Context-Aware Technology Goes to Court

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While most shadow social networks aren't nefarious, they can sometimes be instrumental in helping employees perpetrate fraud. Shadow social networks can be especially useful to wrongdoers in companies that have stringent fraud-prevention mechanisms, such as requiring multiple signatures for large transactions. In those cases, it often takes groups of people to skirt controls, Charnock says. Cataphora has encountered shadow social networks comprised of fraternity brothers, avid collectors of Nazi memorabilia, and people from the same region of a European country, who all spoke the same regional dialect.

Missing: glances, whispers, winks

Social network analysis can be helpful in determining which groups of employees might have had interactions across the company. In the book Coolhunting, authors Peter Andreas Gloor and Scott Cooper recount their efforts in a research project to look at e-mail messages between late Enron CEO Kenneth Lay and colleagues. The authors were trying to establish whether Lay could have been correct in claiming that he knew nothing of the wrongdoing at the company. Gloor and Cooper learned that Lay had been in contact with dozens of people who were connected to employees who were ultimately convicted in the Enron case. Although no proof of direct contact could be established, the authors say it is "highly unlikely that he did not know of their wrongdoing." When the authors examined the discussions, they found conversations about "highly suspicious topics." Lay was later convicted of fraud and conspiracy but the conviction was vacated after his death.

Examining electronic communications isn't foolproof. It can't capture the whole context of employee interaction. "We don't communicate the same way online as we do in person," says Karen Sobel Lojeski, a professor of technology and society at Stony Brook University and author of the book Leading the Virtual Workforce. In a harassment or discrimination case, for example, electronic communications wouldn't capture certain looks or whispers, she says.

Still, scanning digital employee communications can flag interactions that might be suspicious, such as staffers communicating in a foreign language in e-mails. "Every single time we've seen someone change language with a person they don't normally do it with it's been fraud or attempted fraud, or somebody is having an affair or talking about a drug problem," says Charnock, adding that many companies don't set up electronic compliance and monitoring systems to track more than one language.

Next, Cataphora plans to add real-time capabilities so that companies can identify problems faster. "The benefit of being real-time is that you're catching things that look suspicious before it goes on for weeks or months or years," says Charnock.

King is a writer for BusinessWeek.com in San Francisco.

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