Corporate Fraud: Diagnosis and Therapy

In a presentation entitled "Involving forensic experts to lay the objective foundations of a case", Róbert Melli, Manager of AAM’s Risk Management Services branch stressed that the professional and targeted collection of data, its analysis and presentation can promote speedier and more exact internal investigations, and can make cooperation with the authorities more effective. Speed and good organization from the part of the company is critical as if the presumed "perpetrator" has enough time, he/she will try to destroy or conceal evidence. Nowadays a relevant and investigated business transaction leaves so many "footprints" in the various integrated (IT) systems that complete destruction is quite rare; in the majority of the cases an experienced IT forensic experts can successfully recover the content of the transactions.

In a given case, the use of an external "forensic" expert by companies can integrate - through workshops - the information available, can present models and identify the data categories that can later on play a key role in understanding the possible fraud model. The speaker noted that inter-company investigative work can be safely carried out, without any risks, only with the involvement of a legal expert. The effectiveness of investigations can significantly be improved through the use of public and authentic data sources and the involvement of private investigators both in Hungary and abroad.

The forensic expert can also assist in creating the profile of the perpetrator, organizing the occasional HR screenings, the risk analysis of contracts and can even pinpoint conflicts of interests, internal and external collusion and unethical conduct in connection with a given suspicion.

In his closing remarks the speaker stressed the importance of educating employees and raising their awareness, that they keep their eyes open and report anomalies and atypical cases to their superiors.

László Burger, attorney of Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Ügyvédi Iroda, expanding his presentation entitled "Legal Risks of Information Collection" discussed the legal risks of gathering information in order to assist the uncovering of fraud. He presented the compliance mechanisms that should be used to prevent corporate fraud and corruption in general, and the details of fraud investigation.

The cross-border cases and the special nature of the available means, for instance, communications-technology, pose new challenges. Further difficulties are posed by the more complex nature of the matters, namely that the path of a given asset leads through several companies or several accounts, while the case evolve in a much shorter period.

The involvement of advisors is definitely necessary in the course of uncovering fraud, as the primary goal of the state criminal authorities is not to recover the assets of the company that became the victim of the fraud, but to apply criminal punishment ? At the same time, advisors follow the path of the money, and take the necessary steps to recover it.

The frequency of said actions lends sad timeliness to the topic in Hungary: the financial and mental effects of the global economic crisis, the social and moral crisis which has not eased since the change in political system in Hungary, and the simultaneously generated exaggerated and unrealistic consumer demands are seemingly released in some sort of private redistribution through corruption and fraud. What is more, the majority of the cases remain undiscovered; the crime statistics do not at all reflect the number of presumed problematic cases.

The speaker also discussed the internal investigation which must be carried out when the problem arises, the tasks that need to be completed during the comprehensive internal investigation, for instance, the review of certain types of information (e.g. certain contract groups), and the tasks related to securing evidence and drawing the appropriate consequences.

The task of the advisor during the criminal proceeding is to support the emerging internal conviction of the criminal authorities in the interest of successfully applying criminal sanctions; and, to assist reparation claims through investigative work. The speaker detailed the experiences gained through this kind of work, and how the forensic advisor, the representative of the injured party, the internal auditor and the authorities can successfully work together in practice.

In conclusion, the so-called Compliance programs were introduced in a wide scope, with the speaker particularly emphasizing the labor law, data protection, corporate law and contract law aspects of these as well.

The many questions from the audience and subsequent feedback indicated that genuine problems were discussed and that companies can minimize their direct and indirect damage arising from fraud with due knowledge and the involvement of experts.