If fraud is discovered within your company, you want to be sure you’ll be able to get back the diverted assets. Therefore, it’s crucial that you tell as few people as possible about the fraud. After all, you’re not sure yet who may have been involved in the fraud. The fraudster must be prevented from learning about your discovery and then destroying evidence and/or further diverting the property.
Time is of the essence. Get a lawyer and an external investigator on board as soon as possible. In light of the lawyer-client privilege, it may be useful to have the lawyer furnish the engagement to the investigator. Based on the available information, the investigator will provide as good an overview as possible of the fraud.
Make Discovery Request
Insofar as information, such as transaction data from bank accounts, from third parties is necessary and not provided voluntarily, your lawyer may file an application with the court to inspect the information, preceded, if appropriate, by a seizure of evidence. If the assets turn out to have been diverted out of the country – a frequent occurrence – information from other jurisdictions will generally be needed, too. Gathering information in different jurisdictions requires good coordination and collaboration, because, in jurisdictions like the Netherlands, a discovery request is not made ex parte and the fraudster may unintentionally become aware of what’s going on. For the same reason, it’s sometimes better to hold off on taking seizure measures.
Recover the Assets
Initiating criminal proceedings in addition to civil recovery (or other) proceedings may have added value. As a rule, the company, as the aggrieved party, will gain access to critical information from the criminal file, which may be used for a liability claim or settlement to be reached, and may be the beneficiary of confiscation orders demanded by public prosecutors. We recommend having the civil and criminal lawyer concerned coordinate this properly.
Conduct an Internal Evaluation
Besides an investigation into the fraud that has been committed, the company will have to find out how it was possible for the fraud to occur. Hence, aspects of the administrative organisation and internal control will need to be examined within the context of the internal governance investigation. “Lessons learned,” which may serve as a basis for implementing points for improvement, may emerge from the report.
Develop External Messaging
Depending on the nature and scope of the fraud and the market’s awareness of this, external statements may be made that the company is “on top of the matter,” has initiated an internal or external investigation, and is awaiting the results of this investigation. The idea is to be cautious about making announcements about people possibly involved in the fraud, as this can cause unnecessary damage.
Take Liability Action
After the facts have been set out carefully, and the people who were part of the investigation have been given the opportunity to state their positions through a process in which both sides are heard, a liability action against the perpetrators of the fraud may be expedient. The elements of such an action will partly depend on whether or not the property spirited away has been successfully tracked down and recovered. This may take the form of civil proceedings to obtain compensation for the damage, a settlement to be reached (with the insurer’s assistance) or a well‑considered choice not to take further legal measures. The action that best serves the company’s and its stakeholders’ interests, in these circumstances, will become apparent through an informed decision-making process, best coordinated by the general counsel.
Translated from an article published in Dutch by the General Counsel Netherlands.