On March 19, 2014, Toronto police arrested 3 York University employees in connection with an alleged fraudulent billing scheme. The alleged fraud has apparently cost York University more than $1.6 million over a 7 year period. The University became aware of the fraud through a whistleblower, and immediately engaged an external accounting firm to conduct a forensic audit, the results of which were provided to the police and led to the arrests. The charges have not yet been proven in court. Fortunately, York University has been able to recover the amount, although no details have been released regarding how the University was able to do so.
Recovery from fraudsters can be an extremely difficult undertaking. The stolen funds have often been used or placed in locations that are difficult to trace. One option to consider is fidelity insurance. This type of insurance covers financial losses sustained from an employee’s dishonest or fraudulent acts, and can be carefully tailored to a company’s specific business. Fidelity insurance coverage will require certain conditions to be met, most significantly that the employee: (1) intended to cause the direct financial loss and (2) to either personally profit or cause a profit to be realized by another party at the expense of the employer. Despite these hurdles, fidelity insurance remains a useful option for mitigating against employee-related fraud.