Today, in my third article on managing your legal risks, I address what you do, when in spite of your best efforts, you have become a victim of fraud in the workplace. Once you become aware that a fraud may have occurred, time is of the essence.

First, secure the workstation, records, and documents of the employee whom you suspect of fraudulent conduct. Do not give the employee the opportunity to destroy evidence, cover their tracks, or further damage your business. In a large business, there is likely to be a person assigned the risk management role.

Report your suspicions to that person immediately - they will have an appropriate response procedure and have access to external counsel, insurance details and other relevant information.

Second, it is very important that your attorneys become involved as soon as possible. As far as practicable, do not create any documents at this time without contacting your lawyer.

The legal issues that can develop from a workplace fraud can be varied and complex and you will save money on legal fees in the long run if you contact your lawyer immediately (a stitch in time). Lawyers have experience in securing the evidence, interviewing witnesses, and considering the risk exposure.

Most importantly, any and all documents created by lawyers and written to and for lawyers are privileged from production in any Court proceedings. For more on that topic, see the first article in this series, which is posted on the Appleby Spurling & Kempe web site.

Your lawyer, depending on the circumstances, will typically advise that the police should become involved. The police need to be involved quickly if they are to be effective, particularly in securing the evidence both at the workplace and elsewhere (for example the employee's home) and recovering assets.

In Bermuda there is a specific squad which investigates and prosecutes fraud. They are accustomed to acting in a circumspect manner and appreciate that workplace disruption and media exposure can be damaging to a business.

Depending on the type of business you operate, your loss exposure may be more than your own direct financial loss, and may include possible claims by your clients or other third parties who may have been damaged by your employee's conduct.

This is because employers are liable for the acts of their employees committed during the course of their employment. It is important that all steps are taken as soon as you have notice of any irregularity to prevent any future losses or claims by third parties that may also have been damaged.

Depending on the size of your business, the damage to clients, customers, and other third parties, an internal investigative team may be appropriate. This internal investigative team should liaise and report directly to your in-house and/or external legal team so as to ensure privilege.

If the investigation reveals that the fraud is a complex financial fraud, it is likely that you will employ forensic accountants at the earliest possible opportunity in order to trace and assist in the recovery of assets. Again, this instruction should be made through your legal counsel.

Finally, how do you deal with the employee? Once you have secured the workplace, you must bring the employee in and explain the position, preferably with your legal counsel present.

Depending on the strength of the evidence against your employee, he or she will either be terminated for cause, or suspended pending the results of the investigation. Never allow an employee suspected of fraud to remain in the workplace.

Your lawyer will ensure that your procedure to terminate or suspend is consistent with Bermuda common law and statute.

It is likely that your business has an internal policy on termination as well. Make sure that this policy is implemented consistently for all employees. This acts as a deterrent to future frauds.

Fraud, aside from being economically damaging, can be embarrassing, cause damage to your reputation, cause credit problems with financial and banking institutions and other consequences.

Unfortunately, for these reasons, a business will often fail to act promptly and appropriately when it becomes aware that something is "not quite right". However not one of these effects is a reason to do nothing once you are aware of an irregularity. Be alert, be vigilant, and act swiftly, consistently and appropriately when an irregularity that could be a fraud comes to your attention. Your losses and consequential damage will only increase if the appropriate systems are not followed.

The risk of fraud is an unfortunate but inevitable part of doing business and if your vigilance uncovers a fraud it is to your and your business' credit that you act quickly and decisively.

Kiernan J. Bell is an associate lawyer in the Litigation Department of Appleby Spurling & Kempe. Copies of Ms. Bell's columns can be obtained on the Appleby Spurling & Kempe website at www.ask.bm. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.