Posted on Thursday, February 26th, 2009 by Frank Suponcic, CPA, CFE, CFF
At last fall’s OSCPA Accounting Show, I addressed a breakout group of several hundred participants on the results of the 2008 American Institute of Certified Fraud Examiners (AICFE) Report to the Nation.
One of the more surprising highlights of my talk was the fact that, according to the Report, the most common fraud scheme was corruption. Corruption is more commonly associated with conflicts of interest, bribery, kickbacks, bid rigging, illegal gratuities, and even extortion.
Aside from the material damages associated with financial statement frauds, the financial damages resulting from corruption schemes ranks #2 in “Median Loss” according to the AICFE.
Corruption cases usually occur for two years before the smell of impropriety rises and the scheme begins to unravel.
As a result of multiple players, corruption cases are one of the most difficult types of case to prove and certainly one of the most time consuming to compile (from an investigator’s standpoint). Locally, in September of 2008, the Cuyahoga County Government investigation was well underway. The idea of government corruption, political kickbacks, bid rigging, friends on the payroll, and political favors were fresh in the minds of all attendees.
Yet, while the Cuyahoga County investigation was unfolding locally, and has yet to be completed, the AICFE Report was of national proportion. It’s just that now, those residing here in Cleveland, have a real sense as to what has been happening across this country for so long – or at least long enough to merit the attention and esteemed high fraud ranking of the AICFE.
It’s unfortunate, but in this day and age, corruption occurs in private, not-for-profit, and governmental organizations everyday. In order to minimize the likelihood of corruption occurring in your organization, the best defense remains working with a litigation advisory services professional to implement effective internal controls and whistle blower programs.