First 24 hours crucial in furlough fraud investigations

Do you have robust whistleblowing policies that are trusted by employees? How easily can their concerns be raised and resolved internally? If the answer is ‘no, and not easily’ the business may be at risk of serious reputational damage if the concerns are made public. 

This is in the news following the case of the recruitment agency alleged to have falsely claimed furlough money from the government. The BBC reported that ex-employees of Yorkshire firm Brewster Partners claimed the firm applied for grants under the furlough scheme while staff were still working – that’s prohibited under the scheme rules. To make it worse, it appears this was being directed by senior management. The footage is still there for all to see on the BBC’s website. Here it is: 

Video – BBC report

As a result of that coverage, the firm said it has referred itself to HMRC and no doubt the Revenue will be investigating that case thoroughly. But the damage has been done and that firm has certainly had a hit to its reputation. 

On the back of that case Anne Sammon wrote a piece for Outlaw saying it serves as a reminder of the importance of having robust whistleblowing policies and procedures that are trusted by employees and which enable concerns to be raised, and resolved, internally. That helps avoid the potential reputational damage that can ensue where these matters are made public by ex-employees as in this case. Anne says; ‘now is a good opportunity for employers to consider not only whether they have the right policies in place but whether employees will have the necessary confidence in them to use them.’

Meanwhile a separate report by The Times has highlighted how millions of pounds in furlough grants could have been claimed by companies which were set up after the scheme was established. The Times analysed official data records which showed 7,000 companies registered to five London addresses had claimed up to £473 million in grants between December 2020 and June 2021. HMRC has been writing to employers since the middle of 2020 to advise them they may need to repay money received through the scheme. The March 2021 Budget included a £100 million investment in a taskforce to help the agency combat fraud in Covid-19 support packages, including the furlough scheme.

So back to those whistleblowing policies and what to do if they are used and fraud is uncovered. Someone who advises clients in these cases and helps limit the damage is litigation and fraud investigation specialist Andrew Herring who joined me by phone to discuss this. I started by asking Andrew about those whistleblowing policies Anne Sammon referred to:

Andrew Herring: “I think the biggest concern I've got at the moment when speaking to my clients is that whistleblower policies are there, but it is not clear whether they are actually being used effectively by workforces and I think actually, whilst you may take some comfort from the fact that the whistleblower hotline hasn't been used recently, in actual fact that gives me cause for concern that it is not generally aware and people aren't using it properly so if there are any issues within the business that would be appropriate to be reported in through an anonymous hotline like a whistleblower hotline if it is not being used properly, if it is not being publicised properly, then things may not get reported and dealt with and of course that may result in some commercial risk to the business if those issues come out in an uncontrolled way. So I think the first thing I would take away is if you have got whistleblower policies just have a look at the data to see how often people are calling in and using those services and if they are not being used that actually may be a red flag to so something about it and ensure that your workforce knows about them and is using them.”

Joe Glavina:  “Can I ask you about the response if you are receiving calls. You’ve talked in the past to this programme about the first 24 hours. Why is that so important?”

Andrew Herring: “Because acting swiftly, if an issue is reported to the business, can actually result in a much better outcome. If you can get control of the situation, get control of the information, then you have got a much better chance of minimising the risks attached to anything that might be reported in through a whistleblower or, indeed, through any other avenue. So some of the things I would be looking to achieve in the first 24 hours of any situation where an investigation needs to be carried out are firstly you have got to assemble the investigation team. So who is actually going to be part of that team? Ideally they should be independent of wherever the issues relate to within the business and a chairperson of that investigation team needs to be appointed and that person needs to have responsibility for deciding how the investigation is going to be carried out. I think secondly, the ideal situation is that any investigation is conducted with protection of legal privilege. The reason for that is things will undoubtedly come out of an investigation that you will want to keep control of, and take legal advice in relation to, and by ensuring that lawyers are involved from the very outset will ensure that you have protected any information which might be incredibly sensitive so that you can deal with it properly going forwards.”

Joe Glavina: “What about the investigation itself. Getting at the information you need and not alerting the perpetrators?”

Andrew Herring: “ So you have got to plan very carefully as to who you are going to speak to and what kind of documentation you are going to go and search for and obviously if you think that there is an ongoing issue, and I'm particularly thinking about situations of fraud where you may have an employee involved in some sort of ongoing wrong doing, the investigation team may take the decision that they want to not disturb that wrong doing in order that they can actually catch the person who is carrying out the wrong doing red handed and in order to do that you have obviously got to keep tight control over any information going outside of the investigation team, effectively what in the films you would call "a need to know basis" but also in terms of going about the investigation if you start asking questions of the wrong people the message could quite clearly get back to the wrong-doer that you are onto them and of course the difficulty with that is as soon as they are onto you they are going to look to destroy evidence and they are going to look to move their assets into positions where you can't get hold of them. So particularly in the fraud context when we are talking about the insider threat there is a lot of planning that needs to go in at the outset in order to take a controlled investigation approach which minimises risks going forward. That investigation team needs to have the right expertise to deal with much wider and broader issues that may arise further down the line and to be thinking about them right at the beginning. So, PR issues, how are we going to control and minimise any chances of damage to an organisation's reputation arising out of something that might be reported through a whistleblower hotline? We want to make sure that we don't invalidate any insurance policies that might be relevant, so ensuring that notification issues are thought about, considered and dealt with properly and appropriately right from the beginning, understanding whether we should be reporting externally - so are there any requirements to report to law enforcement. If you are in a regulated sector are there any requirements to report to the regulator? Or indeed, do you need to report to customers, suppliers? Whatever the issue may relate to the chances are your workforce internally may need to know about it and be kept updated as things carry on, and also externally you need to be doing, and be seen to be doing, the right thing to respond to the circumstances."

We mentioned earlier Anne Sammon’s article on furlough fraud and the importance of having robust whistleblowing policies and procedures that are trusted by employees and which enable concerns to be raised, and resolved, internally. That is ‘Furlough fraud fears highlight need for robust whistleblowing policies’ and is available from the Outlaw website.