Corporate fraud may be leveling off

Norcross company monitors allegations for companies

The company, Network Inc., said theft reports in the second quarter 0f 2009 accounted for 20.7 percent of all hotline activity within corporations worldwide, which was a slight decline from the first quarter of 2009, but slightly more than the 19.4 percent rate of alleged fraud called during the second quarter of 2008.

The Network helps corporations monitor alleged fraud and misconduct, as mandated by the 2002 Federal law know as the Sarbanes Oxley Act, which was passed in the wake of such huge corporate accounting scandals as Enron and WorldCom.

Over the past three years the company has recorded about 76,000 reports of corporate fraud received by the Network through "whistle-blower " network of  telephone lines and the Internet, and other contact points, in which the tips can be delivered anonymously.

According to the 2008/2009 Global Fraud Report — a survey of nearly 900 senior executives worldwide —   the average company lost $8.2 million to fraud over the past three years, up from an average of $6.7 million in 2006.

Network CEO Luis Ramos said this week  a mixture of factors might be driving the most recent fraud numbers. On the one hand, a tough economy is creating an environment where “employees make bad decisions resulting in theft and misconduct.”

At the same time, employees are more likely now to blow the whistle on somebody they suspect of fraud than they were during boom times, said Ramos, “because they want to make sure they don’t turn a blind eye to fraud while the company is struggling.”

Ramos said his company does not track how many of the allegations of fraud, often from anonymous tipsters, turn out to be true. “We simply turn the information over to the companies and they have their own investigations and deal with it internally.”

According to the Network’s “Corporate Governance and Hotline Compliance Benchmarking Report,” the industry with the highest rate of fraud reports was Finance, Insurance & Real Estate, at 15 percent. The service industry had the lowest rate of reported fraud, at 7 percent.

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