The psychology of morality – that’s a deep trench to dive into. Everyone from Tolstoy to Jay-Z has asked, in one form or another, “What does it mean to be ‘moral’?
Is morality a human behavioral trait selected by nature over thousands of generations that allows us to live in high-density social settings? Are we the only living beings that are able to identify such an abstract concept? Interestingly, it would appear not:
I knew there was a reason I generally trust animals more than humans!
But I digress…More relevant to our discussion is the psychological landscape of white-collar criminals. By now, many, if not most people in the accounting/audit/fraud investigation are well aware of Donald Cressey’s famous and venerable Fraud Triangle:
Credit: Wikimedia Commons
Pressure – Opportunity – Rationalization: The three ingredients for baking a big ol’ fraud cake. This framework is now standard in most academic courses that are even tangentially fraud-related – everything from accounting and finance, to human resources and financial institution employee training. It’s common sense: give certain individuals a reason to steal, a chance to steal, and something to convince themselves that it’s okay, and you are going to be missing some assets of some sort.
Recently, however, the Cressey model is being supplanted by the Fraud Diamond concept, which adds capability as a fourth fraud dimension:
Makes sense: In order to commit fraud, you have to be able to, you know, commit fraud.
The problem is that these models bring us no closer to answering the existential question: WHY?
In my approximately fifteen years conducting investigations, I’ve yet to come across the hypothetical Parent-Stealing-Money-To-Pay-For-Their-Child’s-Chemotherapy fraudster that we read about in the ACFE’s Fraud Examiner’s manual. But I’ve certainly come across plenty of Trusted-Employee-Cleans-Out-The-Company-Cash-Account-To-Go-To-The-Casino fraudsters. This one happened right in here in my local area:
“Laura Dejong admitted that she embezzled $2,679,227 from her employer, Kansas City Screw Products Inc., from January 2003 to November 2011. Kansas City Screw Products is a family-owned and -operated metal fabrication business in Kansas City. Laura Dejong, who was employed as a secretary and bookkeeper for approximately 23 years, forged checks drawn on two company bank accounts.
According to court documents, significant gambling activity was identified for the Dejongs, totaling approximately $4.5 million from January 2002 to December 2011. The majority of the Dejongs’ gambling was at slot machines.
Records indicate that the Dejongs took at least eight cruises and spent more than $100,000 on payments for cruises, vacations, and airfare between 2005 and 2011. During the time of the embezzlement scheme, according to court documents, the Dejongs used the stolen money to purchase a 2007 Chevrolet Tahoe, a 2009 Honda Accord, a 1997 Crownline boat (20-foot fiberglass runabout), a 1997 Prestige boat trailer, a 1985 Chevrolet RV/motor-home (now a KC Chiefs party bus), a 2008 Jayco travel trailer, four Ameriprise Brokerage accounts, four Kansas Speedway season tickets (for passholder seats, parking passes, and track passes), four Kansas City Chiefs Club Level season tickets and parking passes, membership to the Chiefs Wolfpack Club (an exclusive members-only facility), and their residence.” fbi.gov
Wouldn’t we all like to have our own KC Chiefs party bus, metaphorically if not actually?
Anyhow, nobody needs all that crap. Why do we do it? And frankly, I don’t generally subscribe to the “there’s two kinds of people” worldview that so many fraud professionals have. It’s just not that simple. I’ve met enough convicted felons to realize that they’re not all evil people who only care about bringing chaos and darkness to the world through criminal activity, etc. That’s certainly NOT to say that there aren’t a small percentage of people who comprise an extremely malevolent group of sociopaths that will steal anything that’s not nailed down.
The unsatisfying answer is that just about any of us could be a victim or a perpetrator. Some people start small and find themselves getting in deeper and deeper to a fraud scheme that began as a very small “F You” to their employer, or to borrow money to pay the rent. You would be surprised how many white-collar criminals commit embezzlement in order to please their spouse/partner/boyfriend/girlfriend. It’s among the saddest things I’ve ever seen to listen to a woman in her mid-30’s talk about how her husband served her with divorce papers and took custody of her children the day before she went to federal prison after embezzling hundreds of thousands of dollars that she spent mostly on trying to keep him happy.
NPR has an excellent piece on the psychology of fraud, I recommend listening:
“In general, when we think about bad behavior, we think about it being tied to character: Bad people do bad things. But that model, researchers say, is profoundly inadequate…
…Here is, she says, a common misperception that at moments like this, when people face an ethical decision, they clearly understand the choice that they are making.
“We assume that they can see the ethics and are consciously choosing not to behave ethically,” Tenbrunsel says.
This, generally speaking, is the basis of our disapproval: They knew. They chose to do wrong.
But Tenbrunsel says that we are frequently blind to the ethics of a situation.
Over the past couple of decades, psychologists have documented many different ways that our minds fail to see what is directly in front of us. They’ve come up with a concept called “bounded ethicality”: That’s the notion that cognitively, our ability to behave ethically is seriously limited, because we don’t always see the ethical big picture.
One small example: the way a decision is framed. “The way that a decision is presented to me,” says Tenbrunsel, “very much changes the way in which I view that decision, and then eventually, the decision it is that I reach.”
Essentially, Tenbrunsel argues, certain cognitive frames make us blind to the fact that we are confronting an ethical problem at all.
Tenbrunsel told us about a recent experiment that illustrates the problem. She got together two groups of people and told one to think about a business decision. The other group was instructed to think about an ethical decision. Those asked to consider a business decision generated one mental checklist; those asked to think of an ethical decision generated a different mental checklist.
Tenbrunsel next had her subjects do an unrelated task to distract them. Then she presented them with an opportunity to cheat.
Those cognitively primed to think about business behaved radically different from those who were not — no matter who they were, or what their moral upbringing had been.
“If you’re thinking about a business decision, you are significantly more likely to lie than if you were thinking from an ethical frame,” Tenbrunsel says.
According to Tenbrunsel, the business frame cognitively activates one set of goals — to be competent, to be successful; the ethics frame triggers other goals. And once you’re in, say, a business frame, you become really focused on meeting those goals, and other goals can completely fade from view.”
I too disagree with many of the outdated beliefs of the ACFE’s founders in relation to the red flags of fraud – it’s just overly simplistic to assume that every accounts payable clerk who buys a new car is embezzling. I find there to be a lot of implied sociological bias in those assumptions, some of which border on racism and misogyny.
Good people do indeed do bad things. Kind of like how Schrödinger’s mythical quantum cat can be both alive and dead at the same time.
So what can we do as preventive and detective controls to minimize the risk of fraud? We’ll address that in our next installment…
Music Recommendation: Keith Urban’s new album, Graffiti U. One of the best in the business, KU releases another well-crafted, soulful album of country-flavored music that continues to push the boundaries of the genre.
Food Recommendation: Hummus. So many ways to use chickpeas to make tasty stuff. If you haven’t tried it, you’ll like it. Recipe: https://www.bonappetit.com/test-kitchen/cooking-tips/article/best-hummus-ever