The Reasons Fraud Spikes in a Recession

By Adam Smith / London Wednesday, May. 20, 2009

As sure as growth slides and employment numbers tumble, so

cases of fraud rise during recessions. This time is no different. According to a report out May 20 from the Network, a U.S. firm that runs compliance and corporate-governance hotlines for about half the Fortune 500, fraud-related calls amounted to 21% of all reports in the first quarter of this year, up from 14% in the same period in 2007. While reports of problems such as harassment, discrimination or health and safety transgressions saw "no appreciable increase," according to Luis Ramos, CEO of the Network, the number of whistle-blowers reporting fraud, theft or the misuse of company assets is "going up dramatically."

It's too early to gauge the extent of corporate fraud triggered by the recent gloom, but with credit scarce and jobs precarious, there's little doubt we're in a boom time for scams. A majority of members of the U.S. Association of Certified Fraud Examiners who were polled in February and March said they had seen the number of company fraud cases climb in the previous 12 months; the bulk of those experts attributed the rise to heavier financial pressure.

The Reasons Fraud Spikes in a Recession - TIME

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