Weak economy may trigger frauds -- US regulator

By Emily Chasan

NEW YORK, May 1 (Reuters) - Regulators at the U.S. Securities and Exchange Commision are preparing for more cases of corporate fraud, as weak economic conditions could drive companies and workers over the edge, a top U.S. regulator said on Thursday.

"Looking forward you may see more of these frauds come through and I guess I'm kind of expecting it," said Susan Markel, chief accountant at the SEC's division of enforcement.

"When you have a decline in the economy, sometimes more frauds come through."

As a weaker economy forces customers to pull back on spending, it could become more difficult for companies to meet targets. But companies may feel desperate to hold on this time because the credit crunch has also hurt a firm's ability to borrow funds that would get it through the downturn.

"You get companies who may only have one line of credit that's out there," Markel said at a Baruch College accounting conference in New York. "Whereas, in the past, they had five or six different sources of capital, they've got one, they need to hold it and, if they don't, bad things happen to their company."

She also said companies would have to beware of stresses on individual workers who find it harder to meet targets.

A worker, "may feel that, if their operation doesn't hit their numbers, that they'll close down that shop," she said.

"That might cause people individually to do things their company doesn't even know about."