The statistics reveal a troubling reality: 66% of HR professionals acknowledge widespread FMLA abuse in their organizations. In energy operations, this fraud creates problems that extend far beyond lost productivity. When safety-critical positions sit empty due to fraudulent medical claims, operational integrity suffers and people can get hurt.
Energy companies face a unique vulnerability to FMLA fraud. The physical demands of energy work provide ready-made excuses for injury claims, while specialized skill requirements make it incredibly expensive when key personnel disappear during critical operations.
The Perfect Storm: Why Energy Operations Are Prime Targets
Energy facilities create ideal conditions for FMLA exploitation. The demanding physical environment offers built-in justification for injury claims. High-stress operations provide cover for mental health leave requests. Most importantly, the specialized nature of energy work means finding qualified replacements is both difficult and expensive.
Consider the impact during a refinery turnaround or major pipeline project. Certified welders, experienced operators, and specialized technicians who understand complex systems become irreplaceable. When these critical employees develop mysterious medical conditions at crucial moments, operations face disruption that costs far more than simple wage replacement.
The fraudsters understand this leverage. They recognize that strategic timing creates maximum operational pressure, reducing the likelihood of thorough investigation. Management teams focused on maintaining production schedules and meeting regulatory requirements often accept questionable medical documentation rather than risk project delays.
Union environments can compound the problem. Protective workplace cultures sometimes discourage reporting of suspicious behavior, while shop stewards may interpret any investigation of medical leave as harassment. This environment gives dishonest employees confidence that their schemes will go unchallenged.
Seasonal patterns reveal the fraud clearly. Refineries experience injury spikes before maintenance seasons. Wind farms see medical emergencies during storm response periods. Solar installations face chronic conditions during summer installation pushes. The timing correlation is so consistent it suggests coordination rather than coincidence.
The True Cost: Beyond Fraudulent Wage Payments
FMLA fraud in energy operations creates cascading financial impacts that multiply the initial deception:
When a certified electrical supervisor takes fraudulent medical leave during a planned outage, replacement costs explode. Contractor rates of $180 per hour replace normal supervisory wages of $45 per hour. Add travel expenses and the inefficiency of unfamiliar personnel, and costs triple or quadruple.
Remaining crew members work massive overtime to cover absent positions. Exhausted workers make mistakes. Safety protocols get overlooked. Shortcuts become tempting. The fraudulent back injury that started the problem might ultimately cause a real accident costing millions in damages and regulatory penalties.
Equipment downtime multiplies when specialized operators aren’t available. A single technician’s fraudulent leave can shut down entire production units. Lost production days represent permanent revenue that can never be recovered, often worth far more than the wages paid during fraudulent leave.
Regulatory compliance becomes problematic when energy facilities must maintain specific staffing ratios for safety reasons. Fraudulent medical leave forces impossible choices between shutting down operations or violating federal safety requirements.
Emergency response capabilities suffer dangerous gaps when critical personnel claim fraudulent injuries. Energy facilities require 24/7 emergency response teams, and fraudulent leave can create coverage gaps that endanger both workers and surrounding communities.
Recognizing the Patterns: Red Flags That Demand Investigation
Energy sector FMLA fraud follows predictable patterns that become obvious once you understand what to look for:
Strategic Timing: Multiple employees in the same department developing unrelated medical problems before busy periods. One refinery experienced six welders claiming back injuries in the two weeks preceding their biggest maintenance shutdown.
Selective Capabilities: Workers claiming inability to lift 15 pounds while completing major home renovation projects during medical leave. Operators who cannot handle shift work due to stress but coach youth sports multiple nights weekly.
Medical Provider Shopping: Employees visiting multiple healthcare providers until finding one willing to approve leave requests. They present different symptoms to different doctors, building medical documentation that supports their desired condition.
Convenient Emergencies: Medical situations that consistently occur before performance reviews, safety training requirements, or disciplinary meetings. Pattern analysis often reveals timing that defies statistical probability.
Digital Evidence: Social media posts that contradict claimed limitations. The crane operator with chronic fatigue posting beach vacation photos. The maintenance worker with severe back injury uploading furniture-moving videos.
Miraculous Recovery: Medical conditions that resolve immediately after holidays, vacations, or other desired time off. Recovery timing that surpasses professional athletic rehabilitation.
Why Internal Investigation Falls Short
Human resources departments lack the specialized capabilities required for complex fraud investigation. Most HR professionals need HR investigation services that provide surveillance capabilities, medical record analysis, and digital investigation techniques beyond typical HR expertise.
Legal liability concerns create decision paralysis. FMLA law includes severe penalties for employers who violate employee rights during investigations. HR teams often avoid actions that might be perceived as retaliation, allowing obvious fraud to continue unchallenged.
Information security becomes impossible when HR begins questioning suspicious medical leave. Word spreads through facilities rapidly, allowing fraudulent employees to delete compromising evidence and coach family members on responses to potential inquiries.
Resource limitations prevent thorough investigation. HR departments managing daily operations cannot dedicate months to intensive fraud investigation while maintaining recruiting, benefits administration, and other essential functions.
Relationship dynamics complicate objective investigation. HR staff working daily with suspected employees find it difficult to maintain investigative objectivity, especially when suspects are well-regarded by coworkers.
Professional Investigation: Capabilities That Deliver Results
Professional investigators provide specialized capabilities unavailable within most organizations:
Legal Surveillance: Licensed investigators can legally observe employees during medical leave, documenting activities that contradict claimed limitations. This surveillance must meet strict legal standards for admissibility in employment proceedings and potential criminal cases.
Digital Forensics: Systematic monitoring of social media activity, online behavior, and digital communications identifies evidence contradicting FMLA claims. Professional investigators understand legal requirements for preserving and using digital evidence.
Medical Analysis: Expert review of healthcare provider certifications identifies inconsistencies, questionable medical opinions, and patterns suggesting fraud. Investigators collaborate with medical consultants when complex medical issues require specialized understanding.
Comprehensive Background Research: Professional investigators examine financial pressures, employment history, and personal circumstances that might motivate FMLA fraud, building complete profiles through detailed background investigations.
Strategic Interviewing: Trained investigators conduct interviews with witnesses, family members, and others using techniques that produce useful information while maintaining legal compliance. They understand how to reveal inconsistencies without violating privacy rights.
Admissible Evidence: Professional investigators understand legal requirements for evidence handling and documentation. They preserve evidence properly, maintain chain of custody, and document findings to support both employment decisions and potential criminal prosecution.
Investigation Methodology: Systematic Evidence Development
Professional FMLA fraud investigations follow structured processes designed to gather solid evidence while protecting both employer and employee rights:
Case Evaluation: Investigators analyze FMLA history, medical documentation, workplace behavior, and timing patterns to determine investigation merit and appropriate methodologies.
Surveillance Operations: Covert observation is planned and executed to document actual physical capabilities and daily activities during claimed medical leave, using legally compliant techniques that produce admissible evidence.
Digital Intelligence Gathering: Systematic monitoring of social media, online activity, and public records reveals activities contradicting FMLA claims, with proper documentation preserving evidence for legal proceedings.
Medical Documentation Analysis: Expert examination of healthcare provider certifications identifies inconsistencies, gaps, or questionable medical opinions supporting leave requests.
Witness Development: Strategic interviews with coworkers, neighbors, and others who observed employee behavior during medical leave, conducted to protect both investigation integrity and witness privacy.
Comprehensive Documentation: Complete case documentation in formats suitable for employment actions, insurance claims, and potential criminal prosecution, with clear recommendations for resolution.
Legal Compliance: Navigating Complex Requirements
FMLA investigations carry significant legal risks requiring professional expertise. Employees enjoy protection from retaliation for using FMLA leave, so investigations must be structured to avoid any appearance of retaliatory action.
Privacy laws governing medical information and surveillance activities vary by state, with violations carrying both civil and criminal penalties. Professional investigators understand these requirements and conduct investigations within legal boundaries.
Evidence must be gathered using legally acceptable methods to be useful in employment proceedings and criminal cases. Documentation standards for FMLA fraud cases are strict, and improper evidence collection can destroy otherwise solid cases.
Due process rights require fair treatment throughout disciplinary proceedings. Employees accused of FMLA fraud have rights that must be respected during investigation and resolution processes.
Federal law enforcement coordination becomes necessary when fraud reaches criminal levels. FMLA fraud constitutes a federal crime, and professional investigators understand when and how to work with federal agencies for prosecution.
Financial Analysis: Investment vs. Ongoing Loss
Professional FMLA fraud investigations typically cost $8,000 to $20,000 depending on complexity and duration. This investment must be weighed against ongoing fraud costs:
Individual fraudulent FMLA cases cost energy companies $75,000 to $300,000 in direct expenses including wage replacement, overtime coverage, contractor costs, and productivity losses. Adding equipment downtime, safety incidents, and regulatory complications, total costs often exceed $500,000.
Successful investigations typically recover costs through stopped fraudulent payments, insurance recovery, and civil restitution. However, the primary value lies in preventing future abuse and protecting operations from disruption.
Professional investigations provide legal protection against wrongful termination lawsuits. Thorough documentation of fraudulent activity supports employment decisions and reduces liability exposure when dishonest employees pursue legal action.
Strategic Response: Protecting Operations and Workers
FMLA fraud in energy operations creates safety risks extending beyond fraudulent wage payments. When critical positions remain empty due to fake medical conditions, operations suffer and workers face increased dangers. This employee misconduct creates risks that demand professional resolution.
Energy companies cannot afford to ignore obvious FMLA abuse, but they cannot afford to mishandle fraud investigations either. Professional FMLA fraud investigation provides expertise necessary to document workplace misconduct while protecting legitimate employee rights.
Facilities experiencing suspicious FMLA patterns, timing coincidences, or questionable medical claims should consider professional corporate investigation as the optimal approach for resolution and prevention of future abuse.
Delayed action increases both expense and disruption. Each day of continued fraudulent leave costs money and creates preventable safety risks.
Concerned about suspicious FMLA activity at your facility? Schedule a confidential consultation with Kyle Robison, Deputy Director of Investigations at Lauth Investigations International. Kyle specializes in FMLA fraud cases in the energy sector and can help determine whether investigation is warranted and how to proceed safely.
Schedule your consultation today to discuss your specific situation and learn how professional investigation can protect your operations from FMLA fraud.
Lauth Investigations International has conducted hundreds of FMLA fraud investigations for energy sector clients nationwide. Our team understands the operational challenges of energy companies and specializes in investigations that protect both employer rights and employee protections under federal law.
Last Tuesday, a regional bank president called our team. “We just discovered our head teller has been stealing from us for four years… how did we miss this?”
Said bank had spent $2.3 million on cybersecurity upgrades in the past two years. State-of-the-art firewalls. AI-powered fraud detection. The works. Meanwhile, the head teller was skimming $300 a week from dormant accounts, and nobody noticed because she was careful, she was patient, and she knew exactly how their systems worked.
The teller walked away with $62,400 before they caught her. The bank’s going to lose about $1.2 million by the time this mess gets cleaned up.
The frustrating part? The suspected employee wasn’t some criminal mastermind. She was just paying for her mom’s nursing home care and figured nobody would miss money from accounts that hadn’t been touched in years. She was wrong about the “nobody would miss it” part, but she was absolutely right about how easy it would be.
The numbers from this year are brutal. According to the latest industry report, 57% of financial institutions lost over $500,000 to fraud in 2024. A quarter of them lost over a million. That’s not “some banks.” That’s most banks.
The fraud examiners association puts the total at 5% of revenue lost to fraud annually. Take your bank’s revenue, multiply by 0.05, and try not to throw up.
But here’s what really gets complicated: these numbers only represent the fraud we actually catch. For every suspected teller who gets discovered, how many others are out there right now, slowly bleeding banks dry?
Your Security Strategy Has a Teller-Sized Hole in It
Most banks approach security like they’re building Fort Knox. Massive perimeter defenses. Sophisticated detection systems. Armed guards. Electronic monitoring. It’s all very impressive.
But Fort Knox doesn’t help you when the threat is already inside, wearing a company ID badge and asking about your weekend plans.
Your firewall doesn’t know that Steve from commercial lending is using customer information to make stock trades. Your fraud detection system won’t flag Sarah from operations when she approves fake expense reports for her boyfriend’s contracting company. And all those automated alerts? Completely useless when someone knows exactly how to fly under the radar.
Last year’s case involved three employees who figured out how to create phantom loan accounts. Not sophisticated stuff—just basic knowledge of how the approval process worked and where the gaps were. Over eighteen months, they “approved” $340,000 in loans to fake borrowers, then split the proceeds. The beauty of their scheme? Each step looked completely legitimate to anyone checking.
Another case involved a compliance officer—the person whose job was literally to prevent fraud—who figured out how to hide unauthorized wire transfers in routine regulatory reports. She stole $180,000 over two years, and the only reason they caught her was because she got greedy and started moving larger amounts.
These weren’t criminal masterminds. They were regular employees who understood their bank’s blind spots better than the security team did.
The Real Cost Makes the Teller Case Look Like Pocket Change
Direct theft is just the appetizer. The main course is everything that comes after.
Then there’s the reputation damage. Banking is built on trust. When customers find out your employees have been stealing, they start wondering what else you’re not telling them. Accounts close. New customers go elsewhere. Community banks have lost 15% of their deposit base after internal fraud becomes public knowledge.
The operational chaos is devastating too. Good employees get pulled off important projects to deal with the investigation. New procedures have to be implemented overnight. Staff morale craters because everyone’s now under suspicion. Some banks never fully recover from the disruption.
And then the lawyers show up. Customers sue. Shareholders file lawsuits. Insurance companies fight claims. Legal bills pile up faster than snow in January.
The bank president mentioned earlier? By the time the teller’s case was resolved, the total cost was $1.2 million. For $62,400 in actual theft.
The Trusted Employee Problem
The worst cases always involve people you’d never suspect. Not the sketchy new hire who shows up late and leaves early. It’s the 20-year veteran who coaches Little League. The manager who organized the office Christmas party. The compliance officer who never missed a continuing education seminar.
These folks don’t wake up one day and decide to become criminals. It starts small—borrowing from petty cash with every intention of paying it back. Taking a small amount from an inactive account “just this once.” Using customer information for a “sure thing” stock tip.
But here’s what becomes clear after investigating hundreds of these cases: once someone crosses that line the first time, it gets easier every time after that.
And the longer they’ve been with your institution, the more dangerous they become. They know which accounts get reviewed and which don’t. They understand your approval processes inside and out. They’ve built relationships with colleagues who trust them implicitly. They know exactly how much they can steal without triggering alerts.
Most importantly, they know how to make their theft look like system errors, processing delays, or customer mistakes.
Why Your Internal Team Can’t Handle This
Your internal audit department is good at checking boxes and following procedures. They’re not trained to think like criminals. Your IT security team knows technology but doesn’t understand criminal behavior. Your HR department can handle policy violations but can’t conduct covert surveillance or digital forensics.
Here’s what happens when you try to investigate internal fraud with internal resources: word gets out immediately. The suspected employee either covers their tracks or disappears. Evidence gets deleted or destroyed. Witnesses get nervous and stop cooperating. The investigation becomes a circus, and the fraudster usually walks away clean.
Professional investigators bring capabilities that don’t exist in most banks:
Covert observation: Professional teams can watch suspected employees without them knowing an investigation exists. No office gossip, no warning signs, no opportunity to destroy evidence.
Digital forensics: Deleted emails, cleared browser histories, encrypted communications—specialized tools and expertise can recover digital evidence your IT department can’t access.
Social media investigation: Many internal fraudsters post about their newfound wealth on social media. Expensive dinners, luxury vacations, designer purchases—all funded by stolen money and documented online.
Interview techniques: Getting the truth from employees requires specialized training. Professional investigators know how to conduct interviews that actually produce useful information, not just denials and deflections.
Legal evidence handling: Finding evidence is one thing. Making sure it holds up in court is another. Professional investigators know how to preserve evidence, maintain chain of custody, and document everything properly for prosecution.
Red Flags That Should Scare You
Some warning signs are obvious: employees living beyond their means, reluctance to take vacation time, defensive behavior about routine questions. Others are more subtle.
Watch for employees who seem to know too much about other people’s financial situations. Staff members who volunteer for overtime constantly, especially on weekends when fewer people are around. Anyone who gets unusually anxious when others handle their responsibilities.
Pay attention to customer complaints about account discrepancies, even minor ones. Notice employees who have unusually close relationships with vendors or specific customers. Be concerned about resistance to new procedures or system changes.
Anonymous tips should always be taken seriously, even if they seem vindictive or far-fetched. Most anonymous tipsters are fellow employees who’ve seen something suspicious but are afraid to speak up directly.
Here’s the thing about gut instincts: they’re usually right. If something feels off, it probably is.
The Math Works (When You Do It Right)
Yes, hiring professional investigators costs money. But consider the alternative.
The average internal fraud case costs financial institutions $1.4 million in direct and indirect losses. That includes the stolen money, regulatory fines, legal costs, reputation damage, and operational disruption. Some cases cost much more.
A comprehensive fraud investigation typically runs $15,000 to $50,000, depending on complexity. Even expensive investigations cost a fraction of what you’ll lose if fraud continues undetected.
Plus, professional investigators often uncover additional fraudulent activity that internal investigations miss. More complete investigations lead to better recovery through insurance claims, civil lawsuits, and asset seizure.
And here’s something most bank executives don’t consider: the deterrent effect. When employees know management takes fraud seriously and has professional resources to investigate suspicious activity, they’re much less likely to try anything stupid.
Don’t Wait for Your Next Audit to Discover the Problem
Internal fraud isn’t theoretical. It’s happening right now, at banks just like yours, committed by employees who seem just as trustworthy as yours.
The longer fraudulent activity continues, the more sophisticated it becomes and the more expensive it gets to resolve. Early detection saves money, protects reputation, and minimizes disruption.
If you’re seeing red flags, experiencing unexplained losses, or just want an honest assessment of your vulnerability, don’t wait. The cost of acting too late is always higher than the cost of acting early.
Ready to discuss your institution’s fraud prevention and detection capabilities? Schedule a confidential consultation with Kyle Robison, our Deputy Director of Investigations at Lauth Investigations International. Kyle brings extensive experience helping financial institutions identify, investigate, and resolve complex internal fraud cases.
Schedule your consultation today to discuss how professional investigative services can protect your institution’s assets and reputation. You can also text us directly at 317-759-1004— really, text us.
Lauth Investigations has been helping financial institutions deal with internal threats for over twenty years. We know banking, we understand fraud, and we know how to investigate these cases without destroying your institution’s reputation in the process.
Hiring is one of the most critical decisions a company makes, directly impacting its bottom line, workplace culture, and legal standing. Yet despite best efforts, organizations often encounter the costly consequences of a bad hire. Whether it’s an employee who lacks the skills they claimed to have, engages in unethical behavior, or creates conflict within teams, the repercussions can be severe and long-lasting.
According to a 2024 report by the Society for Human Resource Management (SHRM), the average cost of a bad hire is estimated at $14,900, factoring in recruitment expenses, training, lost productivity, and potential legal costs. Another study from Glassdoor found that a single mis-hire can cost an organization up to 30% of that employee’s first-year earnings. CareerBuilder adds that 74% of employers admit to hiring the wrong person for a position, highlighting how common and costly this issue truly is.
So, how can companies avoid these pitfalls? The answer lies in investigative due diligence—a deeper, more comprehensive approach to pre-employment screening that goes well beyond resumes and standard interviews. Firms like Lauth Investigations International specialize in uncovering critical information about candidates that traditional hiring processes often miss, helping companies protect themselves from the costly aftermath of a bad hire.
The Hidden Costs of a Bad Hire
Before diving into investigative due diligence, it’s important to understand the broader impact of a bad hire:
Financial Loss: Beyond salary and benefits, companies incur costs for recruiting replacements, onboarding new hires, and lost productivity during transition periods. A disengaged or underperforming employee can also negatively affect team output and morale.
Cultural Disruption: A misfit employee can create tension, reduce collaboration, and even drive valued employees to leave. This “domino effect” can undermine years of culture-building efforts.
Legal Exposure: Some bad hires expose companies to legal liabilities—whether through harassment, discrimination, theft, or breaches of confidentiality. These risks often result in costly settlements or litigation.
Damaged Reputation: Poor hiring decisions can harm a company’s reputation internally and externally, impacting customer trust and future recruitment efforts.
Given these high stakes, relying solely on resumes and interviews, which can be easily manipulated or incomplete, is increasingly risky.
Why Standard Hiring Practices Are Not Enough
Resumes provide a candidate’s educational background and work history but often lack verification of claims or context regarding performance and behavior. Similarly, interviews are limited by the candidate’s presentation skills and the subjective impressions of interviewers.
Standard background checks—such as criminal record screenings and reference calls—are helpful but insufficient for high-stakes or sensitive roles. They may miss red flags like undisclosed litigation, financial troubles that could suggest vulnerability to fraud, or lifestyle factors that may impact job performance or ethics.
This gap is where investigative due diligence becomes invaluable. By conducting a more thorough vetting process, companies can uncover risks early, preventing costly mistakes.
How Lauth’s Investigative Due Diligence Goes Deeper
Lauth Investigations International employs a range of specialized investigative techniques designed to provide a 360-degree view of candidates, far beyond traditional screening:
1. Litigation History Checks
A candidate’s involvement in past lawsuits—whether as a plaintiff, defendant, or witness—can reveal important insights into their character, judgment, and potential risks. Lauth’s investigators access court records, legal databases, and public filings to identify any relevant litigation history that could impact a candidate’s suitability.
For example, undisclosed involvement in employment-related lawsuits or financial disputes might signal a risk for future workplace conflicts or ethical breaches. Early detection of such histories allows employers to make informed decisions or include protective clauses in employment contracts.
2. Financial Screening
Financial stability can be a significant factor, especially for positions involving fiduciary responsibility, access to company assets, or handling sensitive information. Lauth conducts discreet financial screenings that look beyond credit scores to identify issues like bankruptcies, liens, or patterns of excessive debt.
Candidates experiencing financial distress may be more susceptible to fraud, theft, or other unethical behaviors. By assessing financial risk factors, Lauth helps companies safeguard their resources and reputations.
3. Lifestyle Audits
While respecting privacy boundaries, Lauth’s lifestyle audits evaluate public online activity, social media presence, and other available information to identify behavior or affiliations that could raise concerns. This includes evidence of substance abuse, violent behavior, discriminatory attitudes, or associations with extremist groups.
For instance, a candidate’s public social media posts might contradict their professed values or professional image, indicating a potential risk for workplace conflict or reputational harm. Detecting such discrepancies early enables employers to ask critical questions during interviews or reconsider a candidate altogether.
Case Example: Avoiding a Costly Mis-Hire
In 2024, a national financial services firm engaged Lauth Investigations to assist with vetting a candidate for a senior accounting role. The resume and interviews portrayed an ideal fit, but Lauth’s investigation uncovered a prior undisclosed lawsuit involving allegations of financial misconduct and a history of unpaid debts. The candidate also posted inflammatory content on social media, which could have jeopardized the firm’s public image.
Armed with this information, the company decided not to proceed with the hire, avoiding potential financial losses, legal exposure, and reputational damage. This case underscores the value of investigative due diligence in mitigating risks standard hiring processes might overlook.
Benefits of Partnering with Lauth for Investigative Screening
Risk Mitigation: Identifying red flags before hiring reduces turnover costs and potential legal liabilities.
Confidence in Hiring Decisions: Comprehensive reports provide HR and leadership teams with objective, verified information.
Customized Investigations: Lauth tailors investigations to the specific role, industry, and client needs, ensuring relevant and actionable insights.
Confidentiality and Compliance: Investigations are conducted discreetly, adhering to all applicable privacy laws and regulations, including the Fair Credit Reporting Act (FCRA).
Conclusion
The true cost of a bad hire extends far beyond lost productivity. It encompasses financial loss, cultural disruption, legal exposure, and reputational harm that can affect an organization for years. As hiring environments become increasingly competitive and complex, relying solely on resumes, interviews, and standard background checks is no longer sufficient.
Investigative due diligence, as practiced by Lauth Investigations International, provides a critical layer of protection-uncovering litigation history, financial red flags, and lifestyle concerns that might otherwise go unnoticed. By investing in these deeper vetting techniques, companies can make more informed hiring decisions, safeguard their workplaces, and ultimately save millions in potential costs associated with bad hires.
In the end, the question isn’t just about finding the best candidate on paper—it’s about protecting your organization’s future with thorough, reliable, and discreet investigative support.
