2. CALLING THE COPS:
ACCDocket 31 October2008
A few jobs ago,I was assigned to investigate one of our company’s top sales-
men. Someone reported anonymously that the salesman—a top
earner in the company for the past five years—had submitted
bogus sales contracts toward the end of the year to meet his
revenue targets and collect his annual bonus. The company paid
bonuses based on anticipated, rather than collected, revenue.
My subsequent investigation proved that many of the sales-
man’s customers did not really exist. As to those few who did,
we determined that the salesman fronted each customer’s first
payment under the contract. Either way, it was the intention of
both the salesman and the customers that the contracts were to
be breached and terminated soon after the salesman received
his bonus. Until we uncovered the scheme, the company had
already paid the salesman more than $50,000 in unearned
commissions and bonuses. When confronted with the proof
I gathered through the investigation, he reluctantly admitted
his wrongdoing, explained how he did it, and was immediately
terminated. After reporting my findings to senior management,
they told me they wanted to “throw the book” at him.
My experience as an investigator has taught me that addi-
tional skills are needed to manage management expectations
when getting the police involved, while also maximizing the
possibility that the investigation’s findings will result in a pros-
ecution. Sharpening these skills gives investigators one more
opportunity to showcase the value we bring to our companies.
It is a fact of corporate life that some investigations show
that your company was the victim of a crime. In my case, the
fraudster even admitted it. If you view your investigative role
as a meaningful corporate fiduciary, then your next step is to
decide what to do with the findings. Management usually faces
three options: reporting the matter to the police—local, state,
or federal law-enforcement authorities—for possible prosecu-
tion; filing a civil lawsuit; and/or pursuing claims informally
against third parties and their insurers.
re You Dial
3. ACCDocket 32 October2008
If your company is typical, when crime is
suspected, your management will want the police
to swoop down, make some arrests, and cart the
bad guys off to jail. It is an understandable senti-
ment, but it is not very realistic. If management
wants to press for possible criminal action against
the wrongdoers, they must be counseled care-
fully. The company must consider the benefits
and risks of this important step.
A cautionary note: Any law enforcement
agency will likely take your company’s report of
criminal activity if it falls within their jurisdic-
tion. The focus of this article, however, is mov-
ing the matter beyond this initial step, leading to
a criminal investigation and eventual prosecu-
tion of the people who victimized your company.
Business Goals
The referral of the matter to the police should
never be simply a knee-jerk corporate reaction.
The referral must further some business purpose.
My former company was led by some hard-charg-
ing executives. Some wanted the salesman to go to
jail as both a punishment to him and to serve as
a deterrent to other salesmen who might be simi-
larly tempted. Other bosses didn’t care about jail,
but wanted us to recapture all his commissions
and bonuses. Others just wanted the problem to go away,
thereby avoiding negative publicity.
These competing views are not unique. The lesson to
us is that, in our roles as corporate advisors, we must help
identify the company’s business goals at the outset and
before referring the matter to the police. For example,
does your company simply want the satisfaction of having
reported it to the police, regardless of what happens after
the report is made? Don’t laugh: This can be useful if
the company wants to publicize the incident internally to
raise the “perception of detection” as a deterrent to others.
Would the arrest of the wrongdoer be sufficient, regard-
less of whether he is convicted? Does your company want
the wrongdoer punished or to send a public message to its
marketplace? Your company must first make this deci-
sion as it affects your internal preparation of the referral,
as well as the amount of resources your company should
expect to devote in order to achieve its desired result.
The Company’s Reputation
Although executive management may feel that they are
vindicating the company’s rights by contacting the police, it
is nonetheless a public act. People are going to find out about
it. If the wrongdoing was enabled by some internal business
failure, the company will be announcing that failure to its
customers and competitors. The company may
also be saying, although indirectly, that it has
hired dishonest people. This may lead to ques-
tions by shareholders and the marketplace about
the competence of your company’s management.
On the other hand, your company may view
the referral as an act of institutional hygiene,
and that it shows that the company is commit-
ted to the highest ethical standards. It may also
highlight the efficacy of your company’s com-
pliance program and fraud investigators. The
referral shows that compliance-minded senior
managers “walk the talk.” It is also important
to fully consider the varying perceptions that
the referral will have, and for your executive
management to make an informed decision.
Contacting an Agency
My former employers decided that the sales-
man should be prosecuted. My next question
was to which law-enforcement agency should I
report the matter?
Naturally, you want to choose the best agency
to handle your case. Remember, however, that
your choice may be among a number of law
enforcement agencies with jurisdiction. Federal
criminal laws cover most of the criminal miscon-
duct committed by company employees, including various
types of fraud, interstate transport of stolen property, com-
mercial bribery, intellectual property crimes, and racketeer-
ing. State criminal laws cover most of the same conduct.
Therefore, a criminal act that can be prosecuted by federal
authorities may also be prosecuted by state or local ones.
Take the time to choose the right one in light of the nature
of the crime, its complexity, the dollar amounts involved, and
the location of the incident. Although your executive manage-
ment may feel comforted to know that a high-profile agency
like the FBI or Secret Service has the case, a referral to local
or state police, while less glamorous, might produce a faster
and more meaningful result for your company. After some
consideration, my former company decided to go to the local
police. In this case, we felt that the local police, who might
be impressed with the dollar amounts at issue as well as our
promise to actively assist them throughout the case, would be
more willing to take on the task of prosecuting the offender.
However, avoid the temptation to shop your case around
to a number of agencies. One of the first questions you will
be asked when the report is taken is whether any other
agency has been contacted. Whether for reasons of resources
or turf, many agencies do not take a case that another agency
is handling, even if that other agency only took some initial,
nominal steps. This is also why the decision to contact the
MERIC CRAIG BLOCH
is vice president—
corporate investiga-
tions for Adecco S.A.,
the world’s leader in
human resources and
staffing services. He
acts as the compliance
officer for Adecco’s
operations in North
America, conducting
internal investiga-
tions, managing the
internal investigations
process throughout the
company, and training
employees in key
internal departments to
conduct investiga-
tions. He is also the
author of An Insider’s
Guide to Workplace
Investigations: Build
the Process in your
Company and has writ-
ten a number of articles
for the compliance
industry on investiga-
tions topics. He holds a
BA and a JD from New
York University. He can
be contacted at meric.
bloch@adeccona.com.
4. ACCDocket 34 October2008
police and the initial contact must be coordinated by execu-
tive management. A well-intentioned manager who called the
police to make a report when he first suspected wrongdoing
may preempt you from later getting any other agency—
especially a more appropriate agency—to take the case.
Timing
Time your initial contact properly. Do not contact the
police prematurely. The police cannot investigate every
allegation, so wait until you have developed sufficient facts
to explain—and document—what happened. Do not expect
the agency to do the fact-finding. Instead, put your investi-
gation report and supporting documents to good use.
Remember, the investigation will only be one matter that
competes for the resources of the police. Their world is a
fluid one, full of unexpected shifts in resources. Business-re-
lated investigations often give way to more urgent police mat-
ters. Police detectives and government agents are busy with
many matters under investigation and prosecution. Unless
the magnitude of the misconduct is such that it is deemed
a priority, the investigation will proceed as resources allow,
and that may mean waiting for an extended period of time.
Sympathy
Most of us conduct our investigations on behalf of our
corporate employers. While the people who supply the
capital to those corporations are very real, the corporation
may appear to most as a faceless monolith. It is, therefore,
essential that you make your company appear sympathetic.
This might be a challenge. On a daily basis, police and
prosecutors deal with violent crimes and similar inhuman-
ity. Those victims motivate the authorities. The authorities,
in contrast, may view the crime you report as the result of
poor business practices that created the opportunity for
the problem rather than seeing the company as someone’s
victim—the equivalent of leaving the front door unlocked.
If your company has a well-developed compliance program,
this is a good time to emphasize its role in the company. An
effective program shows that the company takes proactive
measures to ensure that it and its employees act ethically,
and affirmatively prohibits the conduct in question. Your
company may then be perceived as having been victimized
despite its own efforts to protect itself.
Case Complexity
When you do get the opportunity to present what your
workplace investigation found, don’t let your case appear too
complex. In the case of our fraudster salesman, I could not
afford to lose the detective’s focus with elaborate explanations
about how revenue is recognized, how quarterly sales targets
are calculated, and how the company’s management quali-
fies potential customers. You must be able to summarize the
case in one sentence. Keep it simple. Otherwise, there is little
realistic hope that it will be meaningfully investigated.
The police deal with serious crimes on a daily basis. It is
relatively easy for them to assemble the evidence to prove,
for example, the elements of a robbery. This is their world.
The corporate world, with its policies, compliance processes,
hierarchies, and business units, is not that familiar to them.
Similarly, don’t expect the police to embrace the com-
plexity of your business operations as a chance for them
to expand their personal knowledge. Most lack a business
background, and don’t expect them to confess to you that
they do not understand the machinations of how you do
business. Consequently, and considering that they may
have more open case assignments than they can manage,
they may stay with what is familiar to them, focusing on
those matters, and ignore your report.
You must be prepared to overcome their reluctance. One
way to do this is by “gift-wrapping” the investigation. Marshal
the known facts into an objective report and organize copies
of key documents. Document the chain of custody for them,
build a paper trail or chronology of what you believe hap-
pened, provide a list of witnesses, and offer an expert witness
from your company, if necessary. In addition, prepare charts,
graphs, maps, and other demonstrative aids, and be prepared
to break the incident down into simple terms that they can fol-
low. Also be prepared to identify potential problems or factual
gaps. The more complete and documented your package of
information, the more likely it is to be selected for prosecution.
It goes without saying that you should present the case
to the police personally, not over the telephone. Making an
appointment to personally present your case will demon-
strate your company’s commitment to the process.
Cooperation
Be prepared to cooperate fully. Although you may not
always have the opportunity, depending on the agency, you
should try to expand your role from that of a victim repre-
sentative to being part of their investigative team.
Assign a single point of contact to facilitate all company-
related inquiries and to ensure quick access to people, doc-
uments, and information. Offer to be a company translator,
guide, and intermediary for the police. Get senior managers
involved to show their commitment. Most importantly,
remember that the police and prosecutors will approach
the case in terms of probable cause and burdens of proof.
Everything you do to help them address those factors in-
creases the chances that your case will be prosecuted.
However, be prepared to surrender all control over the
investigation after the referral. The police may also insist
that the company take no further action on its own—
such as a civil lawsuit—to avoid compromising a possible
criminal prosecution.
5. ACCDocket 35 October2008
For some significant investigations, you should also
recognize that the criminal investigation may interfere
with the company’s day-to-day operations. The police may
need access to computer systems, personnel, and business
records. Your investigation, however comprehensive, does
not prevent the police from making their own inquiries,
and they likely will anyway.
Prosecutor Resources
If the investigation is fruitful, the evidence will then be
reported to the appropriate prosecutor. This is a crucial
step in the process. While your agency may have done an
excellent criminal investigation, your goal is to prosecute
the wrongdoers.
With limited resources, the prosecutor has broad dis-
cretion to decide not to prosecute, even if the company and
the police believe the case is a compelling one. The prosecu-
tor is not obligated to prosecute someone simply because the
police did an investigation and thinks a prosecution is war-
ranted. Acknowledge this reality and help build a case that:
is attractive to a jury,
presents the company as a sympathetic victim, and
has sufficient proof to justify a verdict beyond a
reasonable doubt.
Don’t be afraid to use some salesmanship. If your case
has some hook to catch the prosecutor’s interest—dollar
amount, organized-crime involvement, headline-grabbing
facts—be sure to emphasize it.
You must remember that the government—state, local,
or federal—has different objectives than your company.
They are focused on righting wrongs against society, not
the specific wrong done to your company. Your company’s
goal could be sidelined by plea bargains, cooperating testi-
mony, tradeoffs to get your fraudster to testify against oth-
ers deemed more culpable, and political factors. External
factors, such as national-security demands on federal agen-
cies, may also affect the results your company seeks. The
prosecutor may make decisions about charging, settlement,
or strategy with which your company may not agree.
Be Realistic
You must be prepared to temper management expecta-
tions. Although we built a pretty tight case against
the salesman, the county prosecutor never moved forward
on it. Focus on what it takes to capture your prosecutor’s
interest in prosecuting the wrongdoers. This may not be
easy. Due to demands of police, prosecutors fail to pursue
75 percent of bank check fraud cases. According to the
US Government Accountability Office, in large cities
where a majority of resources are used to prosecute vio-
lent crime, that percentage rises to 90 percent.
You must, therefore, educate your managers on the real-
istic outcome of the referral. Their vision of someone being
led out in handcuffs—known as the “perp walk”—will
rarely occur. The time needed for these prosecutions will
not usually be as quick as management would like. Minor
offenses may not be severely punished and jail time may not
be likely. Senior managers must understand that referring
the matter to law-enforcement authorities may neither
bring a prompt resolution of the matter nor will it neces-
sarily bring prompt restitution. There is just no “magic
bullet” to help a company that is victimized by crime.
Criminal Recovery and Restitution
The criminal courts provide for victim restitution, and
this is frequently ordered as an attempt to make the victim
whole. In reality, this is ineffective for your company as
few defendants ever pay any of the restitution they have
been ordered to pay.
Do not look to the criminal courts to recover from
those who steal or commit fraud against your company.
You are asking for disappointment. Also, do not allow your
company’s leadership to make the criminal court system
part of your recovery strategy.
Resolve Your Business Problem First
The lesson I learned from my investigation of the sales-
man is that contacting a law-enforcement agency when
you believe your company is a crime victim should never
be considered as just another step in your company’s
incident-management process. Solve your business problem
first. Identify the areas where the business processes need
to be improved, hold the appropriate employees account-
able, resolve the external problems with your customer or
vendor, and then contact the police if the company wants to
prosecute. And if executive management fully supports the
referral and appreciates its benefits and risks, your efforts
may be worth it.
Have a comment on this article? Email editorinchief@acc.com.
ACC Extras on… Risk Assessment
Looking for ways to avoid crime in the first place?
Come to ACC’s 2008 Annual Meeting from October 19-22
in Seattle, WA and sign up for any of the numerous ethics
courses that are being offered. Attend session 607: Ethics
in Practice; session 702: Personal Liability Risks Facing
In-house Counsel; or session 801: Ethics SuperSession.
Plus, all of these courses are eligible for CLE ethics credit!
Register today at http://am.acc.com.
