Organi-Cultural DevianceTHE CULTIVATION OF A WHITE COLLAR CRIMINAL
(Husted & Gendron 2011)
Joe Collins, CFE
Agenda
New Pay Plan
What is Corporate Deviance
Types of Behavior
Gang Mentality
Takeaway
This is an exercise
MEMORANDUM
To: All Certified Fraud ExaminersCC: Chief Financial OfficerFrom: HeadquartersDate: 4/1/2013Re: Compensation Policy Change
New Compensation Plan for All Fraud Examiners
Due to changes in our economy, sequester, Obamacare, devaluation of the dollar, increases in the money supply and an $8 Trillion deficit we will no longer be able to pay you what you are currently earning. Beginning April 2, 2013 all fraud examiners will work a maximum of 29 hours per week and will be paid $8.50 per hour.
MEMORANDUM
To: All Certified Fraud ExaminersCC: Chief Financial OfficerFrom: HeadquartersDate: 4/1/2013Re: Compensation Policy Change
New Compensation Plan for All Fraud Examiners
Due to changes in our economy, sequester, Obamacare, devaluation of the dollar, increases in the money supply and an $8 Trillion deficit we will no longer be able to pay you what you are currently earning. Beginning April 2, 2013 all fraud examiners will work a maximum of 29 hours per week and will be paid $8.50 per hour.
This is an exercise
New Pay Plan
This is an exercise
Top Reason for Revising the Payplan
•Improve alignment between fraud investigation, pay & business strategy
•Decrease the time it take to catch fraud, simplify pay plan
•Change performance measures to place more emphasis on stopping fraud in its tracks
This is an exercise
Credit Card Fraud
20%
AllFraud
Confessionsand/or
convictionsCONFESSIONS GET PAID
This is an exercise
Commission ExampleCase Type: Ghost EmployeePerpetrator: “Sue” in AccountingAmount: $120,000 stolen in the last yearCommission: 20%Actual Payout: $24,000Recovery: $20,000Commission: (3%) $600Types of Fraud: Corrupution, Billing Schemes, Financial Statement Fraud, A/R,A/P, Asset Misappropriation, Expense account
This is an exercise
Fast Start Bonus
2013 Camaro
Chevrolet.com
90 Days
This is an exercise
2nd Place
2009 moviescreenshots.blogspot.comThis is an exercise
3rd Place
This is an exercise
Nervous?Hungry?
White Collar Crime
The term "white-collar crime" was coined in 1939 during a
speech given by Edwin Sutherland to the American Sociological Society.
Sutherland defined the term as "crime committed by a person of respectability and high social status in the course of his occupation.”
Many white-collar crimes are especially difficult to prosecute because the perpetrators are sophisticated criminals who have attempted to conceal their activities through a series of complex transactions.
Corporate Deviance
Organization culture has been defined as: “written and unwritten expectations (rules and norms) that influence members of the
organization” (Ross, 1995, page. 346
Corporate CrimeA crime is committed by corporate employees or owners to financially advantage a corporation
Lack of Supervision
LackLack of Critical thought , input of substance from group members or meaningful opportunities to engage in constructive criticism of the leaders action, direction of the organization, process and/or overall Ethical soundness of a situation.
Group Think
Micromanagement
Deviant Organizations
Self Censorship
(Fukashima)
Illusion of invulnerability
Collective Rationalization(Challenger Disaster)
Stereotyping(goody two shoes)Pressure
to Conform(robosigning)
Group Think
Symptoms
Illusion of Morality
Illusion of Morality
Illusion of
Unanimity(gangs)
Illusion of
Unanimity(gangs)
Mind Guards
Mind Guards
Deviance in GovernmentExamples: Blagojevich affair –
Rod Blagovich began serving a 14 year sentence in federal prison following his conviction for corruption including thesolicitation of bribes for the political appointments including the US Senate seat President Obama gave up to when he went to the white house.
No CommentAccuse the AccusersInsisting Deviant Action was Necessary (End Justified the Means)
Social Learning TheorySocial Control is formal and informal attempts at enforcing norms.
For Negative behavior For Positive behavior
The NORMS are exactly opposite in culturally deviant organizations
Progress Diagram
Changing RolesRole ManipulationLoaded languageGroup becomes the ultimate authority
Changing RolesRole ManipulationLoaded languageGroup becomes the ultimate authority
Stripped of Personal identify
Self-ActualizationGroup identity
Unethical Acts
“Tests”
Keep a secret
Stripped of Personal identify
Self-ActualizationGroup identity
Unethical Acts
“Tests”
Keep a secret
Isolation from healthy dialogue, processes & actionDevelops subcultureUnquestioning allegienceUndivided time and attention
Isolation from healthy dialogue, processes & actionDevelops subcultureUnquestioning allegienceUndivided time and attention
ALLEGIENCEALLEGIENCE PROBATIONARYPROBATIONARY Role dispossessionRole dispossession
Individual Indoctrination
Confront the reality of the new job- adjust your expectations
Achieve role clarity-
Locate oneself in the organization-
How does your work contribute?
Assess success- Newcomers assess the value of their contributions
Socialization- learn the language of the organization
Do You Accept Society’s Goals?
“focuses on materialism and monetary gain
as being of utmost importance in capitalist society.”
Toxic LeadershipPablo Escobar
Drug CartelPower
RespectMoney- Inv. Banking
Protection$160 millionPackagingBrokering
Securitization
Dick Fuld- Lehman Brothers
PowerRespect
Money- CocaineProtection
NW- $3 billionExtortion
TraffickingRobbery
Kidnapping
Maslow’s Heirarchy of Needs turned upside down.
Hierarchial Funnel of Individual Needs
MS13 vs. Wall Street
Wall Street brokerage firm was founded in 1869 and is headquartered Lower Manhatten area of New York City, with additional offices in international financial centers. The firm provides mergers and acquisitions advice, underwriting services asset management and prime brokerage to its clients, which include corporations, governments and individuals. The firm also engages in Market making and private equity deals, and is a primary dealers in the United States Treasury securities.
Mara Salvatrucha is a criminalgang that originated in Los Angeles with additional offices in other parts of the US, Canada, Mexico, and Central America. The gang is known to provide asset (human and arms) smuggling, drug smuggling, robbery, extortion, illegal immigration, murder, racketeering and kidnapping to it clients which include the Sinaloa cartel, Gulf Cartel, La Familia, Mexican Mafia, and Los Zetas.
Source: Wikipedia
Gang MembershipComparing mafia, cults, and gangs to deviant corporations. •Isolation•Discouraged from expressing dissenting views•Altruistic purpose•Confession•Sanctification•Transactional Relationships•Reward- Meeting the Groups wishes•Sacred Science- Rules of the Group are viewed as supreme governing rule•Cults strongly discourage critical thinking
DARK LEADERSHIP
What does it look like?
Example: Lehman Brothers
The Goldman executives, including CEO Lloyd Blankfein said they didn’t do anything irresponsible. “Regret to “Regret to me means something you feel you did me means something you feel you did wrongwrong– I don’t have that.” said Daniel Sparks, head of Goldman’s mortgage department.
Gregory Zuckerman (WSJ)
The Smartest Guys In the Room?Skilling: “ Andy what is going on?”
Andy: “Jeff, I don’t know,”. “They won’t tell me.”
“I don’t think I did anything wrong.”
This after Fastow ripped off Enron for over $60 million.
The Smartest Guys in the Room, Page 377
Predictive Behavior?
Quote from LinkedIn
Don’t know David, what I do know is . . .I will do whatever it takes to provide for my wife and my children. I’m an opportunist and if all else fails I will be a criminal. March 23, 2013 LinkedIn post.
Reducing Unethical Behavior
Here’s what to look for:
Clarity- Telling management and staff what is desirable and undesirable behavior
Role Modeling-
Achievability of Goals
Commitment
Transparency of Behavior
Openness
Enforcement
Sources
1. Organi-Cultural Deviance- Gendron & Husted, 2011- Presented to The American Association of Behavioral and Social Secience (2011) 1. Colossal Failure of Common Sense, Lawrence McDonald & Patrick Robinson (2009)2. The Smartest Guys in the Room, Bethany McLean & Peter Elkind (2004)3. Financial Serial Killers- Tom Ajamie & Bruce Kelly (2010)5. Tangled Webs- James Stewart (2011)6. Hearings Possible on Whale Loss, Scott Patterson & Daniel Fitzpatrick, Feb. 20, 20137. Description of MS-13 & Goldman Sachs, Wikipedia8. Chevrolet Camaro, chevrolet,com9. Predictive Behavior quote, Linkedin discussion, March 23, 2013