BusinessCorporate FinanceOn the money with Gavin Hinks

On the money with Gavin Hinks

It’s been a great week for sending finance directors to prison

Gavin Hinks, AccountancyAge

First of all Dennis Lomas, FD at Independent Insurance, got four years ,
along with the chief executive and the deputy managing director. They were
guilty of defrauding directors, employees, re-insurers and sundry other people
when they decided to hide the true state of the accounts.

Then there was Sharon Bridgewater, who got five years for stealing more than
£2m from employers, buying flash cars, going to expensive restaurants and taking
some very up market holidays.

I’ve said it before, FDs are very well positioned to fleece the company if
they want to. They know how the accounting works and can quickly become very
adept at covering their tracks. Fortunately few do it.

But in the words of a policeman I know met ‘crime does pay’. I won’t reveal
his name for fear of embarrassment, since he has broken with the key tenet of
crime fighting ­ admitting that it works.

But his point was that only a percentage of crime, especially fraud, gets
detected. And an even smaller proportion of the money is recovered and only a
fraction of the perpetrators are brought to book.

Why? A cost benefit analysis. If it’s not a really big fraud it’s not worth
the police getting involved ­ they employ very few fraud experts. If company
bosses discover a fraud internally they are more likely to bring in a freelance
expert to track down who is responsible, fire them and keep the whole affair
under wraps. Far better to stop the fraud and fill the hole in the system rather
than spend time on criminal proceedings, which may or may not succeed.

This approach to financial crime creates open season for people like
Bridgewater. We can look forward to more lurid fraud stories in our courts for a
long time to come.

Gavin Hinks is the editor of Accountancy Age

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