CFEs' Pledge to Protect Employees


Fraud Magazine

James D. Ratley, CFE
ACFE President and CEO

A CEO is committing fraud. And many of the middle managers and staff members know it. What to do?

Corporate leaders have always faced pressure to tweak the ledgers to make the company goals. Since the Sarbanes-Oxley Act of 2001, organizations have implemented fraud hotlines and whistleblower protection programs to curb C-suite transgressions. However, as Bob Tie writes in Fraud Magazine's cover article, only when such resources are well-designed, implemented and managed do employees have the confidence to use them.

According to the ACFE's 2014 Report to the Nations on Occupational Fraud and Abuse, "Owners/executives accounted for less than one-fifth of all frauds, but the median loss in owner/executive cases was $500,000, approximately four times higher than the median loss caused by managers and nearly seven times that of employees." The median duration of fraud schemes perpetrated by employees was 12 months; by managers, 18 months; and by owners/executives 24 months, according to the report.

Clearly, Tie writes, organizations need to improve their employees' ability to report C-suite misbehavior. CFEs can offer guidance to employees who'll help fight fraud if they know hotlines are truly anonymous and responsive and they're convinced they'll be thoroughly protected if they come forward.

Tie quotes management consultant Warren G. Bennis: "A manager has a short-range view; a leader has a long-range perspective." 2012 ACFE Sentinel Award recipient Michael C. Woodford, then president and CEO of Japan's Olympus Corp., decided that he would be a leader and heed the fraud accusations of an anonymous Olympus employee reported in a Japanese business publication. Woodford confronted the company's board and forfeited his job. But his actions propelled the story into the media and the courts.

Tie writes that Woodford had performed well, but he wasn't born a leader. However, he became one by maintaining his integrity. "Because I was CEO of a large multinational corporation, it was much more likely that people would eventually hear me out," Woodford says in the article. "The real concern is how you make it easier to report wrongdoing for, say, a junior management accountant with three children and a big mortgage."

Indeed. CFEs' responsibilities go beyond just performing thorough fraud examinations. We have to actively encourage C-suite executives to protect employees who want to do the right thing. Our pledge to detect and deter fraud demands no less.

Read more about the fraud options of the C-suite on