the Association of Certified Fraud

examiner's together reducing fraud

worldwide

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white-collar criminals differ from other

types of criminals in one important way

they're much worse

the person who robs you know your car

and takes a two hundred dollar stereo or

the person who robs the 7-eleven

hopefully not violently and takes a

couple thousand dollars those people are

involved in high-risk low reward crime

it's very risky to do that you can get

shot in a 7-eleven if you find a robbing

and and you've got a couple thousand

dollars with the white-collar criminal

you have low-risk high-reward so you

have somebody like Bernie Madoff who

stole sixty billion dollars wow that's a

lot of money and he he had a risk but

his career went on for years and years

and nothing happened to him until

finally he got caught and if he'd been

caught after 2008 we're in an era now

very reduced sentences and prosecutions

he might not have gone to jail or he

might have gone to a country club jail

or something

there are some personality traits are

fairly common among white-collar

criminals and fortunately they are

defined in the American Psychiatric

Association diagnostic manual the come

under the category of personality

disorders

the first is narcissistic personality

disorder and the second is antisocial

personality disorder so it's not like

your wife or girlfriends saying you're a

narcissist it's like you have a severe

pathology where with narcissism you see

everything through the lens of your own

personality what's good for you what you

want will will enhance you and so forth

antisocial personality has nothing to do

with being gregarious it has to do with

a total disrespect for society's laws

you do what you want and you rationalize

it and it really doesn't matter how it

affects other people so when you have a

combination of those two the

narcissistic and the antisocial

personality disorder you have a fuller

explanation for the fraud triangle the

part that says pressure the fraud

triangle is really excellent but when

you say well what creates the pressure

it's not just money

it isn't just money there there is a

definition of how much is enough but for

the big fraudsters it's really not how

much money it's how much glory gain

prestige they can get so those are those

are two markers for fraudsters are from

our research

one characteristic of people with

personality disorders is they don't

really change over time after the age of

24 or 25 so there are two factors here

one

these people aren't likely to change

because they probably fall within some

area of a personality disorder second we

really don't know what their prior

record was they will admit to X amount

of fraud but it's probably been going on

a long time once they get out they'll be

happy to get out say the right things

and probably in many cases go right back

to it there was one study for the

Sentencing Commission that found the

recidivism rate for fraud white-collar

crime was 50% so rehabilitation that's a

nice idea the real point here though is

harm reduction for us how do we make

sure they don't get out and start a new

company and fleece everybody for the

stock value or get involved in some

scheme to to take advantage of the

public and I think there there's some

pretty good indicators that prison

sentences scare people off from fraud

that's according to one of the best

judges in the federal court system Jed

Rakoff and taking away the right to run

publicly held company is taking the way

the right to be a fiduciary financially

anything that will protect us and

prevent them from getting back into this

is what we want whether they're

rehabilitated or not is up to that that

the protection is up to us

punishing white-collar crime has has had

a compressed and sort of rollercoaster

history since 1940 in 1940 edwin

sutherland identified the term

white-collar crime and he made the point

that white-collar criminals were very

dangerous and he gave examples from the

Great Depression and the robber barons

of the 19th century about how much

trouble they caused at that time people

really weren't sentenced for anything

you could barely get these people into

court let alone punish them as time went

on their sentences were developed for

white-collar criminals but it would be

lower time and they would be sent to

what were called country club federal

prisons okay well no prison is a Country

Club but they were there certainly some

that were much better than others so

there was not really a threat and nobody

objected too much as really Enron

probably it seems like Enron was a

turning point when Enron happened they

crashed tens of thousands of retirement

plans all across the country the

organization was basically a scam from

the start I mean it was really amazingly

crooked and you know there were

sentences handed out unfortunately

Ken Lay who's the chief perpetrator died

before he could go to jail but the

that's when people began to match up the

societal harm with white-collar crimes

and sentences Bernie Madoff was

sentenced to 150 years in jail there

were a couple other high-profile

white-collar criminals around that time

who received one received an 800 year

sentence and so forth and what happened

after that was the Great Recession okay

and when that when that started up

people really I believe hungered to see

the fraudsters punished for what had

happened we know that the crash was

largely based on real estate

securities that were sold that every

beckoned well that anybody that looked

new were were bogus the people that sold

them do that or should have done that

and as a result six trillion dollars of

homeowner equity disappeared how many

people went to jail as a result of the

fraud committed prior to the Great

Recession the fraud that kicked it off

exactly one the Savings and Loan

scandals which happened in them in the

mid 90s resulted in eight hundred and

sixty some people convicted of crimes so

you have savings alone which was a real

disaster and then you've got the the you

know the crash or the Great Recession of

2008 you know eight hundred convictions

one that you know is part of a reaction

to the harsh sentences that came just

before the Great Recession and there's a

debate that you can find in the Yale Law

Review and other places where people are

actually saying these white-collar

sentences are just too much you know why

are you doing this and the other side is

saying well we have to what's happened

is judges no longer have to follow

sentencing guidelines for white-collar

crimes so instead of getting 150 years

sentence those from Bernie Madoff if you

follow the guidelines which you get are

kind of nothing for for people that are

prosecuted now I don't think the public

is quite aware of this but we're seeing

a you know sort of a counter-revolution

in sentencing

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