Winston Churchill famously remarked that people who don't learn from past mistakes are doomed to repeat them. This is certainly apt when considering the lessons of various futile attempts over the years to combat financial fraud.
In TNB's own accounting profession each major scandal (unfortunately many) has been met with new auditing rules and other methods intended to prevent or uncover fraud. Landmark situations, each of which generated strong but ultimately somewhat ineffectual responses, included McKesson Robbins (1938), The Great Salad Oil Scandal (1962) and Enron (2001). Then there were (are?) the ever present Ponzi schemes culminating in the (so far) granddaddy of them all, which was only brought to light when more of Bernie Madoff's investors demanded withdrawals than new pigeons could be found.
Why don't new and improved regulations, standards and awareness succeed better at curtailing fraud? Besides an unfortunate "willingness" (greed) on the part of some prospective victims, the psyche of the fraud perpetrators usually includes an ego so large that being caught is not contemplated. And/or the sociopathic nature of these people is often not noticed, as again best exemplified by that distinguished gentleman now sitting in a New York jail awaiting his June 16 sentencing.
It sounds cynical, but as this posting is being typed and despite everything noted above, no doubt new and improved frauds are now being created. Thus TNB's advice echoes that of the Sergeant at roll call on the old Hill Street Blues TV show "just be careful out there".
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1 comment:
Well said, TNB. I would add that the regulations promulgated as reactions to fraud are often so tortured and tortuous -- that the purpose is quickly lost -- i.e., only the honest and compliant are actually regulated!
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