HR Fraud Dilemma: Should We Investigate Internally or Go Straight to the Police?

In the event of prima facie fraud committed by HR employees, whereby a substantial amount has been siphoned off from company accounts through tampering and the creation of fake accounts over several years, is it necessary to conduct a formal domestic inquiry, or should the complaint be lodged directly with the police?

Dear member, Upon detecting fraud, it is advised to immediately suspend the employee and initiate a domestic inquiry. If the misconduct is proven, appropriate disciplinary action should be taken. In the event that the employee reimburses the misappropriated amount, it is worth consulting with a legal professional to determine if involving the police is necessary.

Involving the Police Post Domestic Inquiry
Should you decide to involve the police after the domestic inquiry, having concrete evidence readily available will be beneficial for substantiating the case. Without such evidence, the situation might be perceived merely as an allegation.

Thanks,

Regards, Dinesh Divekar

I would disagree slightly with Divekar ji. You should go to the police immediately and inform them of the crime, file the FIR, etc. Any delay may give the perpetrator a chance to escape.

Domestic Enquiry
A domestic enquiry also needs to be done, but its timeline is not connected with the investigation by the police.

To strengthen your case, lodge an FIR immediately in the name of the employee or employees associated with this crime. Put the employee under suspension with immediate effect and conduct a domestic inquiry. However, the FIR should be filed in the first instance.

An FIR followed by suspension with immediate effect.

First step is to file a police case and obtain a copy of the FIR for the management. Secondly, the alleged employee or employees should be suspended forthwith. Then, management can conduct a domestic inquiry and proceedings.

There is a risk in going ahead now with a FIR and criminal case. This being a white-collar crime, all records, documents, and other evidence have to be submitted to the police in the original, and you will be handicapped in proceeding departmentally against the employee. Secondly, the standard of proof in a criminal case is to prove the guilt beyond doubt, and also the process is a long-winding one. So you will have to keep the employee under suspension for too long.

In case you proceed with the domestic inquiry, the degree of proof is much less stringent (preponderance of probability), and the action can be relatively very quick. So you may take a call looking at all these facts. From practical experience, I can say, finish the disciplinary action fast, take action, and tie down the employee in the criminal case.

One thing remains a mystery, how an HR person could do massive swindling of finances through falsification of records; maybe others too are involved.

An employee's criminal conduct, if sufficiently serious and relevant to the employment, can jeopardize an employer's trust and confidence in the employee, which is an essential foundation of the employment relationship and can, therefore, be grounds for summary dismissal. Even if no disciplinary proceedings are conducted, the management may be afforded an opportunity to present their case during adjudication proceedings.

I was tasked with carrying out a domestic inquiry against a government employee long ago when I was a young officer in the Indian Army. The inquiry took over one year to complete, and the employee remained suspended during this period. It was a learning process for me, as the employee kept seeking fresh dates for one reason or another and by calling witnesses/cross-examining witnesses.

A friend of the accused, who was also a government employee based in a different city, was a renowned expert in finding legal loopholes in the conduct of the inquiry. The witnesses backed off in the end, and the accused got off scot-free. It was a case of grave misconduct, though not easy to prove if witnesses backtrack.

Be Sure of Evidence Before Opting for an FIR or a Domestic Inquiry

So, one has to be sure of the evidence before opting for an FIR or a domestic inquiry.