learn of its bad hire until the woman demanded a workers' compensation settlement of more that $50,000 because she had suffered stress after receiving life-threatening notes left on her desk.

Our investigators interviewed the forty-some employees in the office. The interviews revealed that at least five employees were told by the claimant that she didn't like working at the business and wished they would fire her so that she could file a wrongful termination lawsuit.

We then initiated background investigations on the injured employee. A review of workers' compensation records revealed that the employee had a history of suspicious injuries. A check of the civil records indicated two lawsuits against her former employers for a workers' compensation injury and for sexual harassment.

In addition, documents with notes that were in the claimants handwriting were located and compared to the notes left on her desk. Even from a laypersons view, the handwriting appeared comparable.

Once all the evidence was gathered, the investigators met with the employee and expressed their suspicions. The employee eventually became concerned about the probable involvement of the police and suggested that the whole affair be dropped. The entire episode come to a close after she signed and affidavit indicating that she had set the whole thing up.

In this case, the client actually had a policy to conduct a background check on all potential new-hires. However, the company had become selective as a means of cost-cutting and had begun conduction investigations on only about one out of every five new workers. Because of the type of work the client performed, psychological tests were supposed to be administered as well, but the program had been discontinued as another means of cutting costs.

If the company had at the very least conducted exit interviews with departing employees, officials would have discovered that some of these people sought other employment to get away from the problem employee. This case also illustrated the importance of sticking with policies and enforcing them consistently.