Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

ACFE 2012 Global Fraud Study Findings Relating to Occupational Fraud Prosecution and Litigation

The Association of Certified Fraud Examiners (ACFE) recently issued its 2012 Global Fraud Study entitled “Report to the Nations on Occupational Fraud and Abuse.” The Report provides an analysis of almost 1,400 fraud cases investigated worldwide and contains data and findings related to the nature and costs of global fraud.

As a forensic accountant specializing in litigation support services, I was interested in the legal proceedings and loss recovery efforts in the case studies. Following are some of the main report findings relating to criminal prosecutions, civil suits and recovery of losses relating to occupational fraud.

Criminal prosecution

In more than two thirds of the cases reviewed, the victim organization referred the case to law enforcement for criminal prosecution.

  • The median loss in these cases was $200,000 while the median loss of the non-referred cases was $76,000.
  • For those cases with a known outcome, approximately 15% of the perpetrators were convicted at trial, 56% pleaded guilty or no contest and less than 2% were acquitted.
  • For those cases which were not referred to law enforcement, the most commonly cited factor in the decision was fear of bad publicity.

Civil suits

Organizations are more likely to pursue criminal action when victims of fraud than they are to file a civil lawsuit.  In the fraud cases studied, less than one-quarter of the cases resulted in a civil lawsuit

  • The median loss in these cases was $400,000.
  • For those civil actions filed by organizations, the judgment was in the organizations’ favor in nearly half of the cases. The organizations settled with the defendants in 31% of the cases, and the judgment was in favor of the defendant in nearly 15% of the cases.

Recovery of losses

Although many of the legal proceedings were still underway, at the time of the survey 49% of the victim organizations had not recovered any losses. This percentage has grown from approximately 42% in the 2008 study and 48% in the 2010 study.

The entire Report to the Nations on Occupational Fraud and Abuse can be downloaded at www.acfe.com.

Henry+Horne