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Big name corporations more likely to commit fraud: study

mensetmanusman 6y ago
Normalized to the number of employees?
DangitBobby 6y ago
> The researchers noted that this type of elite, white-collar crime is understudied especially when compared with street crime even though it has more wide-reaching consequences. Isn't that something. We spend most of our effort chasing the crime of least consequence? Now why would that be?
- umvi 6y ago
  It's harder to mentally connect white collar crime with real harm because there are so many abstraction levels between the crime and the victims. Whereas with pretty crime it's easy to see who the victims are.
  - newsclues 6y ago
    Who is the victim when people illegally smoke cannabis? Who is the victim when banks steal from millions of people?
    - hansvm 6y ago
      > Who is the victim when banks steal from millions of people The bigger question is who are the criminals? You can't throw the building in jail, and just because a negative emergent behavior manifested doesn't mean any one person had to have taken an action rising to the level of criminal culpability.
      - db579 6y ago
        > just because a negative emergent behavior manifested doesn't mean any one person had to have taken an action rising to the level of criminal culpability. If that is true (and I think it is) I would argue the law is wrong. It should absolutely be the case that senior executives have criminal liability for criminal behaviours that emerge under their stewardship whether or not they personally contributed to them. Either they knew about it in which case they're complicit or they didn't in which case they're negligent. The risk of criminal liability is also the only possible justification for the high current level of CEO pay relative to average salaries at most big name companies.
        hansvm 6y ago
        > or they didn't in which case they're negligent I think some care should be taken in being too reductive here. If a CEO oversees just 50 people (maybe companies should be capped at smaller sizes?) then there will be at least a 50:1 information reduction even if they spend all their working hours in 100% efficient information transfer. Moreover, in many cases I would expect the bulk of that missing information to be the more negative aspects of the business -- who wants to look bad to their superiors? Adding to that, defaults matter. If by default a CEO is culpable then it's suddenly possible to force them into jail by simply joining as a malicious employee. > The risk of criminal liability is also the only possible justification for the high current level of CEO pay relative to average salaries at most big name companies. Not necessarily (I think the idea is that they're paid a lot because they bring in proportionally more profits/cashflow/etc?), but I agree it's a little fishy that a CEO can take credit for large gains and be handed a golden parachute when a company's fraud sees the light of day.
      - srswtf123 6y ago
        This is absurd. The buck stops with the C-level and, if need be, the board. Toss them in prison, in gen-pop, and see if it doesn’t reform some behavior. Part of the job of running a business is ensuring said business doesn’t run afoul of the law. If that doesn’t happen, well the boss needs to go to jail, do not pass Go, do not collect $200mm golden parachute. “We can’t figure out who to charge so we charge no one” is not an acceptable answer in a just society — or a society that strives to be just.
    - acct776 6y ago
      Legally? Their neighbors, who are the ones calling.
  - elil17 6y ago
    I don’t think it’s actually that hard for most people to see that wage theft is theft, for example. It’s the choices of lawmakers, the media, prosecutors, and others that minimize white collar crime in the public discourse.
    - Aunche 6y ago
      If you're using wage theft as an example of how the game is rigged, then you also need to consider time theft: logging additional time that wasn't actually worked. Obviously, wage theft is worse, but the reason both aren't prosecuted is because they're difficult to prove, and when it does it caught, it usually gets resolved by other means.
  - javajosh 6y ago
    Totally. The number of people who really felt the implication of the Libor scandal (https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal) among the general population, for example, is close to 0. Not only this, but term "white collar crime" has been abused to include what is properly termed "implies unwanted externalities", and so it weakens the meaning. Enron executives are not criminals simply because their industry pollutes! Nor are bankers criminals simply because their industry depends entirely on enforcing artificial scarcity and information asymmetry. Crime specifically requires breaking a law! Another related disturbing trend that weakens the concept of "white collar crime" is the "wouldn't you gave done it, too?" argument. That is, to defend cheating or bad faith behavior by arguing that you would have done if you were in the same situation. There is a lot wrong with this kind of argument, and it is similar to "whataboutism" in that it functions as a kind of strawman that tacitly assumes egoism and moral relativism, and moreover projects that lack of principle onto the counter-party. (And if you claim you wouldn't do that, the other person can say you are posturing, etc. A very nasty rhetorical tactic indeed! None of these effects are really new, but I think what is new is that the attention economy has as a side-effect cause an overall drop in the critical thinking skills needed in a large chunk of the population to ensure these cognitive mistakes don't become official policy. There has always been an unofficial bulwark against populism in America, comprised of the "elite" - the well educated, thoughtful, articulate, careful men and women trained in philosophy, morality, and religion, and who are wealthy enough to have time to spend on such matters. Obama was and is such a one. But apocalyptic levels of egoism and intellectual laziness has spread to all corners of our society, even, shockingly, to the elites themselves. (See: Josh Haweley). The net effect is to weaken the notion of "white collar crime" into nothingness, which is great news for those that do it, and terrible news for the rest of us.
    - guerrilla 6y ago
      > Enron executives are not criminals simply because their industry pollutes! Nor are bankers criminals simply because their industry depends entirely on enforcing artificial scarcity and information asymmetry. Not sure about this point. They're only not criminals because their industries can afford lobbyists and few others can.
- throwaway3699 6y ago
  It's not a conspiracy. Street crime is much easier to prosecute and has far fewer eyes looking onwards. Much easier to abuse the metrics in that area to look good at your job, whereas tackling corporate fraud is expensive, time consuming and likely to attract all manners of unwanted attention, even physical violence and intimidation -- thus making people look worse on paper.
  - wombatmobile 6y ago
    What is your definition of "conspiracy"?
  - jrimbault 6y ago
    Systemic issues/consequences don't need conspiracy to manifest, they're a manifestation of misplaced incentives/causes. I don't think OP implied any conspiracy on any part. I'm sorry to get the big name out, but. It's really part of the Marxist framework that there's mostly no willful conspiracy against the worker class, the balance of power is a result of a complex but understandable system, with some corrupt actors but they don't need to be, they just have conflicting incentives.
    - sudosysgen 6y ago
      The last thing is why Marxist analysis is so revolutionary. It was the first real systemic critique that didn't rely on principles of individual morality, and in essence it's also why it's probably always going to be relevant.
- LockAndLol 6y ago
  Because you (the people) don't vote for people who actually want to prosecute white-collar criminals. That probably comes from it not being so relatable. Most people understand physical theft and probably think it's easier to catch those thieves. Sure, a big part of the problem is white-collar crooks working in industries that possess a lot of power to manipulate the world we live in, but we can't just absolve ourselves of responsibility. If you think it's a problem, find the most impactful ways you can help resolve it. Simply talking about it and convincing yourself that "you made more people aware of it" is not very impactful if that's all you're doing.
- jjcon 6y ago
  It may not have direct monetary impacts as large but I would argue the effects of high street crime are much higher and harder to account for. People know that backroom deals by fat cats negatively affect their lives, but they don’t feel physically unsafe because of them. Conversely if street crime is prevalent the people are fearful and feel unsafe in their homes. It only takes one break-in in a neighborhood to put everyone on their toes.
  - sudosysgen 6y ago
    The relationship between feelings of safety and actual crime rate is incidental. Feelings of safety are moreso a product of the media up until a certain threshold we are very far from. Conversely, white collar crime absolutely does cause physical harm, as does most economic ruin, which is highly correlated with morbidity for the less fortunate.
    - WarOnPrivacy 6y ago
      > The relationship between feelings of safety and actual crime rate is incidental. Two things that strongly support this are stranger kidnapping and domestic terrorism. Among possibilities that might take loved ones away from us, these are about the least likely. > Feelings of safety are moreso a product of the media The media reports distant tragedies as if they occurred in our own communities, leading the public to carry a sense of threat that doesn't reflect reality. However, the media is parroting (and amplifying) the messages that are given to it from LEO, Gov's and other official channels. The media's shortfall is to trust Gov/LEO messaging, without spending the few moments of analysis to vet it's integrity.
      - throwawayboise 6y ago
        Let's not give the media such a pass as simply trusting Gov/LEO messaging. Their interest is in getting and retaining your attention, and creating fear and anxiety is a proven way to do that. They do it knowingly and with intent.
        6y ago
- dls2016 6y ago
  Some of the other replies are missing the fact that we can look at the history of why police departments were created: to break strikes and chase slaves. The historic record is clear that police were generally created to protect capital.
  - dls2016 6y ago
    I am curious about downvotes. This stuff is historical fact. I know someone else commented that my view is American, but the original article is about the (American) SEC... so... I will double down and show evidence from my home state: Pennsylvania. https://www.psp.pa.gov/About-PSP/Documents/Pennsylvania%20State%20Police%20History.pdf https://www.psp.pa.gov/About-PSP/Documents/Pennsylvania%20St... The whole idea of the PSP was to create a less violent force to control labor (compared to the companies' private security solutions). The (downvoting) reader is encouraged to repeat this exercise for their own locality.
  - bluefirebrand 6y ago
    This is a very American-centric view of policing.
    - nobodyknowsyoda 6y ago
      "We compiled data on 250+ US public companies involved in corporate securities frauds identified in 1,000+ Securities and Exchange Commission filings over 2005–2013; we randomly selected a comparable control group of 500+ US public companies from Compustat."
- SN76477 6y ago
  They are too busy chasing bad guys. /s The policing system needs an overhaul
- wwwwwwwww 6y ago
  > Now why would that be? Who donates money to fund the studies?
- dbattaglia 6y ago
  The pretty awesome "Philosophize This" podcast* episode on Foucault, where he discusses crime and punishment over the years, makes an interesting point that always stuck with me regarding punishment of white collar crime: "9 times out of 10 they are not going to see the inside of a prison cell because their behavior...doesn't really need much reformation in the eyes of the people in power. Keep doing almost everything you're doing...keep working, keep creating jobs, keep starting new companies and going to badminton on Sundays...just pay your taxes. Whereas the guy that robbed the Taco Bell...it doesn't matter if he marches back into the store...hands over the 85 bucks directly to the manager...baby birds the burrito supreme back into his mouth...9 times out of 10 that guy is going to jail because the goal of the penal system is reforming criminals to fit a pre-existing mold of what a normal person is." Of course this doesn't get into the very real issues of how modern US police departments work, systematic racism and other factors, but it's still an interesting perspective IMO. *transcript: https://www.philosophizethis.org/podcast/episode-121-transcript https://www.philosophizethis.org/podcast/episode-121-transcr...
  - bobthepanda 6y ago
    It’s not really for reforming criminals into a normal person, that would require a rehabilitative system purposefully optimizing for lower recidivism rates. What we have is a vengeful, punishment oriented prison system that is designed to bludgeon people for not fitting in, and also incidentally using them for slave labor.
    - imtringued 6y ago
      I don't understand the point of prison. Vengeance only makes sense if you have committed a crime so great that you could never undo it and the only way to balance the situation is to take an equal amount of damage as the victim. That's an even stronger argument in favor of prison time for white collar crime because you cannot rehabilitate the perpetrator, you can only punish him. Meanwhile for someone who is prone to violent behavior it is the opposite. That person still has the potential to do less damage in the future.
      - 6y ago
- nobodyknowsyoda 6y ago
  Cause the collar isn’t the only thing that’s white
- andi999 6y ago
  Well, somebody claiming it has more wide reaching consequences doesn't make it true. I mean why is white collar crime worse than getting knifed in a backallay?
  - BoorishBears 6y ago
    Because you can't single-handedly knife a hundred people in a backalley (or at least, not easily...) But you can single handedly sign off on some environmental fraud that kills/maims a hundred people and their unborn children
- Rebelgecko 6y ago
  I think violent crime has more of a direct impact on individuals emotionally, and so there's a larger reaction to it
  - adamcstephens 6y ago
    When the banks crashed the economy in 2008 and millions lost their jobs and homes, people were directly emotionally impacted. Nobody went to jail or admitted fault.
- RcouF1uZ4gsC 6y ago
  The big difference is threat of violence, and invasion of personal space. I would rather lose $1000 in the stock market because a company cooked the books than $50 by mugging or home burglary.
gwern 6y ago
No. The statistics here are absurd: "We compiled data on 250+ US public companies involved in corporate securities frauds identified in 1,000+ Securities and Exchange Commission filings over 2005–2013; we randomly selected a comparable control group of 500+ US public companies from Compustat."
- djbebs 6y ago
  Yeah their entire study is "we looked at a list of companies who comitted fraud, and can see that the percentage of companies in that list that committed fraud is higher than that of the average company" Nothing was discovered here, and the title is not supported by their methodology
  - cycomanic 6y ago
    What do you mean this is a perfectly valid statistical method to employ. It's being used in all sorts of contexts, e.g. violent crime, men are X times more likely to commit violent crime. That number comes from instances of violent crime and then you related the percentage of instances committed by men to the percentage of men in the population. That's the exact same methodology, except here in this study they use the control group to find what the average size of a public corporation is.
- _8091149529 6y ago
  Just posting to lament the fact that there are two blatantly garbage-tier research articles on the front page at the moment (this and the Ramanujan machine).
jefftk 6y ago
> examined the characteristics of more than 250 U.S. public corporations that were involved in financial securities fraud identified in Securities and Exchange Commission filings from 2005-2013. They were then compared to a control sample of firms that were not named in SEC fraud filings. Alternatively, the SEC might be more interested in looking into larger companies.
- abakker 6y ago
  This seems very likely to be the case. It also ignores that big companies have more employees who can both commit crimes or act as whistleblowers. Small scale corporate crime is likely easier to keep secret. Also, there is a lot of detection lag. Enron committed crimes for quite a while before they got caught. So did MCI.
- dundarious 6y ago
  Possibly true. However, while the IRS is not really analogous to the SEC, they do appear to audit EITC claimants (low income) at a very high rate relative to high income individuals. I have no evidence either way, but I wouldn't be surprised if the dollar value of tax fraud is skewed to higher incomes. https://www.propublica.org/article/earned-income-tax-credit-irs-audit-working-poor https://www.propublica.org/article/earned-income-tax-credit-...
  - jefftk 6y ago
    Except audit rates do rise with income, especially at the extremely high levels that are analogous to Fortune 500 companies: $0: 2.04% <$25k: 0.69% <$50k: 0.48% <$75k: 0.54% <$100k: 0.45% <$200k: 0.44% <$500k: 0.53% <$1M: 1.10% <$5M: 2.21% <$10M: 4.21% >$10M: 6.66% Per https://www.nolo.com/legal-encyclopedia/what-are-the-odds-being-audited.html https://www.nolo.com/legal-encyclopedia/what-are-the-odds-be... (Your article concurs: "Only households with income above $1 million were examined at significantly higher rates.")
anovikov 6y ago
Big corporations are simply more likely to be able to defend themselves, so maybe it's just natural selection. Those who tried to investigate and prosecute them, are no longer on the jobs...
- Kaze404 6y ago
  More like capitalistic selection.
  - wizzwizz4 6y ago
    No, this would still be natural selection, I think; it's selection by survival in the environment. Just because the environment's artificial, that doesn't make https://en.wikipedia.org/wiki/Peppered_moth_evolution https://en.wikipedia.org/wiki/Peppered_moth_evolution artificial selection.
- foolmeonce 6y ago
  If you were an investigator and liked promotions and job security, would you put 3 years into trying to get 60X, but getting 30X $100k fines or trying to get 2X but getting 1X $100m fine? Who could pay such a large fine? Where does the article say they corrected for that, and what miraculous method did they use?
Triv888 6y ago
It is probably because they commit more transactions.
DodgyEggplant 6y ago
This is a bit like the difference between old wars, where people faced their foes, and modern war where you guide some weapons on a screen. You care less.
JoeAltmaier 6y ago
Is this just a heat-map? Is the probability calculated per-dollar, or per-employee, or what? If its just per-company, then this is the expected result (a bigger pond has more fish).
cwwc 6y ago
> Fortune 500 firms with strong growth profiles are more susceptible to “cooking the books” than smaller, struggling companies Curious if this has something to do with the type of law firms/accounting firms these big companies hire -- as opposed to smaller firms hired by struggling companies, that have more to worry about when it comes to reputation (aka the companies aren't forced to use them every few years, as with big acct firms)
FriedrichN 6y ago
I get a little upset when people want a crackdown on street crime but seem to forgive white-collar crime because "you won't get them anyway", while you easily could say that about street crime too. Arguably the US has one of the harshest policies regarding small time criminals with the highest incarceration rates of any developed country, but can't seem to actually get it under control. What people fail to see that these small crimes like theft, drug dealing, assassinations are done because white-collar criminals can launder money. If the money can't be laundered, drug money loses much of its worth. It is understandable that seeing young men lying dead in the street is more tangible than a bank looking away or cooperating when they come across suspicious transactions. Yet if we want to really have an impact we'll have to do something else than (just) busting small time criminals for their crimes. The big guys make the small guys do the dirty stuff.
PragmaticPulp 6y ago
Direct link to study: https://www.tandfonline.com/doi/abs/10.1080/07418825.2020.1853799?journalCode=rjqy20 https://www.tandfonline.com/doi/abs/10.1080/07418825.2020.18... This type of analysis has some obvious limitations: - Fraud is more likely to be recorded in public record when committed at big corporations. Many small companies also commit fraud, but it goes unnoticed, unpunished, or otherwise not recorded in ways accessible to researchers because they're too small to make waves. Maybe too small to bother prosecuting. - Big companies have, by definition, more people, more activity, more transactions, and more opportunities for fraud. It's a mistake to assume that all fraud is orchestrated from the top of these companies. Often, it's mid-level managers looking to get a bonus, raise, or promotion who think they can get away with fraud in their little department. In my anecdotal experience, big companies are far less likely to behave fraudulently than small, local companies. A big company knows that endemic fraud is a death sentence for their reputation and can bring intense regulatory scrutiny. A small company knows that they can defraud you out of a couple thousand dollars one time and it's not worth your time to pursue legal action. Of course, most small companies I've worked with are not out to defraud your customers. Building a long-term relationship with a small company can be much more fruitful than being customer number 10,001 for a big company. Always be careful, regardless of who you're dealing with.
- Nextgrid 6y ago
  I've noticed fraud (as a customer, and in one case as an insider) at big "growth & engagement"-funded startups most of us have heard of. It's rarely fraud in the legal sense of the term, but it's definitely fraud in the moral sense. They exploit information asymmetry (in one case, the main customer base was mostly teenagers unaware of their options such as card disputes or small claims court) or make it hard for people to claim compensation in case things go wrong, relying on the fact that most people won't bother for the relatively small sums (though at scale that adds up to quite a bit of money).
- tobylane 6y ago
  What do you think should be the weighting factor? Something like revenue or employee count? Maybe someone with access (OpenAthena, Shibboleth) could post the stats and methodology.
Causality1 6y ago
This is why monetary fines are a fundamentally wrong method of punishment. When breaking the law becomes a line item on a budget a company will do anything as long as it's profitable. Breaking the law always comes down to the personal choice of an individual or individuals and therefore the consequences should fall on those individuals. When Verizon chooses not to meet its legal obligations to build out fiber and maintain copper infrastructure, they shouldn't be scared of the FCC fining them. They should be scared of their board members being hauled into prison in orange jumpsuits.
hikerclimber 6y ago
i agree with this.
kazinator 6y ago
Fraud is actually committed by individuals working for an organization. Suppose that every individual i has a certain probability P_i of committing fraud, or, equivalently, (1 - P_i) of not committing fraud. The probability that two individuals j, k will not commit fraud is (1 - P_j) (1 - P_k), which is smaller than either probability. Therefore, the probability that fraud is taking place in an organization increases with the number of employees: 1 - (1 - P_1) (1 - P_2) ... (1 - P_n) Sheer organization size is a predictor for occurrence of fraud; with increasing size, the probability tends toward 1. We can know this without gathering any data at all, just by remembering high school probability and stats. "Big name" is not the same thing as "big", but organization size correlates with fame. "Big name" is a facsimile for "big".
- hutzlibu 6y ago
  "Suppose that every individual i has a certain probability P_i of committing fraud" That assumption is not right. As corporate culture can encurage fraud by setting up unrealistic goals and rewarding fraud (if not get caught) - or it can really encourage to play by the rules. And I assume this is what this study is about. (also I hope that they taken size per employes into account)
- imtringued 6y ago
  Did you fail to consider that larger companies have an easier time to filter out fraudulent individuals? Lots of fraud will create a process against fraud. If not, the culture of the company inherently rewards fraud. Meanwhile smaller companies will have a lot of first time fraud. Remember Amazon sellers? Once their reputation is tarnished they just create a new identity.
microdrum 6y ago
This also means that corporations with more women on their board of directors are more likely to commit fraud.
tremendo 6y ago
As soon as I read "financial securities fraud identified in SEC filings…" immediately brought to mind an article in Bloomberg [1]: "Securities fraud is a universal regulatory regime; anything bad that is done by or happens to a public company is also securities fraud, and it is often easier to punish the bad thing as securities fraud than it is to regulate it directly." this right after: "And so contributing to global warming is securities fraud, and sexual harassment by executives is securities fraud, and customer data breaches are securities fraud, and mistreating killer whales is securities fraud, and whatever else…" [1] https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt... The point of TFA likely still stands, but I wonder to what extent the points from Levine's Bloomberg article colors, or skews the data. Edited for formatting
- KirillPanov 6y ago
  Same with money laundering. If you do anything illegal, and there was any kind of economic transaction involved, you almost certainly committed money laundering.
  - bpodgursky 6y ago
    Don't forget Mail Fraud. If anything illegal happened, and the USPS was involved in any way... you're on the hook for federal mail fraud charges.
cccc4all 6y ago
Theranos. When the benefits of fraud greatly outweighs cost of fraud, companies and people will commit fraud. HSBC money laundering for criminal cartels. Big companies will commit outright crimes and when caught, simply pay some fines that is much less than the profit. How does the market differentiate between money losing startup, like Amazon of past, and some money losing penny stock pitching free energy electric car engine, aka perpetual engine ? Lots of muddy waters and shady regulations that hide many fraudulent companies preying on people.
nullserver 6y ago
I’ll call out directly. Life and health got ruined. Rented a house from Invitation Homes. Show up. All windows open. House looks great, sign paperwork. Agent leaves. Closed up windows, notice a chemical smell. Call, and told it’s just new carpeting, will be gone soon. Me and family proceed to get extremely sick over the next months. Like people can’t wake up, forgetting names, stroke symptoms, etc. Many calls got nothing but run around. Our mental capacities are greatly diminished. Turns out there was a massive natural gas leak. Plus multiple appliances emitting Carbon monoxide. Gas company stated it was a race to dying in sleep or house exploding. So they knew house had weird smells and fed us endless lies about carpets, flooring, paint etc. Carbon monoxide detector that came with the house was defective. Destroyed health and career. One kid went from advanced placement to special needs. Dog went insane. We also had a wall catch on fire, ac drop through a ceiling into kids room. We left moment we could, and have a nice big bill from them for breaking lease. Invitation Homes is straight up evil.
- tehlike 6y ago
  I started shaking when I read this...
- neolog 6y ago
  Did you sue them?
  - nullserver 6y ago
    Tried. You have to have a doctor verify that gas caused injuries. Doctors did not want anything to do with a lawsuit. Plus they had no idea what 3 months of natural gas exposure would do to body. Turns out most cases of being exposed to that much and that long simply end in explosion.
    - undefined1 6y ago
      wtf. this is terrible. why didn’t the doctors support it? they couldn’t verify it was caused by the gas?
WheelsAtLarge 6y ago
This might be the case when it comes to the accounting practices but my experience has been that the smaller companies are more likely to pull a fast one on me. I've had "small businesses" be more than happy to do work that I don't need under the excuse that something is failing. Or run the charges because my insurance will pay. I had one or 2 electronic stores try to do a bait and switch. I've found that small businesses are more hungry to make a sale and are therefore more likely to be a bit more shady than the bigger companies. If I have a choice I always pick the bigger company that has a reputation to protect over a small business that I don't really know.
atomicson 6y ago
Fallacy study, from the start. This study need big data analysis to make an unbiased conclusion. Collect all companies data on earth (law cases, locality, races/ethnics, etc). Big or small (company's size) is nothing to do with fraudulent.

Normalized to the number of employees?

> The researchers noted that this type of elite, white-collar crime is understudied especially when compared with street crime even though it has more wide-reaching consequences. Isn't that something. We spend most of our effort chasing the crime of least consequence? Now why would that be?

umvi 6y ago
It's harder to mentally connect white collar crime with real harm because there are so many abstraction levels between the crime and the victims. Whereas with pretty crime it's easy to see who the victims are.
- newsclues 6y ago
  Who is the victim when people illegally smoke cannabis? Who is the victim when banks steal from millions of people?
  - hansvm 6y ago
    > Who is the victim when banks steal from millions of people The bigger question is who are the criminals? You can't throw the building in jail, and just because a negative emergent behavior manifested doesn't mean any one person had to have taken an action rising to the level of criminal culpability.
    - db579 6y ago
      > just because a negative emergent behavior manifested doesn't mean any one person had to have taken an action rising to the level of criminal culpability. If that is true (and I think it is) I would argue the law is wrong. It should absolutely be the case that senior executives have criminal liability for criminal behaviours that emerge under their stewardship whether or not they personally contributed to them. Either they knew about it in which case they're complicit or they didn't in which case they're negligent. The risk of criminal liability is also the only possible justification for the high current level of CEO pay relative to average salaries at most big name companies.
      - hansvm 6y ago
        > or they didn't in which case they're negligent I think some care should be taken in being too reductive here. If a CEO oversees just 50 people (maybe companies should be capped at smaller sizes?) then there will be at least a 50:1 information reduction even if they spend all their working hours in 100% efficient information transfer. Moreover, in many cases I would expect the bulk of that missing information to be the more negative aspects of the business -- who wants to look bad to their superiors? Adding to that, defaults matter. If by default a CEO is culpable then it's suddenly possible to force them into jail by simply joining as a malicious employee. > The risk of criminal liability is also the only possible justification for the high current level of CEO pay relative to average salaries at most big name companies. Not necessarily (I think the idea is that they're paid a lot because they bring in proportionally more profits/cashflow/etc?), but I agree it's a little fishy that a CEO can take credit for large gains and be handed a golden parachute when a company's fraud sees the light of day.
    - srswtf123 6y ago
      This is absurd. The buck stops with the C-level and, if need be, the board. Toss them in prison, in gen-pop, and see if it doesn’t reform some behavior. Part of the job of running a business is ensuring said business doesn’t run afoul of the law. If that doesn’t happen, well the boss needs to go to jail, do not pass Go, do not collect $200mm golden parachute. “We can’t figure out who to charge so we charge no one” is not an acceptable answer in a just society — or a society that strives to be just.
  - acct776 6y ago
    Legally? Their neighbors, who are the ones calling.
- elil17 6y ago
  I don’t think it’s actually that hard for most people to see that wage theft is theft, for example. It’s the choices of lawmakers, the media, prosecutors, and others that minimize white collar crime in the public discourse.
  - Aunche 6y ago
    If you're using wage theft as an example of how the game is rigged, then you also need to consider time theft: logging additional time that wasn't actually worked. Obviously, wage theft is worse, but the reason both aren't prosecuted is because they're difficult to prove, and when it does it caught, it usually gets resolved by other means.
- javajosh 6y ago
  Totally. The number of people who really felt the implication of the Libor scandal (https://en.wikipedia.org/wiki/Libor_scandal https://en.wikipedia.org/wiki/Libor_scandal) among the general population, for example, is close to 0. Not only this, but term "white collar crime" has been abused to include what is properly termed "implies unwanted externalities", and so it weakens the meaning. Enron executives are not criminals simply because their industry pollutes! Nor are bankers criminals simply because their industry depends entirely on enforcing artificial scarcity and information asymmetry. Crime specifically requires breaking a law! Another related disturbing trend that weakens the concept of "white collar crime" is the "wouldn't you gave done it, too?" argument. That is, to defend cheating or bad faith behavior by arguing that you would have done if you were in the same situation. There is a lot wrong with this kind of argument, and it is similar to "whataboutism" in that it functions as a kind of strawman that tacitly assumes egoism and moral relativism, and moreover projects that lack of principle onto the counter-party. (And if you claim you wouldn't do that, the other person can say you are posturing, etc. A very nasty rhetorical tactic indeed! None of these effects are really new, but I think what is new is that the attention economy has as a side-effect cause an overall drop in the critical thinking skills needed in a large chunk of the population to ensure these cognitive mistakes don't become official policy. There has always been an unofficial bulwark against populism in America, comprised of the "elite" - the well educated, thoughtful, articulate, careful men and women trained in philosophy, morality, and religion, and who are wealthy enough to have time to spend on such matters. Obama was and is such a one. But apocalyptic levels of egoism and intellectual laziness has spread to all corners of our society, even, shockingly, to the elites themselves. (See: Josh Haweley). The net effect is to weaken the notion of "white collar crime" into nothingness, which is great news for those that do it, and terrible news for the rest of us.
  - guerrilla 6y ago
    > Enron executives are not criminals simply because their industry pollutes! Nor are bankers criminals simply because their industry depends entirely on enforcing artificial scarcity and information asymmetry. Not sure about this point. They're only not criminals because their industries can afford lobbyists and few others can.
throwaway3699 6y ago
It's not a conspiracy. Street crime is much easier to prosecute and has far fewer eyes looking onwards. Much easier to abuse the metrics in that area to look good at your job, whereas tackling corporate fraud is expensive, time consuming and likely to attract all manners of unwanted attention, even physical violence and intimidation -- thus making people look worse on paper.
- wombatmobile 6y ago
  What is your definition of "conspiracy"?
- jrimbault 6y ago
  Systemic issues/consequences don't need conspiracy to manifest, they're a manifestation of misplaced incentives/causes. I don't think OP implied any conspiracy on any part. I'm sorry to get the big name out, but. It's really part of the Marxist framework that there's mostly no willful conspiracy against the worker class, the balance of power is a result of a complex but understandable system, with some corrupt actors but they don't need to be, they just have conflicting incentives.
  - sudosysgen 6y ago
    The last thing is why Marxist analysis is so revolutionary. It was the first real systemic critique that didn't rely on principles of individual morality, and in essence it's also why it's probably always going to be relevant.
LockAndLol 6y ago
Because you (the people) don't vote for people who actually want to prosecute white-collar criminals. That probably comes from it not being so relatable. Most people understand physical theft and probably think it's easier to catch those thieves. Sure, a big part of the problem is white-collar crooks working in industries that possess a lot of power to manipulate the world we live in, but we can't just absolve ourselves of responsibility. If you think it's a problem, find the most impactful ways you can help resolve it. Simply talking about it and convincing yourself that "you made more people aware of it" is not very impactful if that's all you're doing.
jjcon 6y ago
It may not have direct monetary impacts as large but I would argue the effects of high street crime are much higher and harder to account for. People know that backroom deals by fat cats negatively affect their lives, but they don’t feel physically unsafe because of them. Conversely if street crime is prevalent the people are fearful and feel unsafe in their homes. It only takes one break-in in a neighborhood to put everyone on their toes.
- sudosysgen 6y ago
  The relationship between feelings of safety and actual crime rate is incidental. Feelings of safety are moreso a product of the media up until a certain threshold we are very far from. Conversely, white collar crime absolutely does cause physical harm, as does most economic ruin, which is highly correlated with morbidity for the less fortunate.
  - WarOnPrivacy 6y ago
    > The relationship between feelings of safety and actual crime rate is incidental. Two things that strongly support this are stranger kidnapping and domestic terrorism. Among possibilities that might take loved ones away from us, these are about the least likely. > Feelings of safety are moreso a product of the media The media reports distant tragedies as if they occurred in our own communities, leading the public to carry a sense of threat that doesn't reflect reality. However, the media is parroting (and amplifying) the messages that are given to it from LEO, Gov's and other official channels. The media's shortfall is to trust Gov/LEO messaging, without spending the few moments of analysis to vet it's integrity.
    - throwawayboise 6y ago
      Let's not give the media such a pass as simply trusting Gov/LEO messaging. Their interest is in getting and retaining your attention, and creating fear and anxiety is a proven way to do that. They do it knowingly and with intent.
      - 6y ago
dls2016 6y ago
Some of the other replies are missing the fact that we can look at the history of why police departments were created: to break strikes and chase slaves. The historic record is clear that police were generally created to protect capital.
- dls2016 6y ago
  I am curious about downvotes. This stuff is historical fact. I know someone else commented that my view is American, but the original article is about the (American) SEC... so... I will double down and show evidence from my home state: Pennsylvania. https://www.psp.pa.gov/About-PSP/Documents/Pennsylvania%20State%20Police%20History.pdf https://www.psp.pa.gov/About-PSP/Documents/Pennsylvania%20St... The whole idea of the PSP was to create a less violent force to control labor (compared to the companies' private security solutions). The (downvoting) reader is encouraged to repeat this exercise for their own locality.
- bluefirebrand 6y ago
  This is a very American-centric view of policing.
  - nobodyknowsyoda 6y ago
    "We compiled data on 250+ US public companies involved in corporate securities frauds identified in 1,000+ Securities and Exchange Commission filings over 2005–2013; we randomly selected a comparable control group of 500+ US public companies from Compustat."
SN76477 6y ago
They are too busy chasing bad guys. /s The policing system needs an overhaul
wwwwwwwww 6y ago
> Now why would that be? Who donates money to fund the studies?
dbattaglia 6y ago
The pretty awesome "Philosophize This" podcast* episode on Foucault, where he discusses crime and punishment over the years, makes an interesting point that always stuck with me regarding punishment of white collar crime: "9 times out of 10 they are not going to see the inside of a prison cell because their behavior...doesn't really need much reformation in the eyes of the people in power. Keep doing almost everything you're doing...keep working, keep creating jobs, keep starting new companies and going to badminton on Sundays...just pay your taxes. Whereas the guy that robbed the Taco Bell...it doesn't matter if he marches back into the store...hands over the 85 bucks directly to the manager...baby birds the burrito supreme back into his mouth...9 times out of 10 that guy is going to jail because the goal of the penal system is reforming criminals to fit a pre-existing mold of what a normal person is." Of course this doesn't get into the very real issues of how modern US police departments work, systematic racism and other factors, but it's still an interesting perspective IMO. *transcript: https://www.philosophizethis.org/podcast/episode-121-transcript https://www.philosophizethis.org/podcast/episode-121-transcr...
- bobthepanda 6y ago
  It’s not really for reforming criminals into a normal person, that would require a rehabilitative system purposefully optimizing for lower recidivism rates. What we have is a vengeful, punishment oriented prison system that is designed to bludgeon people for not fitting in, and also incidentally using them for slave labor.
  - imtringued 6y ago
    I don't understand the point of prison. Vengeance only makes sense if you have committed a crime so great that you could never undo it and the only way to balance the situation is to take an equal amount of damage as the victim. That's an even stronger argument in favor of prison time for white collar crime because you cannot rehabilitate the perpetrator, you can only punish him. Meanwhile for someone who is prone to violent behavior it is the opposite. That person still has the potential to do less damage in the future.
    - 6y ago
nobodyknowsyoda 6y ago
Cause the collar isn’t the only thing that’s white
andi999 6y ago
Well, somebody claiming it has more wide reaching consequences doesn't make it true. I mean why is white collar crime worse than getting knifed in a backallay?
- BoorishBears 6y ago
  Because you can't single-handedly knife a hundred people in a backalley (or at least, not easily...) But you can single handedly sign off on some environmental fraud that kills/maims a hundred people and their unborn children
Rebelgecko 6y ago
I think violent crime has more of a direct impact on individuals emotionally, and so there's a larger reaction to it
- adamcstephens 6y ago
  When the banks crashed the economy in 2008 and millions lost their jobs and homes, people were directly emotionally impacted. Nobody went to jail or admitted fault.
RcouF1uZ4gsC 6y ago
The big difference is threat of violence, and invasion of personal space. I would rather lose $1000 in the stock market because a company cooked the books than $50 by mugging or home burglary.

gwern 6y ago

No. The statistics here are absurd: "We compiled data on 250+ US public companies involved in corporate securities frauds identified in 1,000+ Securities and Exchange Commission filings over 2005–2013; we randomly selected a comparable control group of 500+ US public companies from Compustat."

djbebs 6y ago
Yeah their entire study is "we looked at a list of companies who comitted fraud, and can see that the percentage of companies in that list that committed fraud is higher than that of the average company" Nothing was discovered here, and the title is not supported by their methodology
- cycomanic 6y ago
  What do you mean this is a perfectly valid statistical method to employ. It's being used in all sorts of contexts, e.g. violent crime, men are X times more likely to commit violent crime. That number comes from instances of violent crime and then you related the percentage of instances committed by men to the percentage of men in the population. That's the exact same methodology, except here in this study they use the control group to find what the average size of a public corporation is.
_8091149529 6y ago
Just posting to lament the fact that there are two blatantly garbage-tier research articles on the front page at the moment (this and the Ramanujan machine).

jefftk 6y ago

> examined the characteristics of more than 250 U.S. public corporations that were involved in financial securities fraud identified in Securities and Exchange Commission filings from 2005-2013. They were then compared to a control sample of firms that were not named in SEC fraud filings. Alternatively, the SEC might be more interested in looking into larger companies.

abakker 6y ago
This seems very likely to be the case. It also ignores that big companies have more employees who can both commit crimes or act as whistleblowers. Small scale corporate crime is likely easier to keep secret. Also, there is a lot of detection lag. Enron committed crimes for quite a while before they got caught. So did MCI.
dundarious 6y ago
Possibly true. However, while the IRS is not really analogous to the SEC, they do appear to audit EITC claimants (low income) at a very high rate relative to high income individuals. I have no evidence either way, but I wouldn't be surprised if the dollar value of tax fraud is skewed to higher incomes. https://www.propublica.org/article/earned-income-tax-credit-irs-audit-working-poor https://www.propublica.org/article/earned-income-tax-credit-...
- jefftk 6y ago
  Except audit rates do rise with income, especially at the extremely high levels that are analogous to Fortune 500 companies: $0: 2.04% <$25k: 0.69% <$50k: 0.48% <$75k: 0.54% <$100k: 0.45% <$200k: 0.44% <$500k: 0.53% <$1M: 1.10% <$5M: 2.21% <$10M: 4.21% >$10M: 6.66% Per https://www.nolo.com/legal-encyclopedia/what-are-the-odds-being-audited.html https://www.nolo.com/legal-encyclopedia/what-are-the-odds-be... (Your article concurs: "Only households with income above $1 million were examined at significantly higher rates.")

anovikov 6y ago

Big corporations are simply more likely to be able to defend themselves, so maybe it's just natural selection. Those who tried to investigate and prosecute them, are no longer on the jobs...

Kaze404 6y ago
More like capitalistic selection.
- wizzwizz4 6y ago
  No, this would still be natural selection, I think; it's selection by survival in the environment. Just because the environment's artificial, that doesn't make https://en.wikipedia.org/wiki/Peppered_moth_evolution https://en.wikipedia.org/wiki/Peppered_moth_evolution artificial selection.
foolmeonce 6y ago
If you were an investigator and liked promotions and job security, would you put 3 years into trying to get 60X, but getting 30X $100k fines or trying to get 2X but getting 1X $100m fine? Who could pay such a large fine? Where does the article say they corrected for that, and what miraculous method did they use?

Triv888 6y ago

It is probably because they commit more transactions.

DodgyEggplant 6y ago

This is a bit like the difference between old wars, where people faced their foes, and modern war where you guide some weapons on a screen. You care less.

JoeAltmaier 6y ago

Is this just a heat-map? Is the probability calculated per-dollar, or per-employee, or what? If its just per-company, then this is the expected result (a bigger pond has more fish).

cwwc 6y ago

> Fortune 500 firms with strong growth profiles are more susceptible to “cooking the books” than smaller, struggling companies Curious if this has something to do with the type of law firms/accounting firms these big companies hire -- as opposed to smaller firms hired by struggling companies, that have more to worry about when it comes to reputation (aka the companies aren't forced to use them every few years, as with big acct firms)

FriedrichN 6y ago

I get a little upset when people want a crackdown on street crime but seem to forgive white-collar crime because "you won't get them anyway", while you easily could say that about street crime too. Arguably the US has one of the harshest policies regarding small time criminals with the highest incarceration rates of any developed country, but can't seem to actually get it under control. What people fail to see that these small crimes like theft, drug dealing, assassinations are done because white-collar criminals can launder money. If the money can't be laundered, drug money loses much of its worth. It is understandable that seeing young men lying dead in the street is more tangible than a bank looking away or cooperating when they come across suspicious transactions. Yet if we want to really have an impact we'll have to do something else than (just) busting small time criminals for their crimes. The big guys make the small guys do the dirty stuff.

PragmaticPulp 6y ago

Direct link to study: https://www.tandfonline.com/doi/abs/10.1080/07418825.2020.1853799?journalCode=rjqy20 https://www.tandfonline.com/doi/abs/10.1080/07418825.2020.18... This type of analysis has some obvious limitations: - Fraud is more likely to be recorded in public record when committed at big corporations. Many small companies also commit fraud, but it goes unnoticed, unpunished, or otherwise not recorded in ways accessible to researchers because they're too small to make waves. Maybe too small to bother prosecuting. - Big companies have, by definition, more people, more activity, more transactions, and more opportunities for fraud. It's a mistake to assume that all fraud is orchestrated from the top of these companies. Often, it's mid-level managers looking to get a bonus, raise, or promotion who think they can get away with fraud in their little department. In my anecdotal experience, big companies are far less likely to behave fraudulently than small, local companies. A big company knows that endemic fraud is a death sentence for their reputation and can bring intense regulatory scrutiny. A small company knows that they can defraud you out of a couple thousand dollars one time and it's not worth your time to pursue legal action. Of course, most small companies I've worked with are not out to defraud your customers. Building a long-term relationship with a small company can be much more fruitful than being customer number 10,001 for a big company. Always be careful, regardless of who you're dealing with.

Nextgrid 6y ago
I've noticed fraud (as a customer, and in one case as an insider) at big "growth & engagement"-funded startups most of us have heard of. It's rarely fraud in the legal sense of the term, but it's definitely fraud in the moral sense. They exploit information asymmetry (in one case, the main customer base was mostly teenagers unaware of their options such as card disputes or small claims court) or make it hard for people to claim compensation in case things go wrong, relying on the fact that most people won't bother for the relatively small sums (though at scale that adds up to quite a bit of money).
tobylane 6y ago
What do you think should be the weighting factor? Something like revenue or employee count? Maybe someone with access (OpenAthena, Shibboleth) could post the stats and methodology.

Causality1 6y ago

This is why monetary fines are a fundamentally wrong method of punishment. When breaking the law becomes a line item on a budget a company will do anything as long as it's profitable. Breaking the law always comes down to the personal choice of an individual or individuals and therefore the consequences should fall on those individuals. When Verizon chooses not to meet its legal obligations to build out fiber and maintain copper infrastructure, they shouldn't be scared of the FCC fining them. They should be scared of their board members being hauled into prison in orange jumpsuits.

hikerclimber 6y ago

i agree with this.

kazinator 6y ago

Fraud is actually committed by individuals working for an organization. Suppose that every individual i has a certain probability P_i of committing fraud, or, equivalently, (1 - P_i) of not committing fraud. The probability that two individuals j, k will not commit fraud is (1 - P_j) (1 - P_k), which is smaller than either probability. Therefore, the probability that fraud is taking place in an organization increases with the number of employees: 1 - (1 - P_1) (1 - P_2) ... (1 - P_n) Sheer organization size is a predictor for occurrence of fraud; with increasing size, the probability tends toward 1. We can know this without gathering any data at all, just by remembering high school probability and stats. "Big name" is not the same thing as "big", but organization size correlates with fame. "Big name" is a facsimile for "big".

hutzlibu 6y ago
"Suppose that every individual i has a certain probability P_i of committing fraud" That assumption is not right. As corporate culture can encurage fraud by setting up unrealistic goals and rewarding fraud (if not get caught) - or it can really encourage to play by the rules. And I assume this is what this study is about. (also I hope that they taken size per employes into account)
imtringued 6y ago
Did you fail to consider that larger companies have an easier time to filter out fraudulent individuals? Lots of fraud will create a process against fraud. If not, the culture of the company inherently rewards fraud. Meanwhile smaller companies will have a lot of first time fraud. Remember Amazon sellers? Once their reputation is tarnished they just create a new identity.

microdrum 6y ago

This also means that corporations with more women on their board of directors are more likely to commit fraud.

tremendo 6y ago

As soon as I read "financial securities fraud identified in SEC filings…" immediately brought to mind an article in Bloomberg [1]: "Securities fraud is a universal regulatory regime; anything bad that is done by or happens to a public company is also securities fraud, and it is often easier to punish the bad thing as securities fraud than it is to regulate it directly." this right after: "And so contributing to global warming is securities fraud, and sexual harassment by executives is securities fraud, and customer data breaches are securities fraud, and mistreating killer whales is securities fraud, and whatever else…" [1] https://www.bloomberg.com/opinion/articles/2019-06-26/everything-everywhere-is-securities-fraud https://www.bloomberg.com/opinion/articles/2019-06-26/everyt... The point of TFA likely still stands, but I wonder to what extent the points from Levine's Bloomberg article colors, or skews the data. Edited for formatting

KirillPanov 6y ago
Same with money laundering. If you do anything illegal, and there was any kind of economic transaction involved, you almost certainly committed money laundering.
- bpodgursky 6y ago
  Don't forget Mail Fraud. If anything illegal happened, and the USPS was involved in any way... you're on the hook for federal mail fraud charges.

cccc4all 6y ago

Theranos. When the benefits of fraud greatly outweighs cost of fraud, companies and people will commit fraud. HSBC money laundering for criminal cartels. Big companies will commit outright crimes and when caught, simply pay some fines that is much less than the profit. How does the market differentiate between money losing startup, like Amazon of past, and some money losing penny stock pitching free energy electric car engine, aka perpetual engine ? Lots of muddy waters and shady regulations that hide many fraudulent companies preying on people.

nullserver 6y ago

I’ll call out directly. Life and health got ruined. Rented a house from Invitation Homes. Show up. All windows open. House looks great, sign paperwork. Agent leaves. Closed up windows, notice a chemical smell. Call, and told it’s just new carpeting, will be gone soon. Me and family proceed to get extremely sick over the next months. Like people can’t wake up, forgetting names, stroke symptoms, etc. Many calls got nothing but run around. Our mental capacities are greatly diminished. Turns out there was a massive natural gas leak. Plus multiple appliances emitting Carbon monoxide. Gas company stated it was a race to dying in sleep or house exploding. So they knew house had weird smells and fed us endless lies about carpets, flooring, paint etc. Carbon monoxide detector that came with the house was defective. Destroyed health and career. One kid went from advanced placement to special needs. Dog went insane. We also had a wall catch on fire, ac drop through a ceiling into kids room. We left moment we could, and have a nice big bill from them for breaking lease. Invitation Homes is straight up evil.

tehlike 6y ago
I started shaking when I read this...
neolog 6y ago
Did you sue them?
- nullserver 6y ago
  Tried. You have to have a doctor verify that gas caused injuries. Doctors did not want anything to do with a lawsuit. Plus they had no idea what 3 months of natural gas exposure would do to body. Turns out most cases of being exposed to that much and that long simply end in explosion.
  - undefined1 6y ago
    wtf. this is terrible. why didn’t the doctors support it? they couldn’t verify it was caused by the gas?

WheelsAtLarge 6y ago

This might be the case when it comes to the accounting practices but my experience has been that the smaller companies are more likely to pull a fast one on me. I've had "small businesses" be more than happy to do work that I don't need under the excuse that something is failing. Or run the charges because my insurance will pay. I had one or 2 electronic stores try to do a bait and switch. I've found that small businesses are more hungry to make a sale and are therefore more likely to be a bit more shady than the bigger companies. If I have a choice I always pick the bigger company that has a reputation to protect over a small business that I don't really know.

atomicson 6y ago

Fallacy study, from the start. This study need big data analysis to make an unbiased conclusion. Collect all companies data on earth (law cases, locality, races/ethnics, etc). Big or small (company's size) is nothing to do with fraudulent.