By Matthew Albert
Let’s face it, anytime you find out an employee is committing fraud in your company, it hurts. Obviously, it hurts your business by harming your bottom line. However, it can also hurt personally. You spend time vetting employees, hiring them, training them, and then they go and do something to betray all of that trust. Depending on how much trust you’ve placed in them, it can be even more frustrating than what you’d usually expect. Not to mention, it can also make you question just how watertight your operation is. For our last entry in our three-part series, we’re going to cover a source of fraud that sometimes hits on a more personal level–kickbacks.
Kickbacks
Kickbacks occur when your employees get bought off by outside influences. These outside influences provide something like illegal cash payments, bribes, concert tickets, sports tickets, fancy dinners, etc. In return, the employee provides preferential treatment to the outside influence.
Here is a generic example:
- You have two vendors pitching bids for your company–Vendor A and Vendor B.
- Vendor A does not have as good a pitch as Vendor B.
- So, Vendor A goes to one of your employees who is part of your decision-making committee.
- Vendor A gives the employee big bags of cash under the table in return for their “vote”.
- Your employee accepts the payment and then smooth-talks the rest of the committee (and you) into voting for Vendor A.
- The result? You agree to a deal that ultimately rips you off.
- Your employee, however, makes out like a bandit.
This scenario shows an example of a common kickback scheme called procurement fraud. It’s one of the most common kickback schemes out there, and it’s one you may have to sniff out at some point. If you have a crew of employees who share the same vision as you, they’ll be more than happy to alert you to something that’s fishy. Once they do that, let the investigation begin.
Epilogue
As we said at the start of this series, life was so much simpler when you had less to worry about as a budding entrepreneur. In a perfect world, we wouldn’t have to deal with fraudsters. Unfortunately, they’re real, but they’re NOT spectacular.
If you do find yourself investigating fraud in your company, remember that two of the most likely reasons the fraud is occurring are:
- You have employees who are living beyond their means
- You have employees experiencing financial difficulties of their own.
That shouldn’t be terribly surprising. If you’re pushed so far as to worry about your own basic survival, your threshold to follow the law decreases. Simply put, desperation motivates theft.
We’ve given you a lot to keep in mind, a lot to look out for, and a bunch of strategies during this fraud series. Remember, above all else, hire good people and train them to buy into your vision and mission. If you stick to these basic principles, you’ll collectively figure out ways to defend against anything that tries to derail you.