The Top 6 Reasons Business Leaders Get Accused Of Fraud
The number of fraud investigations into business leaders is higher than you might think. In fact, it happens a lot, usually because the rules are just so complicated.
The purpose of this post is to detail the main reasons why entrepreneurs get accused of fraud in the UK. By the end of it, you should have a better picture of where the risks lie so you can avoid them.
Inflating Earnings
Inflating earnings is a big one. Business leaders will often try to bump up profits to improve their own performance bonuses.
Of course, doing this is illegal, and those causes can be accused of fraud. That’s why it is so essential to keep all accounting honest and avoid any hint of inflating the numbers.
Enron is a good example of a company that got this wrong. It tried to hide its debt to make its profits look bigger so that more people would invest in it.
Personal Financial Gain
Personal financial gain is another reason business leaders get into trouble and need a fraud solicitor.
Stakeholders, board members, or other officials can accuse them of rigging company accounts to benefit themselves, which, again, isn’t allowed.
The fraud that occurred at Tyco is a good example of this. The CEO attempted to steal hundreds of millions of dollars from investors and other owners.
Pressure To Meet Targets
Pressure to meet targets is also a strong reason why business leaders get into serious trouble.
Many want to ensure that they receive the highest tier of bonus pay, so they massage profit numbers to convince boards or owners to give them a raise.
Again, this sort of approach is illegal. CEOs are essentially managers, not owners, so they can’t aggrandise profits to themselves in this way. Doing so is a form of deception, since, ultimately, they are providing the owners with less value.
Hiding Losses
On the other side of the profit equation, some business leaders attempt to hide losses. Again, this type of action makes the business appear more profitable than it really is.
The best example of this is Evergrande, which managed to inflate its revenues by a massive $78 billion, shattering trust in the entire market.
This was an extreme example, and it is unclear what consequences the leaders faced. But if something similar happened in the West, it would likely result in criminal charges.
Bribery
Bribery is another reason why business executives get into trouble. Sometimes, they can attempt to pay off officials to overlook certain aspects of their operations, which is against the law.
The best way to avoid this issue is to abstain from paying bribes to anyone, especially regulatory authorities. This sort of action is highly detrimental to branding.
Ponzi Schemes
Lastly, business leaders can get into trouble for facilitating Ponzi schemes.
Financial setups that constantly encourage new people to enter the company with money to pay those already there is unsustainable, and therefore, unethical. Therefore, always choose business models that have room to run long-term.
