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Introduction

to undertake, both in terms of money and time spent. In addition, even if a civil lawsuit is successful, there is no guarantee that the organization will be able to recover whatever judgment it receives. Fraudsters frequently squander the proceeds of their crimes, and thus are unable to pay back what they have stolen, even if required to by a court order. For these reasons, many organizations are very reluctant to go to civil court to try to re- cover their losses.

In our study, 940 CFEs responded to questions about civil lawsuits against occupa- tional fraudsters. We found that the victim organizations sued the fraudsters in only 24 percent of these cases. Not surprisingly, the civil suits were generally associated with high-dollar frauds where the benefit of potential recovery presumably outweighed the costs of litigation. The median loss in cases that resulted in a civil lawsuit was $1,200,000, as opposed to a median loss of $100,000 in those that did not. (See Exhibits 1.28 and 1.29.)

When victim organizations did initiate civil lawsuits, they had a good success rate. There were 238 cases in our study in which we received information about the outcome of civil suits. Over 60 percent of those cases were still pending at the time of our survey, but of the remaining 91 cases, the victim won a judgment in 54, while there were only 2 judgments in favor of the perpetrator. In the other 35 cases the parties settled out of court. (See Exhibit 1.30.)

No Legal Action Taken

One goal of our study was to try to determine why organizations decline to take legal action against occupational fraudsters. In cases where no legal action was taken, we provided respondents with a list of commonly cited explanations and asked them to mark any that applied to their case. Exhibit 1.31 summarizes the results. The most commonly cited reason was fear of bad publicity. The fact that a private settlement

Exhibit 1.28

2006 National Fraud Survey: Percent of Cases by Civil Suit

Civil Suit Filed

Yes

23.5%

No

76.5%

0%

20%

40% 60% Percent of Cases

80%

100%

41

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