The Fraud Examiner


Social Media Sites: The Fraud Investigator’s New Best Friend... But “Friending” Can be Risky
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February 2012 

By Peter Goldmann, CFE 

 

“Mining social media for clues is one of the fastest-growing areas of insurance-fraud investigation. (For example), workers compensation investigators might find that a supposedly injured employee is bragging about hang gliding and is posting action photos on Facebook” -- James Quiggle, Coalition Against Insurance Fraud

 

A growing number of fraud examiners, investigators and attorneys are finding that social media sites can be potentially powerful tools in investigating fraud. Case-in-point: a woman who claimed workers compensation benefits from an insurance company during a legal proceeding  went to jail after it was discovered that she posted details about her employment on her Facebook page. But there are legal traps to beware of...

 

Facebook For Fighting Fraud
At the corporate level, in-house attorneys and investigators have their own awareness challenges regarding fraud on social media. For example, they must be aware of attorneys’ professional responsibility rules in conducting social networking investigations.

 

Example: According to Jaclyn S. Millner, an attorney at Fitch, Johnson, Larson & Held, P.A. and  Gregory M. Duhl, Associate Professor of Law at the William Mitchell College of Law in St. Paul, Minn., there is nothing unethical or illegal about a defense attorney or an agent of the attorney, such as a company representative or investigator, accessing a fraud suspect’s information and photographs that are stored on a social-networking site and are not protected with privacy settings preventing public access.

 

In that sense, according to the Millner and Duhl -- who have researched and written extensively on the topic -- searching for public information on a social networking site is no different than video surveillance in any public location that defense counsel may authorize in a fraud investigation.

 

However, your organization’s attorney(s) cannot initiate contact with an opposing party -- such as an employee suspected of committing fraud -- who is represented by counsel. In that light, courts are likely to rule that it is a violation of professional ethics for the organization’s counsel to “friend” a suspect on Facebook or any other social media site if he or she is represented by counsel.

 

Extended Risk 

The rules governing professional responsibility of attorneys do not distinguish between the activities of a lawyer and those of an investigator who is supervised by the attorney on a particular case. That makes it highly risky for an attorney to direct an investigator (or a company representative) to “friend” an employee represented by counsel on Facebook or another social networking site.

 

For investigators, the good news, according to Millner and Duhl, is that ethical considerations do not apply to informal investigations of social networking sites when the information is publicly available and no direct contact is made with the opposing party.

 

The Fine Line of Propriety
The guidelines on what is and what is not legally permissible with regard to searching for fraud evidence on social networks comes, by a large degree, from a recent ruling by the New York State Bar Association Committee on Professional Ethics. Helpfully, the opinion provides clear guidance that lawyers and their investigators can use informal discovery to search for, view and investigate public social networking profiles.

 

However, as Millner and Duhl point out, non-attorney investigators and organization representatives in fraud litigation are not regulated by the attorney codes of professional responsibility. They are not ethically prohibited from “friending” a subject on Facebook or gaining access to his or her other social networking profile -- as long as the investigator is not employed by or associated with an attorney.

 

And here’s where it gets really tricky. Attorneys working with companies and private investigators must be especially careful because an attorney cannot advise a non-attorney to initiate contact with a fraud suspect if the suspect is represented by counsel. Many companies’ investigators routinely work with the same attorneys, and this may be considered association with an attorney, even if the attorney was not involved with the case at the time of the social networking investigation.

 

Attorneys and investigators or other company representatives may initiate contact with a social network account holder who is not represented by counsel. However, it is important to note that even if a subject is not represented by counsel, your organization’s attorney(s) should proceed with caution before having a representative “friend” or contact the subject through a social networking site because that conduct is likely to be deemed deceptive and thus prohibited in many states.

 

Deception Matters 

Trickier still, states differ on whether lawyers and their agents, including investigators and other company representatives, can engage in deception in investigations under the supervision of an attorney. In some states, for example, deceptive practices could technically include “friending” a fraud suspect under a false name or account in order to gain access to his or her private social networking account.

 

Caution: According to Millner and Duhl, even “friending” a fraud suspect from a valid personal social networking account for the sole purpose of obtaining information to use in litigation may be deceptive -- as a form of misrepresentation.

 

The legal trap here is that making a misrepresentation in “friending” a suspect from a valid personal social networking account stems from the intentional omission of the fact that the only reason the friendship is requested by the attorney or investigator is to uncover incriminating evidence for litigation.

 

Important Distinctions
It is important to note that this is distinguished from video surveillance and monitoring of a suspect in a public location where anyone would be able to view the activity.

 

Still, in some states, if an attorney suspects the subject of having committed a crime -- such as embezzling funds -- the victim company’s lawyer can supervise or authorize deceptive behavior… but not directly participate in it. In those states, it may be permissible for a company lawyer to supervise an investigator or client who “friends” an opposing party in order to gain access to his or her social networking site, if the lawyer believes the opposing party is engaging in unlawful activity -- again, such as embezzlement.

 

The bottom line: The attorneys, organizations and investigators confronting fraud will increasingly face discovery, privacy and professional responsibility issues that arise when dealing with social networking information. That’s because fraudsters are routinely using social networking in their daily lives. Lawyers, companies and investigators need to be able to navigate around social networking sites such as Facebook, LinkedIn, Twitter and Myspace, and know how they work. At the same time, it couldn’t hurt to find out in advance what your state’s laws are pertaining to use of social networking sites for fraud investigation activity -- before the need to do so actually arises.

 

Peter Goldmann, CFE, is president of White-Collar Crime 101 LLC/FraudAware. Contact Peter at pgoldmann@fraudaware.com.
 

 

Contact the ACFE
For more information, contact Scott Patterson, Media Relations Specialist
Phone: (512) 478-9000 ext. 156; email: spatterson@acfe.com

 
 

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