Do you think the corporate world has more or less fraud in the last 10 years than it used to? Do you think there are more or less people who lie, cheat, and steal today than 50 years ago?
The ACFE 2008 Report to the Nation (RTTN) study on 959 fraud incidents shows that the top two indicators of perpetrators were “living beyond means” and “financial difficulties”. So, in these difficult economic times, one might expect fraud to increase. This report indicates that the way cited most frequently for initially uncovering these incidents was through a tip, such as those provided through anonymous hotlines. The prevalence of identifying the incident with a tip increased from 24% to 46% between the report in 2006 and 2008.
While fraud seems to be increasing, so are the size of the frauds themselves (ala Mr. Madoff), with more prevalent media about them, and better ways of detection. Is our population really more dishonest or in the typical yin and yang of life, is there a typical honesty – dishonesty balance that exists?
I reflect on a different time, about a half a century ago, when my grandfather met Mr. C., an “enterprising” man who was selling profitable shares. My grandfather initially bought some of those shares from Mr. C., but asked for his money back when he heard that others were buying based on Mr. C. touting my grandfather purchased shares. Only because of word of mouth, many others asked for their money back, too.
As it turned out, Mr. C.’s shares weren’t worth the paper they were printed on… A half a century ago, Mr. C. bilked a handful of people for a few hundred or thousand dollars. In today’s world, that could be millions or even billions of dollars, with the right promise and the right “other investors”. The detection and publicity of Mr. C.’s downturn was entirely different then versus now. In today’s world, if Mr. C. and my grandfather worked in corporate America, my grandfather could call the anonymous hotline to identify Mr. C.’s fraudulent act. The internet would likely be used to publicize his misdeeds if they were large enough.
So, in summary, I wonder, are we experiencing more fraudulent acts or are they just bigger, while we are doing a better job of identifying them (through hotlines such as Ethical Advocate) and publicizing them? In these tough economic times, I suspect the answer is “Both”….