How people rationalize fraud – Kelly Richmond Pope

How people rationalize fraud – Kelly Richmond Pope


If you ask people whether
they think stealing is wrong, most of them would answer, “Yes.” And yet, in 2013, organizations
all over the world lost an estimated total
of 3.7 trillion dollars to fraud, which includes crimes like embezzlement, pyramid schemes, and false insurance claims. This wasn’t just the work
of a few bad apples. The truth is that many people
are susceptible not only to the temptation
to commit fraud but to convincing themselves
that they’ve done nothing wrong. So why does fraud happen? While individual motivations
may differ from case to case, the fraud triangle, a model developed
by criminologist Donald Cressey, shows three conditions
that make fraud likely: pressure, opportunity,
and rationalization. Pressure is often what motivates someone
to engage in fraud to begin with. It could be a personal debt, an addiction, an earnings quota, a sudden job loss, or an illness in the family. As for opportunity, many people
in both public and private sectors have access to tools that enable them
to commit and conceal fraud: corporate credit cards, internal company data, or control over the budget. The combination of pressure and being exposed to such opportunities
on a daily basis can create a strong temptation. But even with these two elements, most fraud still requires rationalization. Many fraudsters are first time offenders, so in order to commit an act
most would regard as wrong, they need to justify it to themselves. Some feel entitled to the money
because they are underpaid and overworked and others believe
their fraud is victimless, perhaps even planning to return
the money once their crisis is resolved. Some of the most common types of fraud don’t even register as such
to the perpetrator. Examples include employees
fudging time sheets or expense reports, taxpayers failing to report cash earnings, or service providers overbilling
insurance companies. Though these may seem small, and can sometimes
only involve hundreds of dollars, they all contribute to the big picture. And then there’s fraud on a massive scale. In 2003, Italian dairy food giant
Parmalat went bankrupt after it was found to have fabricated
a 4 billion dollar bank account and falsified financial statements to hide the fact that its subsidiaries
had been losing money. Because it was family controlled, corporate governance
and regulator supervision were difficult, and the company likely hoped
that the losses could be recouped before anyone found out. And it’s not just corporate greed. Governments and non-profits
are also susceptible to fraud. During her time as City Comptroller
for Dixon, Illinois, Rita Crundwell embezzled
over 53 million dollars. Rita was one of the country’s leading
quarter horse breeders and winner of 52 world championships. But the cost of maintaining the herd
ran to 200,000 dollars per month. Because her position gave her complete
control over city finances, she was easily able to divert money to an account she used
for private expenses, and the scheme went
unnoticed for 20 years. It is believed that Crundwell
felt entitled to a lavish lifestyle based on her position, and the notoriety
her winnings brought to the city. It’s tempting to think of fraud
as a victimless crime because corporations
and civic institutions aren’t people. But fraud harms real people
in virtually every case: the employees of Parmalat
who lost their jobs, the citizens of Dixon whose taxes
subsidized horse breeding, the customers of companies
which raise their prices to offset losses. Sometimes the effects are obvious
and devestating, like when Bernie Madoff caused thousands
of people to lose their life savings. But often they’re subtle
and not easy to untangle. Yet someone,
somewhere is left holding the bill.

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    Jack Kraken

    And while blue collar crime get criminals in jail for years, many white collar criminals have ridiculously low sentences and/or spend jail time in rather decent prisons.

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    Mark K

    every single person on this planet commits fraud in some form to survive. I'm sure if i start digging the net i will find T.e.d ( the company who makes this amazing videos) avoided taxes or payed out to someone to get somewhere. NO ONE IS INNOCENT NO ONE!

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    Rakshasa

    I hate fraud so much. Don't you? If everyone who reads this post sends me $100, worldwide fraud would end in a week.

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    pyropulse

    You liberals at TED tell me that taxing the rich at higher rates is the "right thing to do" and yet committing small level fraud, of which actually benefits the lower-class citizen, is somehow bad?

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    Blood Angel

    With car insurance and repairs, insurance will cut down the costs quoted by a repairer, so to offset this, a repairer will pad out the quote. Knowing that repairers pad out quotes, insurance companies find ways to cut what they will pay, and so the cycle continues.

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    Сергей Оненко

    The video claimed to explain how people rationalize fraud but it didn't.

    If that's not irony, I don't know what is

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    Gigi W

    The Fifth Estate has an excellent documentary about Rita Crundwell. That lady really had some balls man lmao! here's the link:
    https://www.youtube.com/watch?v=WAYtaFxlw3M

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    Xsarec

    Business owners use this same rationalization when not giving raises, they convince themselves it is OK to take all the profits.

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    acar1994

    So blame the people but not the ones in the 1%.

    So basically Big Banks such as Citi, Chase, Bank of America, and Wells Fargo didn’t commit fraud by causing the 2007 Great Recession Crash by selling NINJA Mortgages. Let’s not forget they cried to the government and were bailed out for $700 Billion and instead of helping innocent people, their executives were given $1 million dollar bonuses.

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    Natasha Paige Cortez

    For several years I stole a lot from my workplace. My rationalization was:

    1) The company I am stealing from has enormous wealth. I take but a crumb from their perspective, but it is a feast to me.

    2) I am not being paid what I am worth, not by a long shot. They low ball me, do not give me vacation time, no medical.

    3) I don't need to work as long, or pay for as much education if I keep doing it. This grants me more time for my family, friends, and hobbies… You know, my life. More freedom for me.

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