Protect Your Business From Employee Fraud

Peter D. Anderson
Director, Litigation Department
December 1, 2003

In today’s environment of heightened awareness and prosecution of business related fraud, companies should act to insulate themselves against potentially devastating prosecutions. The United States Department of Justice has recently developed new guidelines regarding federal prosecution of business organizations. These guidelines apply to all types of businesses, including privately held companies. Many executives in privately held companies believe that since the Sarbanes-Oakley Act of 2002 provisions apply only to public companies issuing stock subject to Securities and Exchange Commission regulations, that they need not be concerned with internal compliance plans.

The guidelines refer to factors prosecutors should evaluate in deciding whether prosecution should be initiated against a business entity when suspected criminal activity has been engaged in by corporate employees. While there are nine factors for consideration, one factor that should be of concern to your business is the “adequacy of the internal compliance plan.” This factor focuses on a business’ internal self policing plan to detect wrongdoing and ensure compliance with all applicable civil and criminal laws.

An effective internal compliance plan should:

  • Clearly articulate the company’s policy of full compliance with applicable civil and criminal;
  • Describe reporting channels of suspected wrongdoing within the organization;
  • Include a document retention/destruction policy; and
  • Include a statement of confidentiality for those who report suspected wrongdoing.

Our Criminal Law Practice Group, working with our corporate lawyers, can help clients devise a corporate compliance plan tailored to meet the unique requirements of the new Department of Justice Guidelines.