When money appears to be missing, three things have to happen in parallel: establish what actually occurred, preserve the ability to recover it, and decide, deliberately, whether to involve law enforcement. Companies frequently do the third first, which forfeits control of the timing and often of the recovery.
Waxman Litigation conducts and advises on investigations for companies and their boards. Seth B. Waxman spent 13 years as an Assistant United States Attorney in the District of Columbia, roughly eight of them on fraud and public corruption.
Establish before confronting
A confrontation before the records are secured is how evidence disappears and how a straightforward matter becomes contested. Secure system access and records first; interview second.
Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both. (Added Pub. L. 107–204, title VIII, § 802(a) , July 30, 2002 , 116 Stat. 800 .) U.S. Code Toolbox Law about… Articles from Wex Table of Popular Names Parallel Table of Authorities How current is this? Accessibility About LII Contact us Advertise here Help Terms of use Privacy
The civil recovery runs on its own track
Where the person owed duties to the company, D.C. Code § 29–804.09(b)(1) requires them to account and hold as trustee anything derived. See civil recovery for fraud and embezzlement. Where money has moved to third parties, the fraudulent-transfer remedies at D.C. Code § 28–3107 include attachment and appointment of a receiver.
The referral decision
A criminal referral transfers control of timing, disclosure and, to a degree, of the narrative. It may still be right. It should be a decision, not a reflex, and it is better taken once the facts are established. Interview conduct in the meantime carries its own limits:
(b) Whoever knowingly uses intimidation, threatens, or corruptly persuades another person, or attempts to do so, or engages in misleading conduct toward another person, with intent to— (1) influence, delay, or prevent the testimony of any person in an official proceeding; (2) cause or induce any person to— (A) withhold testimony, or withhold a record, document, or other object, from an official proceeding; (B) alter, destroy, mutilate, or conceal an object with intent to impair the object’s integrity or availability for use in an official proceeding; (C) evade legal process summoning that person to appear as a witness, or to produce a record, document, or other object, in an official proceeding; or (D) be absent from an official proceeding to which such person has been summoned by legal process; or (3) hinder, delay, or prevent the communication to a law enforcement officer or judge of t
What are the criminal and civil tracks after employee fraud is found?
Discovering employee fraud opens two separate tracks, a possible criminal referral, and the company’s own civil recovery, and they run on different rules. The federal provisions govern how the investigation itself must be conducted; the D.C. provisions supply the company’s civil remedies.
| Track | Provision | What it covers |
|---|---|---|
| Investigation conduct | 18 U.S.C. § 1519 | Destruction, alteration, or falsification of records in Federal investigations — 20 years |
| Investigation conduct | 18 U.S.C. § 1512 | Tampering with a witness, victim, or an informant — up to 20 years |
| Investigation conduct | 18 U.S.C. § 1001 | Statements or entries generally — 5 years |
| Civil recovery (D.C.) | D.C. Code § 29–804.09 | “Standards of conduct for members and managers” |
| Civil recovery (D.C.) | D.C. Code § 28–3107 | “Remedies of creditors” — including avoidance, attachment, injunction and appointment of a receiver |
Frequently asked questions
Should we call the police straight away?
It is a decision with real consequences for control and timing. Establish the facts first unless there is an immediate safety or asset-flight concern.
Can we search the employee’s work computer?
Generally a question of policy, notice and jurisdiction — take advice rather than assume.
Can we recover the money without a prosecution?
The company can recover the money without any prosecution. Civil recovery is independent of any criminal process.
Should we suspend the employee?
An employment decision with legal consequences, best coordinated with the investigation rather than taken ahead of it.
Who owes the company a duty to account for what was taken?
A member of a member-managed LLC does, by statute. D.C. Code § 29–804.09(b)(1) requires the member to account to the company and to hold as trustee any property, profit or benefit derived from the company’s activities, from use of its property, or from an appropriated company opportunity.
Why does the civil recovery not depend on a prosecution?
Because the two rest on different rights. The civil claim belongs to the company and is decided on the civil standard of proof; the decision to prosecute belongs to the government alone, and restitution in a criminal case is neither guaranteed nor within the company’s control.
When does the clock start on the company’s civil claim?
Claims of this kind generally run three years, but when the clock started is fact-specific. Concealment is common in exactly these matters, so when the conduct was or reasonably should have been discovered usually matters more than when it actually happened. See D.C. Code § 12-301.
Where does the company file a civil recovery claim?
In the Superior Court of the District of Columbia. The same court hears any application to appoint a receiver or custodian over the business under D.C. Code § 29–312.22, which matters when the person who took the money still controls the entity.
How does a company reach money that has already been moved on?
Who pays for the investigation itself?
Sources and legal authorities
General information, not legal advice. Scope, conduct and privilege decisions turn on the specific facts and should be taken with counsel before the first interview.
Related: Internal Investigations · Fraud & Embezzlement — Civil Recovery · Partner Diverting Company Funds · Court-Appointed Receiverships. Call (301) 901-3109 or use the contact page.