1-3 Short Paper: Fraud Article
Leanore Stuart
Southern New Hampshire University
For my article I chose "Why do they do it?" because white collar criminals pique my
interest. I switched from general accounting to forensic accounting for that reason. I like how
they are usually brought down by something minor, like a minor discrepancy that someone
notices, and how the house of cards collapses, exposing corruption at many different
management levels. This article provided a summary of Eugene Soltes' 2016 book "Why They
Do It: Inside the Mind of a White-Collar Criminal." From the company Enron Soltes interviews
some notorious white-collar criminal like Bernie Madoff and Andrew Fastow.
The article briefly mentions a few of the most significant reasons why these businessmen
became criminals. Soltes wrote to the administrators who were imprisoned, asking them a few
uncomplicated questions to start a conversation. Many of them responded, and I believe Stephen
Richard's response was the most shocking to me. Richards was found guilty of pre-printing dates
on contracts for them to fall in an earlier quarter to meet his team's goals. What's even more
strange is that he didn't think he was doing anything wrong!
He thought he was assisting his company. He reasoned that it would inspire his clients to
complete transactions sooner rather than later. He states unambiguously that he did not believe
he was doing anything wrong. The GAAP clearly states that premature income detection is a
violation. It's difficult to believe Richards truly believed he was innocent, given that all business
majors are required to take at least basic accounting classes to graduate. On the other hand, there
was Ben Horowitz's story.
Ben hired a CFO to maximize employee stock and options; the plan looked to be
completely legal. For whatever reason, the suggested plan didn't sit well with Ben, so he
conferred with an independent counsel about it. This party confirmed Ben's skepticism that the
plan was illegal. Ben could have been imprisoned alongside Richards if he hadn't reached out to
someone outside the company. This is a significant point because it establishes how, with a little
humility, Ben avoided prison by admitting he didn't know enough about the legislation or the
organization of the material to make an educated decision.
The final point raised was the lack of uncomfortable disagreement, which is a social
phenomenon that causes us to reevaluate our actions when we are uncomfortable with the people
around us. Essentially, we will not stop doing something if no one says anything, but if sufficient
questions are raised or there is enough pushback, we will reevaluate our actions. When upper
management is okay with falsifying numbers or preprinting dates on contracts, it is difficult for
uncomfortable disagreement to emerge because those at the bottom want to amaze their bosses
and maintain their jobs.
The article raised some interesting questions about how you would respond in the
circumstances these men were placed in. We all want to believe that we would never do anything
unethical,