Lessons from the private sector

Companies typically lose 5% of their annual revenue to fraud, which works out to well over R23-trillion a year, according to the Association of Certified Fraud Examiners’ (ACFE) “Report to the Nations”.

“The number of incidents that have been reported to Deloitte Tip-Offs over the past five years has increased by 15% year-on-year,” says Nicholas John, chief executive of Deloitte’s fraud hotline, Tip-Offs Anonymous. John says South Africans are no longer turning a blind eye to corruption in the private sector.

Deloitte Tip-Offs runs fraud hotlines for South Africa’s private and public sector.

“We have close to 280 clients that subscribe to the service currently. I wouldn’t like to talk about who the clients are, but I can say that they cross all industries of the private sector. It is a very good split across all industries, and we also do the Public Service Commission anti-corruption hotline,” says John.

A Google search reveals that Deloitte Tip-Offs clients include FirstRand, Old Mutual, pharmaceutical giants Aspen, AngloGold Ashanti, Reunert and Massmart. The outsourced fraud solution should have many clients in the construction sector, given the recent local infrastructure boom resulted in an explosion of construction scams.

On the back of the 2010 World Cup, fraud in the construction industry rose on average by 38.86% each year, for the past four years. Deloitte says the second biggest rise was in mining and energy, at 18.74%, while fraud in the retail sector grew annually by 17.05% since 2007.

Fraud in the banking industry increased by 12.57%, in manufacturing by 11.24%, and the insurance industry saw an increase of 8.96%. Deloitte warned about interpreting the results too readily, saying the spikes could be a result of an increased focus by organisations in these sectors to fight fraud and encourage whistle-blowing.

But why is big business so eager to set up and outsource fraud hotlines given that large consulting initiatives don’t come cheap?

Deloitte Tip-offs Anonymous chief operation officer Carl Venter tells the story of a company that scored big soon after they started using the fraud hotline. “One client had signed on with us and as a result of an incident report we received one month, we were able to identify a specific fraudulent transaction that they could block. This saved the company R20-million as a result of just one call. It paid for their costs for this line for many years to come.”

In the South African market the preferred method is to remain anonymous, says John. “The big thing is victimisation.

“Some 80% of our tip-offs are anonymous, 15% of whistle-blowers who call are happy for Deloitte to send their details in the report we give to clients, while 5% prefer for their details to be safeguarded by Deloitte.”

There’s a lot that government can learn from privately run fraud hotlines, particularly in terms of the data that’s gleaned from these operations and how it helps companies become smarter in combatting scams. Fraud data from fraud hotlines and subsequent investigations by companies not only expose crime, but expose how scams are operated.

“Stats show that hotlines are the best method of fraud detection within businesses, and about 40% of frauds are exposed by whistle-blowers who tip off their employers,” says John.

A whistle-blower’s story
Robert Wiebosch, the whistle-blower who helped oust former Johannesburg Emergency Management Services (EMS) chief Audrey Gule, hasn’t received a salary since November 2010.

Wiebosch worked for the City of Johannesburg for more than 35 years, was a financial manager and was promoted to deputy director before he says he was chased out of EMS “like a dog”.

The whistle-blower was doing well at work, and scoring 90% or more on his assessments when he made the mistake of querying irregular expenses, overtime disbursements and allegedly questionable payments authorised by his boss. This came after an investigation into Gule’s financial management by the public protector was quashed.

Gule’s “excessive” and “wasteful” management was probed by the protector in 2007, but the investigation was dropped after then-mayor Amos Masondo declared that the former EMS chief was in the clear.

But Masondo’s waning influence was unable to save Gule four years later. Charges were brought against Gule following a media exposé in mid-2011. The EMS chief went on sick leave, was subsequently suspended on full pay and resigned in August 2011, but only after her lawyers had reached a settlement with the City of Johannesburg.

Wiebosch, on the other hand, lost his family, his house, his cars and most of his possessions. “Lawyers contacted me and offered to help me with my case after reading about my story. We are now working through the labour courts, but this could take months. I really don’t know how long it is going to take.”

“I am still trying to find work and send out my CV but don’t hear anything back. I have been without a salary for a year and three months, and had to sell everything, including my house. I sold all my furniture as well because I am now living in a two-bedroom flat with my mother.”

Asked whether he’d blow the whistle again after all he has experienced, Wiebosch says there’d be no other option for him. “What? Just keep quiet and give up my integrity?” he exclaims. “Those people were crooks. I would do the same thing again even if I knew that it meant I was going to lose everything.” — Mandy de Waal

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