Your attorney’s role in a fraud investigation
Let’s say you suspect that your purchasing manager is embezzling from the company. He seems to live well above his means, driving a luxury car and buying expensive jewelry for his wife. He also acts cagey and defensive when asked about purchase order discrepancies. Yet you haven’t been able to prove anything.
This is a financial problem — but it’s also a legal one that requires your attorney’s expertise.
Protecting work from discovery
Your instinct may be to call your accountant to investigate. There’s some logic to that, but if there’s a chance you’ll take the employee to court or involve the police, call your attorney first. While you’ll need a forensic accountant, let your attorney hire the expert. That way, any of the accountant’s work obtained for litigation purposes likely will be protected under the work product doctrine — making it at least partially immune from discovery.
You’ll have to reveal your fraud investigator’s findings to pursue litigation. The advantage to immunity, however, is that you’re required to disclose only facts. You don’t have to reveal your accountant’s opinions, beliefs and strategies unless your legal counsel thinks it will help you.
Whether or not you end up in court, the fraud investigation is likely to proceed along certain lines. A forensic accountant will analyze available data to develop a theory, revise it as required and, ultimately, confirm it. While investigating fraud suspicions, forensic experts usually:
- Interview employees,
- Examine internal controls,
- Scrutinize financial records and transactions, and
- Retrieve and copy electronic files.
A review of your purchasing manager’s emails, for example, could reveal that he’s been using realistic-looking, but phony, invoices to keep his fraudulent activities out of sight of the accounts payable department.
None of this is information you’re likely to mind sharing with the employee’s defense attorney. But a fraud investigation will also include more sensitive issues. For example, if your accountant believes you were lax in establishing or enforcing fraud prevention policies, you don’t want that opinion to go public. By letting your attorney hire the accountant, you may be able to keep such opinions from hurting you in either a court of law or the court of public opinion.
It takes a team
The rules of evidence are strict and complex, and once broken can’t be repaired. That’s why it’s important to work with a team of both legal and accounting professionals.