Fraud Research and Litigation

How to avoid being sued and what to do if you are

By Herbert Snyder, Ph.D., CFE;Donna Dietz, Ph.D., CPA, CMA

Some groups and businesses have no desire for their members or employees to complete surveys on fraud in their industries and will sue to keep things quiet. All fraud researchers in the public and private sectors should prepare themselves for possible litigation. Here's how to do it. 

The research began much more innocuously than it ended. The study was originally intended to examine the differences in internal controls among nonprofit organizations that had experienced fraud and those that hadn't. The university researchers had modified for the nonprofit world a Big 4 accounting firm's instrument originally devised for a national fraud survey. The researchers' institutional review board had approved the survey instrument and research protocols before the survey was sent to the study population - nonprofit medical facilities.

Completed surveys began arriving after a week. The response rate was better than anticipated but then the surveys abruptly stopped coming. At the same time, the researchers received a copy of a memo that had been sent to the members of their sample population by a trade group that represented these medical facilities. In the memo, the trade association warned its members not to participate in the study, citing among other things that:

  • the implication that fraud could occur among their members was libelous;
  • they suspected the sponsors of the research were politically motivated and seeking to cause damage to the member organizations (a particularly ironic touch because the researchers had applied to the same trade association for funding and hadn't received any reply);
  • none of the members had experienced fraud in any case; and
  • if members responded that they had experienced fraud they could leave themselves open to legal action by local enforcement officials who could trace the anonymous surveys through the postmarks on the return envelopes. (Apparently, the group assumed that their members didn't report fraud when it occurred.)

The researchers quickly drafted a letter that clarified their aims and refuted the charges and sent it to the entire sample population along with a second survey. A second round of completed surveys began arriving, but the researchers' difficulties with the trade group continued.

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