Firm launches fraud hotline service

So you have hunch a co-worker is dipping into the company’s money pot or that guy who has been recei

So you have hunch a co-worker is dipping into the company’s money pot or that guy who has been receiving workers’ compensation benefits is not really hurt.

Who you gonna call?

A local accounting firm is hoping white-collar tipsters call it instead of the police.

The BST Advisory Network earlier this week launched a subscription fraud hotline service that will field and process tips for area businesses.

Since Congress required publicly-traded companies to establish confidential reporting mechanisms for employees with the Sarbanse-Oxley Act of 2002, demand for fraud hotline services has increased.

BST, which employs 20 forensic accountants, for years advised clients to establish hotlines. But it only recently moved to develop that service in-house, said Chris Rosetti, a partner with BST’s Business Integrity and Forensic Service Group.

“You have to realize a number of [companies] don’t want to go to the police for reputation reasons,” Rosetti said.

Schenectady Public Safety Commissioner Wayne Bennett said he could understand why companies would turn to accounting firms rather than law enforcement agencies. By getting the police involved and pursuing criminal prosecution, companies are forced to “air their dirty laundry for public consumption.” That move might shake donor or shareholder confidence in a company.

Bennett, who headed the New York State Police before coming to the city last May, also acknowledged that state and federal law enforcement agencies have a limited supply of forensic accountants, who largely work on narcotics and terrorism cases. That restricts their ability to respond to investigate smaller scale white collar crimes involve sums ranging from $10,000 to $100,000.

Yet the idea of businesses not notifying the police about employees’ fraudulent activities does not sit well with Bennett, a 38-year State Police veteran. By side-stepping the criminal system and resolving fraud issues civilly, future employers might not learn about an employee’s criminal activities until it is too late.

“It’s a violation of the law, and there is a responsibility to bring it to the attention of the authorities for prosecution,” said Bennett.

Along with helping employers maintain control over fraud investigations, hotlines can reduce and more quickly detect fraud-related losses. Losses can also be recouped more quickly with auditor-assisted insurance claims or civil suits than with court-ordered restitution.

An Association of Certified Fraud Examiners study of 1,134 from cases between 2004 and 2006 found that companies with hotlines sustained a median loss of $100,000. Companies without hotlines lost $200,000. The median fraud detection time at companies with hotlines was 15 months, compared to 24 months at companies lacking them.

Occupational fraud costs U.S. businesses an estimated $652 billion in 2006. In the ACFE study, the median fraud loss was $159,000. But a quarter of the cases reviewed involved losses exceeding $1 million and nine surpassed losses over $1 billion.

BST staff will man the hotline daily from 8 a.m. to 5:30 p.m. Tipsters calling after hours can leave a voice message or submit a tip via a BST Web site. The firm will process those complaints and present them to their respective employers.

BST employs 115 at offices in Albany and Manhattan.

Categories: Business

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