Using Better Judgment About Liens and Judgments: Civil Records in Employee Screening

September 2009

IN THIS ISSUE

— Raise the Red Flag: Civil Debt Records as Fraud Motivators
— An Unsettling Past: Every Record Tells a Story
— In the next issue

GREETINGS!

Welcome to the September issue of our newsletter! In this issue, we’ll examine how civil records can be predictors of potential employee fraud or misconduct.

RAISE THE RED FLAG: CIVIL DEBT RECORDS AS FRAUD MOTIVATORS

Virtually every human resources department knows enough to run a criminal background check, often involving fingerprints and a nationwide history check by the Federal Bureau of Investigation, coupled with acquiring a consumer credit report. While these methods detail activity within approximately the previous ten years, various other civil records can tell the story of an employee’s spending habits, lifestyle, and potential motivators for embezzlement or other financial fraud.

Take, for instance, the case of Dr. Conrad Murray, the personal physician of the late entertainer Michael Jackson. Murray, who attended to Jackson prior to his death and summoned help in the singer’s final moments, is not yet named as a suspect by police, but the media scrutiny of the case revealed that Murray and his medical practice have $680,000 in various liens or judgments against them, as well as Murray having numerous student loans, credit card and child support payments.

While there is not yet any evidence that Murray would benefit financially from Jackson’s death, possible motivations could have included the ability to market a “tell all” book recalling Murray’s first-hand account of Jackson’s daily life.

AN UNSETTLING PAST: EVERY RECORD TELLS A STORY

Even though many of the records against Murray and his practice — maintained at various courthouses and clerk’s offices — are open items for which collection is currently being sought, closed records also indicate patterns of behavior for a prospective employee. In many cases, people in the thrall of various addictions – such as gambling, or drug dependency – will try to kick their habit by relocating to another part of the country and “starting over.” Even if such a person is able to succeed in spite of their various vices to the point where they can pay off the debts they have incurred, the recording of the debts can serve as evidence of problems that may resurface.

What should a company do if a potential employee shows promise and talent yet also a troubled past and pattern of irresponsible or destructive behavior? Possible solutions can include segregation of duties to be sure that, for instance, any access to petty cash or disbursements requires one or more approvals from trusted supervisors, as well as regular audits of that employee’s department financial data. If the employee is truly valued, the additional vigilance of internal auditors would be worthwhile — and if suspicion of fraud does arise, a fraud examiner can assemble the time line necessary to demonstrate that the misconduct is not an aberration but part of a pattern and practice of improper activity.

IN THE NEXT ISSUE

In the October issue, we’ll examine the progress — or lack thereof — in the efforts, spearheaded by the U.S. Treasury Department to combat mortgage fraud and improve disclosure in the process of buying a home.