Have you ever wondered why someone who is already swimming in money still feels the need to defraud someone else? What truly motivates someone to commit white collar fraud?
Isn’t it ironic that the type of financial fraud that incurs the largest losses are typically unnoticed (or are often just discovered by chance) despite efforts in governance and detection?
Understanding the criminal mind has long fascinated psychologists and psychiatrists from around the world. We already know that researchers say that the fraud triangle – 3 factors that are needed to commit fraud has to be present for fraud to occur, but surely there is more to it?
Harvard professor Eugene Soltes has an answer. He says that even rich people commit fraud because they think they can get away with it. It is as simple as that, white-collar criminals will commit fraud for the sheer thrill of it, or so it seems.
Inside the Rich Criminal’s Mind
In his book, Why They Did It: Inside the Mind of the White-Collar Criminal, Soltes explained why people who already have status and wealth still commit financial crimes such as in the case of business executives.
To write the book, the Harvard professor wrote to 4 dozen convicted fraudsters. The people he sought answers from range from Andrew Fastow of Enron Corp, Ponzi scheme manipulator Bernard Madoff, to Dennis Kozlowski of the US$600 million Tyco International fraud.
The criminals responded with all sorts of reasons but the most common 3 are:
I Simply Did It Because I Can
It is all about the ego for some white-collar fraudsters. They are typically respected members of the community, with high social standings and have an educated background but that is not enough for them. They want to feel more ahead of their game, like they are somehow better than others. Typically, they enjoy bending other people to their will and have no problem using their specialized skills and knowledge to get what they want.
Dennis Kozlowski told Soltes that he believed he can do anything, primarily because Tyco’s board will gladly do whatever he says and believe anything he tells them.
It Is Not Really That Bad
Some well-intentioned fraudsters believe that they can somehow repay the money before their deceit would be discovered. Because they don’t really mean to take the money, they rationalize their behavior because they believe that it is for a good purpose.
This is true for Bernie Madoff, who believed that him taking some money can easily be reversed. His reason was that he will repay the money once his other plan worked and no one will know any loss ever occurred.
I Have to Do It
Some fraudsters really do think that they are acting in a legitimate manner. Some of them even believe that their ‘brave’ actions are what is needed for their organization’s survival. They somehow view themselves as martyrs or heroes willing to do the dirty work to save everyone else.
Former Enron chief financial officer Andrew Fastow told Soltes that if he didn’t do what he did, someone else will; that’s why he felt the need to go ahead and do what he thinks needs to be done.