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Mistakes to Avoid When Investigating Losses in Your Business

Finding out that you have dishonest individuals working in your company will evoke a series of natural emotions. Ultimately it’s a discovery of betrayal, and that hurts business owners and colleagues to the core.

After all, when you discover criminal behaviour conducted by people you trusted, looked after and - in many cases - know their families, it is absolutely gut wrenching.

The biggest problem you face is deciding how to deal with the suspects. This is where caution and levelheaded thinking needs to come first. For many managers, business owners, and board members the initial discovery is enough to send them into a blind rage, including confronting the suspects openly.

From my personal experience as head of South Africa’s largest Private Investigation and
Fraud prevention company, I offer the following advice…

What Not To Do

While you will be tempted to confront the individual/s, statistically your chance of getting any valuable evidence or confession is less than 13%. Even when a confession is perhaps obtained, if taken down incorrectly or without following the correct procedures, the chance of success in a disciplinary hearing is all but lost.

Furthermore, without investigation experience or criminal investigation skills you probably won’t establish the full cycle of criminal behaviour that exists. In the case of fraud, having access to a fraud investigator is definitely your best bet.

Threatening to instantly fire/dismiss the suspects generally only comes back to haunt you. Most fraud culprits or union-controlled suspects will almost always call your bluff and demand you provide strong evidence against them. In the case if union members I have seen threats of mass action and strikes bring an investigation to a grinding halt.

Don’t immediately call the police. Chances are the local police constable at your local police station won’t understand your business crime complaint. Even more so if the crime happens to be fraud. The vast majority of uniformed policemen have had no fraud or accounting fraud experience.

Do not have anyone arrested before concluding your internal process, which your HR department and HR manager should handle. Unless you are using a labor consulting or law firm. Arrests should only occur after your internal disciplinary procedures have been completed.

This, however, is different in the case of serious or violent crime, in which case summoning the police is very much recommended.

Relying on managers or other members of staff with no experience in conducting business investigations and investigative interviews is another way of tripping up your own investigation. Interviewing suspects without the correct recording equipment and statement recording process in place will lead to failure to prosecute and land you in hot water from a labour law perspective.

Why Do Companies Jeopardise Their Investigations?

Mostly because emotions overtake rationality and people react. The voices in your head say “screw this I want answers now, heads have to roll”; and that’s when we lose the advantage of surprise and territorial control.

So, What Should You Do Instead?

To put your company into the best possible position you must not only catch the culprits, but also uncover as much evidence and information as possible to successfully defend any CCMA challenge. To achieve this, you must consider the following...

Upon learning about the ongoing thefts, losses, and or fraud taking place in your company involving your employees, take a deep breath and carefully consider your options. My advice is to pick up a phone and call a professional Private Investigation company that specialises in business and corporate investigations. Make sure that the company you are contacting has specialist criminal investigators on staff, not just regular PIs.

Present your suspicions and accusations to the Investigators before confiding in anyone else. A professional Investigation company with adequate experience will certainly be able to advise on the next step, and the best possible strategies to handle the situation.

My experience is that the best results in securing evidence of theft and fraud are obtained when the investigation is kept a complete secret from all. Alerting suspects to you knowing or suspecting something only gives them time to hide evidence and cover their tracks. A professional investigator will always pursue the element of surprise with the greatest discretion.

However, there will be instances of criminal behavior that require a direct and open approach. In this scenario, the investigator will usually begin with full one on one investigative interviews. These are mostly backed up with polygraph tests on all relevant parties.

The seasoned Private Investigator with adequate experience will also introduce a couple of undisclosed “tricks of the trade” during his or her interviews phase.

In the event of an investigation requiring more time and further enquiries, you must allow this process to take place. Remember, a rushed investigation will lead to problems later on.

A further advantage to bringing in independent investigators and perhaps fraud examiners is that their opinions and findings are based on fact not assumptions or emotions. Something that I always warn my clients against.

Calling the police before completing your own internal investigation is a huge mistake. Private investigators do not want to try sort out the mess left by inexperienced policemen with little to no knowledge of complex business crimes, especially fraud.

From an HR perspective it is best that once an investigation is completely done, you schedule your disciplinary hearings. Once that is out of the way any criminal charges you may want to proceed with can then be registered.

Remember, if the police take your employees away and arrest them, only to have the case dismissed by a magistrate and you have terminated their employment contract you are left with a huge problem. Unfair dismissal cases will line up fast and furiously.

In the event of polygraph tests being carried out, please keep in mind that when an employee returns a result of DECEPTIVE it is NOT an automatic license to dismiss. The prosecution labour law in South Africa does not accept a DECEPTIVE polygraph result as sufficient evidence to dismiss someone.

The lie detector test itself is merely a tool in the investigation process. Savvy Private Investigators and HR managers will use the lie detector as a way to confirm suspicions and isolate suspects. From there the investigator will then begin with building evidence for the case.

In terms of South African law, the evidence presented at company disciplinary hearings need only show a strong position of Balance of Probability. In other words, you do not need to prove Beyond Reasonable Doubt, as is the requirement for criminal prosecution.

Therefore, when building your evidence for an in-house investigation, the investigating officer will focus intensely on showing that in all probability the suspect was guilty of misconduct, theft, or any other serious offenses.

To Summarise

  • When first hearing or discovering that you have people in your company that are causing you significant losses through theft and or fraud, sit back and think
  • Do not discuss the issue with anyone just yet
  • Consider how you learnt about the crimes or whether there is an informant with ulterior motives
  • Contact a reputable Private Investigation company, white a seasoned track record of handling civil and criminal investigations in the business sector
  • Carefully consider what the investigators have to say and thrash out their ideas thoroughly
  • Remain calm, do not let the rabbit out of the hat too early
  • Allow the investigation process, such as polygraph tests, interviews, etc. to run their course
  • Prepare your case with the Burden of Proof in mind (remember South African law only requires The Balance of Probabilities to be shown in company disciplinary hearings)
  • If you want to then bring in the police, only do so after completing your own disciplinary process

 

For more information, or assistance with a loss investigation, contact us: at saint@intrigue.co.za or by phone on 011 824 0334.

About the author: Kyle Condon - Grad of I.S (SA) is a founding member and Managing Director of D&K Management Consultants. This second-generation Private Investigation and Fraud prevention company assists businesses and individuals to handle various criminal and civil investigations. After more than 27 years in business Kyle is regarded as one of the country’s leading minds on business crime and investigations. Kyle is a regular contributor to local newspapers and television news. He is also the Regional Director (Africa) on the Council of International Investigators (CII)

 

Contact Kyle Condon on saint@intrigue.co.za, follow him on Twitter @investigatorsZA or visit www.investigators.co.za.

About D & K Management Consultants CC

Established in 1993 by Declan and Kyle Condon – the legacy of the Condon family with their many years of investigative expertise still strongly governs the running of the company today.

Phone: 082 820 5363

Email: saint@intrigue.co.za