fraud

4 Ways to Protect Your Small Business from Fraud

by Fred Abramson on March 31, 2010 · 1 comment

Fraud is not limited to the Bernie Madoff’s of the world.  Because of the recession, it should come to no surprise to learn that financial problems are more likely to lead to more fraud.

Fraud is a huge problem.  According to the Association of Fraud Examiners 2008 report on occupational fraud and abuse, companies lose 7 percent of annual revenue due to this problem. The report also indicates that small businesses are more likely to be victimsthan large companies.

Small businesses are having more difficulty with fraud not only because employees have an increased workload, but also because they have less resources to stop it.

Generally fraud occurs in four primary areas.  I will provide a brief overview and let you know of ways that you can help limit your company from being a victim.

Checks

Altered checks is a major problem for businesses. What out for mistakes from payroll companies and bookkeepers.

Owners should:

  • limit the use of rubber stamps
  • have an outside accountant check your books monthly

Fraud to order

Employees can make fake orders. Check inventory to see if anything is missing.

Owners should:

  • Conduct surprise audits
  • limit access to cash
  • install security cameras

Encourage employees to report Fraud

According the ACFE study, most fraud was uncovered by co-workers.

  • Encourage tips and make sure they reach you.
  • Make it easy for an employee to report the problem anonymously.

Fake employees

This fraud is especially prevelent in the construction industry.  A foreman on a construction site mays say has ten employees and he really has 9.  He collects the 10th  paycheck for himself.  You can avoid this by:

  • handing paycheck personally
  • create a computer program to detect missing hours.

If you or your company is a victim of fraud, contact me at the Law Office of Frederic R. Abramson at  212-233-0666.

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Is a Handshake Agreement Enough to Protect You?

by Fred Abramson on March 5, 2009 · 1 comment

You worked out all the details, and you shook hands on the deal, but there is no written contract. Is that enough to protect you and the agreements you think you have in place? The answer is “it depends”.

Many contracts do not need to be in writing. However, those that fall under the Statute of Frauds and some other laws, definitely need to be in writing or the contract may be unenforceable.

What is the Statute of Frauds?

The Statute of Frauds is a piece of legislation that prevents harm due to fraudulent activity that takes place surrounding an agreement. It does this by requiring all parties to the agreement to sign a written contract. Doing this will often clarify the terms of the agreement, reduce litigation, and provide evidence that a deal was even made. Nobody is videotaping your handshake agreement, so having a written contract agreement will help you solidify your claim that an agreement was made.

What Kinds of Contracts Are Covered Under the Statute of Frauds?

While most states have a Statute of Fraud, the terms of the statute may vary from state to state. Generally, however, the following types of contracts are covered:

1. Promises made in connection with marriage. For example, “if you marry me, I will buy you a beautiful house”.

2. Agreements that according to their terms cannot be completed within a year. This would include a contract to supply a product to someone for five years.

3. Any contract dealing with the purchase or sale of land. Be aware that this does not include leasing of land, because that is not a purchase or sale, as long as the leasing contract can be performed within a year, as stated previously in number 2.

4. A promise to pay someone else’s debt.

Some states have other requirements, so a check must always be made of your particular state’s Statute of Frauds.

Other Legislation Requiring Contracts To Be In Writing

The Uniform Commercial Code (“UCC”) is another piece of legislation that requires contracts to be signed, at least by the party that is being sued under the contract. The UCC governs the sale of goods over $500. Be aware that there are some exceptions that apply to the UCC rules. Your attorney will be aware of them. In addition, there are federal and state acts that apply to door-to-door sales, secondhand car sales by dealers, and certain consumer transactions, to name a few.

What If Your Oral Contract Is In Violation of a Writing Requirement?

The answer to this question depends upon your state and the legislation being violated.

In some cases, the legislation will be a defense to the enforcement of the contract. However, if both parties agree, the contract may still be valid. In other cases, the contract may be absolutely invalid. You will need to consult with your attorney about this.

Conclusion

Even though all contracts aren’t necessarily required to be in writing, it is best to err on the side of caution and protect yourself and your agreement by making sure that the terms of the agreement are written out and signed by all parties.

If you have a question regarding handshake agreements, contracts or the Statute of Frauds, contact the office of Frederic R. Abramson at 212-233-0666

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