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When the $WDI scandal is viewed in the context of many German banking frauds & the VW stock rigging by Porsche, investors can rightly ask whether German financi

When the $WDI scandal is viewed in the context of many German banking frauds & the VW stock rigging by Porsche, investors can rightly ask whether German financial regulation is anything but a fig leaf. The same could be said for many financial regulators all over the world -- clubby relationships with financiers, vulnerable to lobbying, "looking the other way" when there are signs of problems, letting the big fish off the hook while coming down hard on small players, etc. In some countries it's much worse, with outright fraud involving the regulators themselves.

StreamBright 6y ago
This also shows how inefficient government legislation is when the potential risk and impact punishment of being caught is low. These companies and all the people (not only few) should receive a substantial penalty. I think it is was not really sufficient in the VW case. We will see how it is going to be with WD.
denzil_correa 6y ago
The common thread in all of these are post-hoc discoveries of irregularities. In many cases, these are carried over many years and months without being detected. If one needs to address this issue, a near real-time approach would be needed. Otherwise, such operations will continue to take place.
- boringg 6y ago
  Way too expensive to regulate in real time and the sample size for regulating is pretty low. What you need to do is make the punishment for bad behavior strong enough to minimize fraud. I would like to think most actors are good actors and we take the bad actors and make an example to the rest of the industry what to expect if caught. It will always be a cat and mouse game.
  - amanaplanacanal 6y ago
    If the chance of getting caught is low, I'm not sure stronger penalties make that much difference. See the drug war for example.
  - Nasrudith 6y ago
    General criminology finds that the certainty of punishment so long as it is non-neglible relative to the rewards is what matters more than the magnitude as most criminals don't think they will get caught unlike others.
- Retric 6y ago
  It’s almost impossible to do that in real time. The problem is fraudulent activity can often be hidden behind a smokescreen of legitimate behavior, and stratigraphic investments can look overpriced. Apples acquisition of NeXt must have looked all kinds of shady at the time.
pulse7 6y ago
Like Madoff and his financial regulation friends in the US...
- lazyjones 6y ago
  But the difference is that the US has harsh punishment and a system that learns from its mistakes. In Germany, bad actors are usually involved with the highest political circles and nothing ever happens. See the "cum ex" scandal, which cost the tax payers something like $36b and Germany just let it continue for years after taking notice.
  - v77 6y ago
    The U.S. is one of the few countries that actually prosecutes financial fraud. Here in Canada we've quietly become the world's money laundering leader, or at least second only to Switzerland and there's essentially zero resources dedicated to any kind of enforcement.
    - slivanes 6y ago
      North Dakota is now the worlds capital for hiding money.
      - deleted 6y ago
        [deleted]
      - influx 6y ago
        North or South Dakota? Have heard a lot about South Dakota trusts, but nothing about North.
      - apetresc 6y ago
        Judging by the variety of answers on this thread alone, I'm going to assume that if random internet commenters all know that a place is the most secure, secret place to do something illegal, it probably isn't really.
econcon 6y ago
But that's when you make most money. Regulators are salaried individual, what's the incentive for them to do their job properly? Think about if a regulator looks the other way, he is seen as incompetent - many times you'll not be punished for incompetence at work. But this benefits the corporate player and he can offer benefits to the regulator like private jet (for his family/friend use), maybe access to a resort where the regulator's family can stay during vacation or maybe an apartment in some posh locality where the regulator's kid can study abroad. People are acting in their self interest. You've salary and ethics Vs luxuries and loyality from the rich man who is unlikely to go bust. Thing is you can choose to not coperate but that only increases the price and the rich man goes for your boss then you get in trouble as boss is cooperating with them and he may fire you. I once dated a very rich and powerful lady in Asia and she could solve all problems with just 1 phone call - that was amazing, she new everyone everywhere it felt.
- jes 6y ago
  With respect, I do question whether an auditor overlooking financial irregularities is actually acting in their self-interest.
  - deleted 6y ago
    [deleted]
- elliekelly 6y ago
  Do you know any regulators?
  - econcon 6y ago
    Yes I know a few guys in customs who are paid to look other way and they use CHA to benefit from such thing (so they aren't directly involved by indirectly involved through CHA) when caught they blame it on people working under them
    - edoceo 6y ago
      That seems illegal. Who's looking the other way on that?
ryneandal 6y ago
Late stage capitalism in a nutshell.

StreamBright 6y ago

This also shows how inefficient government legislation is when the potential risk and impact punishment of being caught is low. These companies and all the people (not only few) should receive a substantial penalty. I think it is was not really sufficient in the VW case. We will see how it is going to be with WD.

denzil_correa 6y ago

The common thread in all of these are post-hoc discoveries of irregularities. In many cases, these are carried over many years and months without being detected. If one needs to address this issue, a near real-time approach would be needed. Otherwise, such operations will continue to take place.

boringg 6y ago
Way too expensive to regulate in real time and the sample size for regulating is pretty low. What you need to do is make the punishment for bad behavior strong enough to minimize fraud. I would like to think most actors are good actors and we take the bad actors and make an example to the rest of the industry what to expect if caught. It will always be a cat and mouse game.
- amanaplanacanal 6y ago
  If the chance of getting caught is low, I'm not sure stronger penalties make that much difference. See the drug war for example.
- Nasrudith 6y ago
  General criminology finds that the certainty of punishment so long as it is non-neglible relative to the rewards is what matters more than the magnitude as most criminals don't think they will get caught unlike others.
Retric 6y ago
It’s almost impossible to do that in real time. The problem is fraudulent activity can often be hidden behind a smokescreen of legitimate behavior, and stratigraphic investments can look overpriced. Apples acquisition of NeXt must have looked all kinds of shady at the time.

pulse7 6y ago

Like Madoff and his financial regulation friends in the US...

lazyjones 6y ago
But the difference is that the US has harsh punishment and a system that learns from its mistakes. In Germany, bad actors are usually involved with the highest political circles and nothing ever happens. See the "cum ex" scandal, which cost the tax payers something like $36b and Germany just let it continue for years after taking notice.
- v77 6y ago
  The U.S. is one of the few countries that actually prosecutes financial fraud. Here in Canada we've quietly become the world's money laundering leader, or at least second only to Switzerland and there's essentially zero resources dedicated to any kind of enforcement.
  - slivanes 6y ago
    North Dakota is now the worlds capital for hiding money.
    - deleted 6y ago
      [deleted]
    - influx 6y ago
      North or South Dakota? Have heard a lot about South Dakota trusts, but nothing about North.
    - apetresc 6y ago
      Judging by the variety of answers on this thread alone, I'm going to assume that if random internet commenters all know that a place is the most secure, secret place to do something illegal, it probably isn't really.

econcon 6y ago

But that's when you make most money. Regulators are salaried individual, what's the incentive for them to do their job properly? Think about if a regulator looks the other way, he is seen as incompetent - many times you'll not be punished for incompetence at work. But this benefits the corporate player and he can offer benefits to the regulator like private jet (for his family/friend use), maybe access to a resort where the regulator's family can stay during vacation or maybe an apartment in some posh locality where the regulator's kid can study abroad. People are acting in their self interest. You've salary and ethics Vs luxuries and loyality from the rich man who is unlikely to go bust. Thing is you can choose to not coperate but that only increases the price and the rich man goes for your boss then you get in trouble as boss is cooperating with them and he may fire you. I once dated a very rich and powerful lady in Asia and she could solve all problems with just 1 phone call - that was amazing, she new everyone everywhere it felt.

jes 6y ago
With respect, I do question whether an auditor overlooking financial irregularities is actually acting in their self-interest.
- deleted 6y ago
  [deleted]
elliekelly 6y ago
Do you know any regulators?
- econcon 6y ago
  Yes I know a few guys in customs who are paid to look other way and they use CHA to benefit from such thing (so they aren't directly involved by indirectly involved through CHA) when caught they blame it on people working under them
  - edoceo 6y ago
    That seems illegal. Who's looking the other way on that?

ryneandal 6y ago

Late stage capitalism in a nutshell.