Corporate Legal Services / Fraud Prevention-Investigation
Corporate Legal Services
Small and early stage businesses cannot afford to maintain a full time legal team to react to the occasional legal requirements the enterprise experiences. Having an outside resource as EPS provides the services on “as needed” basis at an exceptionally good value
The danger of crippling litigation should also be at the top of a business’ priorities. Legal headaches, especially in America can take a business owner by surprise and severely hurt the bottom line. Some of the most common legal issues facing small businesses in America are:
Disgruntled employees are one of the most common legal headaches. In America, employees have far more rights than other countries, in the form of unions and reasons for “wrongful termination”. If a non-performing employee is terminated, it’s important that he or she signs documents carefully drafted by an attorney upon termination to make the terms of dismissal crystal clear. Letting an employee go without any final termination forms leaves the door wide open for legal actions.
EPS can position ourselves between management and employees to provide a “third party” element into these difficult situations thus reducing direct impact to key executives and preventing department disruptions resulting from the challenges faced when dealing with difficult employees.
The legal ramifications of alleged discrimination – sexual, ethnic, age or otherwise, can cause a company serious problems. It’s essential that a company has access to knowledgeable and highly experienced legal resources to prevent, and when they occur, handle these sensitive issues. Victims of harassment and discrimination tend to attract lots of media attention, which can hurt a company’s public image as well as drain budgets. It is critical to be proactive to avoid problems before they start. Harassment – sexual, racist or otherwise – can be a serious problem in an integrated workplace with workers from various ethnic and religious backgrounds and social classes.
Company employees must be regularly screened to confirm that they can legally work in the United States. The U.S. government has been known to conduct extensive surprise immigration audits that can cripple a company if it is found to be using illegal labor. EPS conducts background checks, to identify illegal immigrants with falsified documents.
Copyright and Patent Issues
Cutting edge companies in the tech industry often face aggressive patent litigation. Companies often sit on patents for years, hoping that another company inadvertently violates them, to get easy money through patent and copyright lawsuits. Many small business fail to maintain trademarks thus losing them to other company’s or having brand names become a generic reference to a product that once was a trademarked brand.
EPS will assist in maintaining trademarks and investigates copyright and patents to be certain that the trademark is maintained or isn’t lost or is “genericized” (e.g. Aspirin, Cellophane, Dry Ice, Escalator, Flip phone, Kerosene, Kleenex, Thermos, Videotape, App, Touch-tone, Zip code, Zipper)
EPS also researches and thoroughly research the patents and copyrights of our client’s current product, to avoid a messy legal battle should a client steps on a competitor’s toes.
Customers who are dissatisfied can file class action lawsuits against a company, in which they gather in large consumer groups and attack your company over faulty products, services or promises. With enough dissatisfied customers, class action lawsuits can do more damage than any individual or corporation and irreparably tarnish your brand’s image.
EPS will assist by being proactive to keep a finger to the pulse of your customers through tech support, online message boards and e-mails. We assist by promptly issuing recalls for flawed products and to be prompt to address customer issues.
Other Legal Issues
These are only some of the most common legal issues facing small businesses today. Other ones include tax litigation (a whole other topic) and legal disputes with competitors and contractors. It’s essential that a client is proactive in solving these problems before they start, and have available a solid legal resource.
Fraud Prevention / Investigation
According to the Association of Certified Fraud Examiners annual report nearly half of all small businesses experience fraud at some point in their business life-cycle. It will cost these organizations an average of $114,000 per occurrence. Worse, such fraud is usually committed by a “loyal” employee.
Common types of fraud for business owners:
1. Payroll fraud.
The best way to prevent payroll fraud is to reconcile all balance sheet accounts and payroll records monthly or, at the very least, quarterly. Look for any discrepancies and investigate them until you have a clear answer.
2. “Double check” fraud.
As a business owner, it is difficult to find good accounting help, but it is important to have more than just one person signing checks and reconciling the bank account. Also, it is important to have an outsider come and look at the books and reconciliations at least annually, and at random times.
3. Over-ordering fraud.
The easiest way for this business to have avoided this type of fraud is to do the right thing from the start. Good employees pay for themselves on average tenfold, and bad employees can ruin companies. The result is an unhealthy work environment and a scenario where a “wronged” employee fells that it is“fair” to steal.
4. “Friendship” fraud.
This kind of betrayal is devastating to the business (victim) whose trust is violated, but can also be devastating to everyone peripherally involved, causing the business to shut down and all employees to lose their jobs. In some cases investors lose their money the reputation that the owner(s) work hard to build.
5. Falsification of expense claims – an old favorite with both senior and junior staff. Common ‘ruses’ include; inflating mileage claims, entertaining friends and relatives at the company’s expense and claiming for expenses never incurred.
6. Stealing money from the company bank account – the perpetrator having got away with this once, will try it again and again. There are cases where the perpetrator had been routinely taking company cash for some twenty years.
7. Manipulating sales figures so as to reach target and achieve bonus – a simple version of this involves booking sales in one month then crediting them back the next. Naturally, unless the perpetrator keeps this up, the overstatement in one month will be shown as a shortfall in the next.
8. Falsifying supplier invoices – one case I have on record involved a senior manager who had renovation work carried out on his house. He then arranged for the invoices to be sent to the company, booked as costs for work carried out on company premises.
9. Theft of inventory stock – a time honored way to make a ‘fast buck’. The perpetrator will over a period of time abscond with a number of items from the warehouse, and resell these. So long as the stock losses are within tolerance, then it is possible for this to remain undetected for a significant period of time.
10. Transactions that are not ‘arms length’ – when a company asks for tenders for a contract with a third party they usually obtain at least three quotes. The best value quote should then be selected. When the system does not run effectively, there is an opportunity for friends and relatives of the purchasing department to send in quotes that are accepted; bypassing the quotes from reputable suppliers.
11. Tax evasion – fraud on the corporate level. Excessively complex organisational structures are created, designed to obfuscate the revenue streams; and so hide reality from the tax authorities.
12. Fictitious invoicing – where there are poor accounting controls the fraudster can arrange for fake invoices from connected parties to be passed for payment.
13. Acquisition of company property at less than market value – this requires the collusion of at least two people (usually quite senior). Company property is ‘sold’ to one of the individuals at a bargain price approved by the other. The property is then resold at market value, and the profit split.
14. Theft of raw materials – manufacturers should measure the quantities and costs of the raw materials used in the manufacturing process. Some processes use expensive materials, such as gold. When the measurement system has been compromised, or management do not investigate adverse yield variances, the fraudster has the opportunity to steal the raw material.
Given the ongoing recession the temptation/pressure to commit fraud is even greater, companies and government organisations would be well advised to review their procedures.
EPS has engaged the services of several law firms for all legal / attorney services related to domestic and international law. Specific specialties include (but are not limited to), international law, contracts, real estate, indebtedness, criminal defense, tax. Fees for their services are quoted based on need and are billed / quoted separately from EPS project based assignments.