Corruption and fraud - the basics

Basic steps in the investigation of corruption and fraud

A basic, ten-step approach that illustrates the skills and procedures needed in the typical complex corruption and fraud case is described below.Much more detail on the ten steps is provided in our Investigating Corruption and Contract and Procurement Fraud seminar programs.

"THE 10 BASIC STEPS"

ONE         BEGIN THE CASE

If the case begins with a report, fully debrief the informant, getting as much detail as possible.

If the case begins with a red flag, match the red flag to the potential scheme(s) and then look for other red flags of the scheme.

Determine if the necessary data is available to conduct a "proactive" search for fraud.

If confidentiality is a concern, determine whether to proceed under the Attorney Client Privilege and Attorney Work Product Doctrine.

Determine if fidelity bond (employee dishonesty insurance) coverage is available and, if so, file the necessary notices of a potential claim.

If a government contractor is investigating its own potential wrongdoing, decide whether to self-report under a voluntary disclosure program.

TWO        TEST THE ALLEGATIONS

Look in the files of the investigating organization for preliminary confirmation or rebuttal of the suspected scheme.

THREE     DO BACKGROUND AND ASSET CHECKS

Do public record and other background checks on the suspect employees and contractors.

FOUR       EVALUATE PRELIMINARY INFORMATION, etc.

Review the results of the investigation to determine if there is adequate “predication” – a factual basis – to proceed.

Prepare the initial “case theory”, start the case chronology, and begin to organize the evidence according to the elements of proof of the potential claim(s).

FIVE        COMPLETE THE INTERNAL INVESTIGATION

Complete the collection of documents and interviews within the investigating organization. Determine if an early interview of thesubject(s) is warranted.

SIX          BEGIN THE EXTERNAL INVESTIGATION

Interview witnesses outside the investigating organization, proceeding from the disinterested, cooperative witnesses to the “facilitators” to co-conspirators to the subjects. Request or compel documents from third parties and the suspect contractor(s) through negotiated agreements, audit rights or, if available, subpoenas.

SEVEN     PROVE ILLICIT PAYMENTS

Determine the best strategy to prove illicit payments – out from the point of payment (the contractor’s records) or back from the point of receipt (the suspect employee’s records) and begin the tracing process. Look for an inside witness to turn.

If it is not possible to prove the corrupt payments directly, try to prove them circumstantially by showing unexplained excess income or expenditures.

EIGHT      INTERVIEW THE SECONDARY SUBJECT

In a corruption case this is often a middleman or the suspect payer.Interview the secondary subject to obtain a confession and their cooperation, by negotiated agreement if necessary.

NINE        INTERVIEW THE PRIMARY SUBJECT

Decide if there is sufficient evidence to obtain a confession.If not, ask questions to learn and rebut possible defenses.Request pertinent financial and other personal records.

TEN         CHOOSE REMEDIES, DRAFT REPORT

Decide what remedies or actions are appropriate: personnel or administrative action, termination of contracts, a civil action for damages, or a criminal referral. Prepare a final report, organized according to the required elements of proof for the desired actions, with recommendations.

Contract and procurement fraud schemes and red flags

How to detect corruption and fraud

Basic steps in the investigation of corruption and fraud

Representative U.S. fraud and corruption statues and their elements of proof

How to prove fraudulent knowledge and intent

How to refer a case for criminal prosecution

 

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