In April 2009 FBI opened more than 200 mortgage-fraud cases and 36 corporate-fraud investigations than in March, a by-product of the recession. FBI officials expect the number of cases to grow exponentially There’s pretty good evidence that white-collar crime, primarily embezzlement, increases during a recession.

A 2009 study on the topic by the Association of Certified Fraud Examiners revealed that more than 55 percent of its members performed more fraud-related investigations in 2008 than in 2007. About 50 percent of the respondents said known perpetrators reported feeling financial pressure before they committed the acts.

Yet the extent to which office employees embezzle, or commit fraud via mail or the Internet may never be fully known because:

• Area law agencies either don’t track such white-collar activity
• Most businesses don’t report such activities, let alone prosecute them
• Companies are ashamed that their processes and practices didn’t catch it
• Companies are embarrassed to concede they lost money due to lack of attention
• Companies that are small and don’t have the right systems in place to detect the activity
• Companies don’t want business partners or the public to know the extent of fraud therefore the authorities rarely get involved
• Companies determine that the unreported embezzlement schemes don’t merit any prosecution because the its only a loss of four or five digits.

The fraud examiner group’s recently published Report to the Nation on Occupational Fraud & Abuse, high-rolling companies reported median losses of $175,000 through embezzlement and other fraudulent acts. More than one-quarter of the instances tracked in the study, of 959 occupational fraud cases, exceeded $1 million.

The report projected that U.S.-based companies lose 7 percent of their annual revenue to fraud. If the figure is applied to the country’s gross national product, fraud arguably cost companies nearly $1 trillion between January 2006 and February 2008.

On the rise

Embezzlement is a common white-collar offense. Others include mail fraud, in which swindlers cheat victims out of money or possessions using a phony mailbox, and Internet fraud, in which someone presents fraudulent business propositions. Either way, perpetrators may have access to accounts or information that no one else in the business enjoys.

There is a need for checks and balances. There are stories of someone who’s been with the company for 20 years and all of a sudden, someone realizes they’re skimming money.”

The fraud examiners’ group suggests:

1. Be proactive. Managers and employees should have a code of ethics. Once such a code exists, company leaders need to enforce it.
2. Establish tight hiring procedures. Conduct thorough background investigations. In particular, if a candidate claims to have an accounting degree, either make them prove it or contact their listed universities or state accreditation agencies.
3. Listen for clues when checking references. Because so few white-collar crimes are reported, such workers can float from job to job without being punished. Yet rules regarding ways to report past employee behavior also make it difficult for a past employer to be candid when discussing the worker’s tenure.
4. Train employees to detect fraud, as well as report suspicious activity by customers and co-workers.
5. Look for incremental money discrepancies. For instance, most embezzlers start off by siphoning small amounts, say $200. If the company is losing small amounts of money over time, an accounts person may be improperly tapping a revenue source.

Often white-collar crimes may not be noticed until a new CFO comes on board.