The mindset of white-collar criminal

Auditors of all kinds would be wise to read up on the psychology of white-collar criminals, to better understand the rationalization vector of the fraud triangle:

David Myers, the former controller of WorldCom, recalled thinking that he was “helping people and doing the right thing” while perpetrating one of the largest accounting frauds in history. In his mind, the fraud was superficially sustaining the company, its stock price, and the jobs of its employees.

For some, the theory is that it was a simple cost-benefit calculation, underestimating the likelihood of being caught and, therefore, the cost. But the article linked to above notes that in other cases, there wasn’t a whole lot of calculating going on at all:

Waksal understood that calling his daughter and telling her to dump her shares was wrong. Since he knew the SEC monitors this kind of trading, his decision couldn’t possibly represent the careful reasoning of a self-made man who prided himself on his intellectual prowess. Had he actually put his mind to it, presumably he could have devised a better fraud.

Part of the problem is how separated the perpetrators of white-collar crime are from their victims, or how relatively small the impact of their fraud will be on them, in their minds. As businesses become bigger, and our communities grow and our connections to each other loosen, this will continue to be a big factor.

Actually the article doesn’t really conclude much. Some felt remorse, some didn’t. Most didn’t think things though, but if they did they underestimated the impact on their lives and their victims’ lives. Some acted out of perceived pressure to meet earnings targets, while others believed they were doing what was right and would be recognized as such (*cough* Fastow).

Interesting read, and always fun to read about the schemes and perpetrators’ justifications for them. Be vigilant, it can happen in your company.

Accountant convicted over hit on client

HitmanIn Sydney, Australia, an accountant was convicted of hiring a hitman to kill a client who he had stolen almost $84,000 from. He had failed to remit those amounts to the government for taxes owed by the victim. The motive was, unsurprisingly, to “stop Mr Williams from bringing the fraud to light.”

This is pretty crazy stuff. Seems like a tragically low amount of money to get someone killed over. I mean, how much do you pay a hitman to do the job? $10-20K? He was convicted of the fraud as well.

Here’s a New Zealander that spread $300,000 across over 80 different clients – an average of $3,750 per client. Diversifying the revenue streams allowed the enterprising chap to make much more than $84K.

Regardless, the old maxim is still holding: If you’re committing a fraud, you will get caught. Then you’ll have to decide if you want to contract the killing of the person who caught you or just face the music.

Wireless internet theft affects us all

A story in the New York Times about your friendly neighborhood wireless thieves. I have to admit I’m guilty of this when I’m not at home, but it pretty much does serve you right if you don’t secure your network. Maybe municipal wi-fi will cut down on this “phenomenon”…

Edit: If only Twitter were invented when I wrote this “post”.