W

hen Vice President Boediono finally gave his testimony before the corruption court in the Century bailout graft case, many hoped that the full details of the case would soon be uncovered.

At the center of the debate in this case is the question of whether or not the Deposit Insurance Corporation'€™s (LPS) decision to inject Rp 6.7 trillion (US$586.7 million) to prevent Bank Century from going under was legally correct and justifiable.

The public is also waiting anxiously to know what the authorities will uncover in their investigation into the alleged BCA tax fraud involving former tax director general Hadi Poernomo, who recently retired as chief of the Supreme Audit Agency (BPK).

Generally, any major fraud audit in Indonesia will most likely be in the spotlight until the offenders are prosecuted. Nevertheless, less attention is paid to what happens after the case is resolved.

In most, if not all cases, when a fraud occurs a considerable part of the losses will never be recovered. The cost of fraud is often not just financial but may also be reputational. As evidenced by a number of graft cases, private companies may be involved in the offense, receiving '€œillegal services'€ from high-ranking public officials to gain privileges or simply to expedite things.

In the case of BCA'€™s alleged involvement in tax fraud, for example, whether or not the bank or its officers are guilty remains to be decided by the court.

Nevertheless, as evidenced by many corporate fraud-related cases in the world, whatever the end result of this case will be, it will most likely affect BCA'€™s image at some point. A previous example of a
major bank that struggled to restore its image due to a fraud-related crisis was Citibank in Jakarta when one of its senior relationship managers embezzled large sums from customers'€™ accounts.

Restoring the corporate image after a fraud-related crisis can be a daunting task for company executives as they must struggle to regain consumer confidence, cope with negative publicity and return their companies to stability.

The world has witnessed various strategies used by major corporations, such as Olympus, BenQ and the Satyam computer company to name only a few, to recover from fraud-related crises.

According to William Benoit'€™s image restoration theory, five general strategies are commonly employed by a company to restore its image: denial, evasion of responsibility, reduction of the offensiveness of the act, corrective action and mortification.

As evidenced by many corporate fraud cases all around the globe, the process of image restoration often starts when fraud is first detected and the media begin to ask questions about it despite denials by corporate executives.

When the public remains skeptical about the denials, corporate executives will attempt to evade responsibility by stating that, among other things, it was caused by uncontrollable factors (e.g. lack of information about the correct procedures) and that their intentions were purely benign.

For major fraud cases in public institutions, bringing offenders to court seems to be a common approach in image restoration especially when the offense falls under the category of corruption. However, things can be quite different for private institutions.

Although mass media covers fraud in public institutions more frequently than it does in private institutions, in reality fraud is also a major problem in the private sector in Indonesia.

Nevertheless, when it comes to sanctioning employees, given that the offense does not involve public resources or public officials, many private institutions choose to treat the matter internally for the sake of their reputation.

This is most likely a reason we do not hear much about fraud in private institutions in the news.

In practice, fraud audits within a private institution are often misunderstood by the organization'€™s own members.

Despite applying similar principles, the audit process is not quite the same as in a public institution especially if it is conducted by internal auditors.

Some (narrow-minded people) may argue that the entire process has no solid basis in fact and is
only motivated by the so-called '€œpolitical interest'€ to bring down a certain group or party within the organization.

This, from the image restoration theory point of view, may be viewed as part of the effort to reduce the offensiveness of the event by means of attacking the '€œaccuser'€.

In addition to being a means to restore corporate image, punishment may also serve as a deterrent for preventing future fraud-related crises.

Nevertheless, determining the right amount of punishment for fraud offenders may become a challenge on its own.

In fact, there have been endless debates regarding the concept of punishment for fraud offenders. Some argue that offenders must be punished for crime they committed and that the punishment has to be in proportion to their so-called '€œblameworthiness'€, also known as the '€œretributivism'€ view.

It is not uncommon for some organization members to argue that a fraud audit will cause more harm than good to an organization and that the auditors are the ones to blame for the problems.

Certainly, with all the evidence-gathering activities that may temporarily disrupt company operations in the short term a fraud audit may appear to be disadvantageous for an organization, but the long-term benefits of the process will outweigh all the costs thereof.

Short- term minded employees may have a hard time seeing that accountability, transparency and corporate reputation are irreplaceable company assets that, if impaired or gone, may mark the beginning of the end of the entire organization.

Fraud audits will ensure that such assets are preserved and the organization will survive for many years to come.