As businesses expand and profits and revenues increase, so, too, do the threats of corporate fraud.
“When an employee begins stealing from his or her company, it starts small,” said Joel Charkatz, a certified fraud examiner with KAWG&F, an accounting and consulting firm with five offices in Maryland. “The problem is, the fraud snowballs.”
Corporate fraud has a staggering effect on U.S. businesses and organizations. Companies and groups such as nonprofits lose about 5 percent of their annual revenues to fraud each year, totaling about $652 billion, according to the Association of Certified Fraud Examiners.
Although law enforcement agencies diligently investigate and prosecute white-collar crimes ? the Maryland Attorney General?s Office includes a Criminal Investigations Division and a Securities Division ? officials often call on accounting firms like KAWG&F for assistance.
“White-collar crime is generally more difficult to prove than violent crime,” Charkatz said. “In financial cases, it?s not always clear who committedthe crime.”
Charkatz, who has investigated numerous fraud cases and is qualified as an expert witness in federal and local courts, will be asked, when fraud is suspected, to work with a law enforcement agency and examine a company?s financial records and controls.
In one “simple yet classic example,” Charkatz said, an area nonprofit hired a woman to be its part-time bookkeeper. The woman was paid about $5,000 a year and would write a check to herself at the end of each year. Soon after, when new officers were installed in the organization, the woman would write another check and ask a new officer ? unaware the woman had written one check ? to sign off on the second check. She was stealing about $5,000 a year from the nonprofit.
Charkatz urges businesses to have some form of employee dishonesty coverage and put several controls, such as multiple signers on checks, in place to prevent fraud.
