"It's so obvious in hindsight, why didn't I act sooner?"

These are the sorts of self-administered admonitions that we hear from clients who have discovered theft by a "trusted" employee. BRH recently assisted an employer to recover 100% of the monies misappropriated by an employee who had day to day management of the employer's accounts. It is uncommon for any recovery to be achieved, let alone 100%.

The happy ending was largely due to the fact that the employee "stashed" a significant portion of the misappropriated monies into the matrimonial home by paying down the mortgage. This, along with acting swiftly to get before the Court to obtain urgent orders to "freeze" the employee's assets, were key to the employer's recovery. If you identify an accounting anomaly and suspect a misappropriation of monies, here are some practical tips to enhance your prospects of recovery:

  • Act quickly but carefully in all aspects of dealing with the suspected misappropriation;
  • Conduct an internal review to establish if the anomaly is more than an accounting error;
  • Interview employees with responsibility for the business activity giving rise to the anomaly being sure to interview all relevant persons independently and to keep detailed records of interview;
  • If the anomaly cannot be explained as an accounting error, engage an external accountant to provide a report on the extent of the anomaly and to trace the misappropriated monies;
  • Retain a lawyer to advise on:
    • steps you may take to suspend or dismiss the employee;
    • a complaint to the Queensland Police Service;
    • conducting discrete enquiries to establish whether the employee has assets;
    • an application for urgent Court orders to freeze the employee's assets, particularly where the misappropriated monies can be traced to those assets; and
    • If the employee has assets into which the misappropriated monies can be traced, then simultaneously with the seeking of urgent Court orders to freeze the employee's assets, commence civil proceedings to seek orders to trace the misappropriated monies, for an equitable charge or lien over relevant assets and for damages.
  • Be aware that you may be faced with an offer by the employee to make restitution of the misappropriated monies on condition that you either conceal the employee's conduct or abstain from, discontinue or delay the prosecution of an indictable offence against the employee. Such conduct will amount to criminal conduct by the employer unless that conduct was for the purpose of:
    • Negotiations between a lawyer representing the employee and the prosecutor to achieve a just outcome;
    • Mediation in good faith between the employee and the employer or any one acting in the interests of the employer, in relation to an apology, compensation or restitution; or
    • Dispute resolution relating to the alleged offence.

In essence, the key to mitigating against the loss and disruption associated with employee fraud are:

  • Understand your business' accounting process and conduct regular reviews of the business to identify anomalies; and
  • In the event an accounting anomaly is detected which cannot be explained, promptly speak with your lawyer and accountant about the steps that should be taken to limit the impact upon your business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.