You’ve worked hard to build your business into a successful organization that is run professionally and legally. If you’re like most legitimate business owners, you seek to run your business in a manner that makes money while adhering to basic standards of business ethics. More importantly, you take the law seriously. You don’t want to defraud your clients, nor do you want your employees to defraud you. However, white collar crime is one of the least tried crimes in America. The reason for this is that it is one of the hardest crimes to prove, and the biggest part of it is business fraud.

You can’t just expect the law to protect you from fraud in your business. You need to be proactive about preventing it in the first place, and there are many ways to do so. This article will discuss some of the behaviors of employees that may be red flags for fraud.

business fraud

Rarely Taking Holidays

Employees with a strong work ethic are hard to come by. Just because an employee doesn’t ever take holidays doesn’t mean they are up to something sinister. However, you should keep an eye on your employees and monitor their activities dutifully just the same even if they are working on a day they could be out.

While not taking holidays may just show commitment to work, employees committing fraud often avoid taking days off because these days leave other employees or managers the opportunity to scrutinize their work in their absence. This is why it’s important to check the work of your employees on both their days off and during their days on.

Refusing Promotion or Job Rotation Without Reasonable Explanation

If an employee shows no interest in moving up in the company, especially when they appear to be managing their duties well enough to deserve a promotion, this is a huge red flag. When employees are actively exploiting some kind of weakness in the structure of a business, they tend to want to stay right where they are. An increase in pay will usually not motivate an individual that has found a way to profit off a company without added responsibility. Maintaining a system of checks and balances and steady rotation of employees when appropriate is a good way to prevent this.

Excessive Lifestyle or Questionable Expenditures

When one of your lower earning employees rolls up to work in a vehicle they could not possibly afford, something is wrong. Often times, employees committing fraud end up making obvious expenses that don’t match what they are earning and fail to keep it hidden from their coworkers. Sometimes they will explain their behavior or spending on a surprise inheritance, but these explanations should be looked at with suspicion. It’s recommended that you accept the explanation, but investigate the truth behind it. While you should never throw around accusations, if you notice an employee living a bit lavishly for their earnings, there’s nothing wrong with quietly monitoring their work and doing research into their integrity.

Defense Mechanisms

As mentioned previously, you should never jump to conclusions without hard evidence. However, if you question the work of your employee and they try to avoid questions or turn the problem back on you for being attentive, this may be an indicator of fraud being committed. Often times, employees committing fraud will challenge your ability to trust them and their work. Other times, suspicious behavior may be explained by an illness that is not present or the passing of a friend whom may not exist.

Inflated Expense Reports

If expense reports appear to be greater than before, it’s important to scrutinize the numbers. If one of your managers has a company credit card, for example, and business dinners or purchases of office supplies are reaching numbers that are not typical, it’s important to ask for receipts. If you feel the receipts are forged, you may even contact the companies the purchases came from to see if the charges are typical for what was purchased.

Inflated Earnings Reports

While usually this kind of fraud is something you would know about or be involved with if you were in management, if you are noticing earnings reports being higher than they should be, it is possible your accountants are trying to keep up appearances for investors or potential clients. You should never allow nor encourage this in your business. Fraud through inflated earnings claims is one of the biggest causes of class action lawsuits out there. If you spot anyone in your management doing this, fire them immediately, or bring them to the attention of your boss if you don’t have the authority.

Excessive Secrecy in Certain Business Areas

While it’s understood that certain positions have certain clearance levels, when there appears to be an excessive amount of secrecy it could be an indicator of something criminal taking place. This is generally more obvious if you are the head of a company, as your employees should be readily able to show you any documentation you need and secrecy should not exist in any sector of your company in relation to you. However, if you are in control of a different area of management it may be more difficult to spot.

The best rule of thumb is that if anyone in your organization is not acting according to their duties and responsibilities, or is making unusual and excessive efforts to keep certain activities in the shadows, you need to be diligent and work through the proper channels to uncover any activities that may be fraudulent within your business.


Business fraud is on the rise, but there are ways to protect yourself and your company. If you feel you may be experiencing fraud in your business, legal representation is often the best route to go.

WB Law Group is happy to assist you with matters involving business fraud. For questions, or to schedule a consultation, contact us today at 559.­431.4888 (Fresno) or 619.399.7700 (San Diego).

Business Attorney Fresno