In the complex world of publicly traded companies, transparency and adherence to legal standards are paramount. Unfortunately, instances of fraud can sometimes occur, slipping through the cracks of daily operations.
Qui tam actions allow individuals to file lawsuits on behalf of the government against companies committing fraud. In addition, your attorney may decide to file with the SEC, or the SFTC. These lawsuits and complaints play a crucial role in exposing these illicit activities. What should employees in the IT and finance sectors know about identifying and taking action against fraud?
What types of fraud might IT employees look for?
Employees in information technology, because of their close work with company technology and systems, may spot a variety of different issues that could indicate fraud. Some of these issues include:
- Failure to protect client or customer data: Protecting the data of clients and customers is not just a policy but a legal requirement. Any failure in data security can lead to serious problems, like identity theft and financial fraud.
- Failure to notify customers of data breaches: Transparency is key in maintaining trust. Failing to report data breaches could be a form of fraud.
- Omitting negative information or falsifying reporting data in SEC filings: The Securities and Exchange Commission (SEC) requires companies to share all information that could impact investors’ decisions. Leaving out negative information can mislead investors. This can manipulate stock prices, which is securities fraud.
What types of fraud might finance employees look for?
In the same way that people who work closely with technology may identify technological tells of fraud, employees in finance may notice inconsistencies in their daily work. Some financial issues include:
- Tax fraud: Deliberate misrepresentation of financial data to reduce tax liabilities is a serious offense. Finance professionals who notice discrepancies could be key to identifying tax fraud.
- Fraud in government contracts: This can include overcharging, charging for unmet services or misrepresenting the cost of goods and services. In addition, it may include failure t be candid during the negotiations or reporting processes, such as for benchmark payments.
- Accounting fraud in government contract negotiations: Changing financial statements to get government contracts under false pretenses not only damages the company’s reputation but also leads to legal consequences under the False Claims Act.
- Submitting false data to the government: Making up data sent to government agencies, whether it involves financial records, compliance reports, or other documents, can result in severe penalties.
- Monopoly, bribes, kickbacks: Although it is often sales personnel who obtain information on sales practices, Finance employees may also have access to such information.
- Import fraud: Failure to pay tariffs owed or falsification or the national origin of the material.
What can you do if you suspect fraud in your company?
If you think there’s fraud in a publicly traded company, keep detailed records of everything you see that makes you suspect fraud. Write down dates, times, names and details of any suspicious transactions or actions.
You should also think about talking to a lawyer who knows about filing whistleblowing complaints. They can explain the laws related to your situation and tell you about any protections – like remaining confidential – or rewards you might receive. They can work with you to research and prepare a detailed complaint for the government pursuant to the False Claims Act as a qui tam action or through the SEC or CFTC complaint process.
Qui tam actions serve as a vital tool for combating fraud in publicly traded companies, and they empower employees to act when they notice wrongdoing. By understanding the specific risks, employees in IT and finance departments can protect the public and seek financial awards.