We found Out-law.com’s posted article (‘Judgement shows need for business to be proactive in preventing employee fraud, says expert’) a great illustration of why business must continue establishing proper procedures for preventing fraudulent activities from happening in their name.
This cautionary tale stems from a July 2012 personal injury claim following at car collision filed by a Mr. Dickson. Dickson was represented by Mellor Hargreaves but as it turns out, NFU Mutual Insurance (NFU) had already settled Dickson’s claim with Barber & Co (B&C) of Preston prior July to 2012. But since B&C didn’t act for Dickson, the firm was not entitled to settle that claim.
NFU brought the case against B&C and added B&C on the issue of cost as a third party into Dickson’s original claim. Subsequently, B&C sought to assign two former employees to the action for costs against B&C, alleging these employees were responsible for making a fraudulent personal injury claim.
Per the ruling, B&C acknowledged it had no authority to act on Dickson’s behalf since he was never a client and the medical report submitted with the claim NFU had previously agreed to settle was, in fact, a forgery. Former B&C employees Arif Barber and Yasin Bagas face disciplinary action in relation to the case.
While Judge Peter Hughes did order B&C to pay costs on an indemnity basis, he refused B&C’s request to link Barber and Bagas to the claim because the late application would widen the scope of the case. The connection between B&C and its former employees, however, could be sufficient enough for the firm to be held liable, suggested the judge.
In his ruling, Hughes said B&C “constantly stalled and obfuscated”, and had failed to assist those acting for Dickson and NFU to find resolution. Doing so had “materially delayed the resolution of the claim and added significantly to the costs”, he said.
Fraud expert Alan Sheeley from Pinsent Masons (the law firm behind Out-Law.com) said, ‘the judgment should serve as a disincentive to any firm that is not proactive enough in preventing employees committing fraud or responding to enquiries once a fraud has been discovered. It is clear that in the absence of proper steps being taken in response to the discovery of a fraud, a court will be minded to pin the employee’s actions on the employer.”
Shelley advises that to prevent fraudulent activities happening in an employer’s name, safeguards and systems must be in place to protect a name. The example of B&C supports this. Shelly goes on to say of employers “if they do not have experience in this area, then they should immediately seek external advice.”
Red Flag Reporting’s mission is to provide that external expertise with a proactive and proven safeguard systems through an online and telephone platform when employee fraud is suspected. Our simple yet simple yet highly effective ethics hotline, safety hotline, fraud hotline and whistleblower hotline. Red Flag Reporting helps protect your organization’s employees, goodwill, and bottom line.