September 5, 2002	Thursday	Jamadi-us-Saani26,1423

LONDON: Employees regarded as most trustworthy by managers are often the most likely workplace fraudsters, a conference on corporate fraud was told on Tuesday.

Julia Penny, an expert on corporate fraud at UK accountancy firm Chantrey Vellacott, told the conference in London that the majority of corporate fraud is committed by staff within a company, frequently by long-serving employees in positions of responsibility.

“It’s often the staff member that everybody would trust with a blank cheque who is likely to be defrauding their employer,” Ms Penny said.

“Typically, management’s attitude is that ‘our staff are too honest to defraud us’. They bury their heads in the sand, thinking fraud will never happen in their company, or treat it as something that they are powerless to prevent.”

A recent study by accountants Ernst & Young found that more than half of the companies it surveyed had been victims of fraud within the previous 12 months.

According to the study, more than 80 per cent of the most significant fraud had been committed by the companies’ employees, half of whom had been working at the company for five years or longer.

Backhanders for awarding valuable contracts, placing “dummy” employees on a payroll and falsified expense claims are examples of fraud committed by staff.

“The reality is that fraudsters can and do exist at all levels in an organization, from the boardroom downwards,” according to Ms Penny — a reference to the massive corporate fraud uncovered at US companies Enron and WorldCom, which appears to have involved senior executives.

Ms Penny believes many listed companies are reluctant to report fraud because they are worried about bad publicity.

As a result, many staff discovered to have committed fraud are simply dismissed. That sends a message to other staff that they can commit fraud without fear of prosecution.

London’s Metropolitan Police’s specialist crime unit estimates that nearly two-thirds of the corporate fraud incidents it investigates could be prevented if companies used sound internal controls.

Ms Penny says companies can take steps to deter internal fraud — including rotating the staff members who deal with contract tendering to reduce the chance they will build an unhealthy relationship with suppliers.—Dawn/The Guardian News Service.