Kelly Richmond Pope

Americans might be the most corrupt people in the world. In an endlessly entertaining book called Fool Me Once, Kelly Richmond Pope, who has dedicated her accounting background, her forensic accounting classes, TED Talk, and blog to outing corruption, says we are looking in the wrong places.

American-style corruption, statistically, comes from above, not below. It is not the poor, the bottom wrung, people of color, immigrants or the working class that are damagingly corrupt (though they will grab their opportunities too). It is senior management, white collar and the rich who steal with abandon in carefully planned frauds. In other words, the trusted ones do the most damage. In case after case, Pope shows how temptation is just too great when people are given the keys. It is a fascinating ride, and she makes it all the more remarkable as she won’t settle for trial verdicts. She seeks out the convicted, interviews them, sometimes videos them, and invites them to speak to her classes. Once, with zero notice, her whole class hopped a plane to visit one of them at home. In Fool Me Once, the result is unexpected depth and humanity, and it is well worth the trip.

The stats are suitably convincing. Pope says among companies with over $10 billion in annual revenues, 52% experienced fraud within the past two years. This is not taking home a calculator or the Scotch Tape dispenser. This is massive fraud worth police and government agency investigations. Put it this way: 20% of those firms reported financial impact of over $50 million. Forget lottery tickets. This is a sure thing for privileged American businesspeople.

One simple favorite is expense fraud. Employees who get reimbursed for expenses file fake claims, to the tune of $2.8 billion a year, 11% of total fraud. The worst are the Senior Vice Presidents, who routinely charge for personal use of company vehicles, trips, meals, tips and gifts, real or otherwise. That they already make six or seven figures a year in pay only seems to enhance their sense of bearing no personal blame. They are entitled, far more than the average employee.

Pope has so much evidence, she can divide up the participants into perpetrators, prey and whistleblowers. And then she can divide the perps into Intentional, Accidental and Righteous. Prey are Innocent Bystanders and Organizational Targets. And whistleblowers are divided into Accidental, Noble and Vigilante. Then there are crossovers, who have their hands in more than one bucket. Pope has stories to show how each of them operated. Until the police showed up. She inhabits a completely different world from most readers, including me. That makes the book totally engrossing.

Whistleblowers are in a very precarious position. Even if they are noble, just doing it because it is right, they can be harassed, fired, jailed and ruined. Stories will be made up about them, and they will be charged with fraud. They will go through self-torment over whether it is the right thing to do. They risk putting fellow workers on the street, for example. Bitter employees expecting promotions or bonuses might threaten them. Their families might be pestered, followed, doxxed. They develop psychosomatic diseases of stress, like PTSD. Until the dastardly deed exposing the fraud is actually done, they are nervous wrecks. In one case, the police kept a whistleblower on the job for three long years until they felt they had sufficient evidence. All of these things are, shall we say, dissuasive.

Sometimes, there is money in it, if they apply for it. Sometimes, there is only hell to pay. One man in Korea received an award of $24 million for exposing massive fraud at Samsung. He’s still waiting for it.

The people stealing the money, “are typically the best employee on the team,” Pope says. They’re they high profile, well-dressed, confident superstars. They’re hero doctors and four star generals. Or lately, Supreme Court justices. No one would ever suspect them of stealing millions. They get the fastest promotions, the most responsibility and the total trust of the owner, the CEO and the Board. They are powerful in the company. And the best part of it (for them), is that only about 17% ever get caught.

Of course, it’s not only top executives. The general public loves a good fraud too. Pope has found websites that will create phony receipts supposedly from local stores so people can “return” items they did not buy there. People also collect receipts off the parking lot. They then take an item on the receipt off the shelf, and “return” it at the desk. America seems routinely and supremely corrupt. And this isn’t even government corruption, or Wall Street corruption, or construction corruption or lobbying/bribery corruption. Fraud is a bottomless pit in the USA.

The absolute star of Pope’s collection is a manager who stole $53 million from a town of just 15,000. She handled the mail, the books, and the bank accounts. What could possibly go wrong? It was easy to pay the income tax deductions of employees right into her own bank account, for example. Meanwhile, this woman was building giant horsefarms and dealing internationally in horses. About 200 of them. She spent several months a year on vacation, presumably managing her horse business. It went on like this for years. Her reputation was such that no one ever even questioned her. There had to be some other reason why the town never had any money for services, maintenance or repairs, but the books always balanced. Because this unassailable angel of a do-it-all manager said they did.

It was during one of her long absences that her assistant came across an urgent IRS final notice before action. It was for lack of payment or co-operation in settling the claims of nonpayment. She researched further, and eventually, delivered it all to the mayor. Pope made an award-winning documentary out of her (All The Queen’s Horses), without ever meeting or speaking with her (which itself is highly unusual. She usually gets personal).

This doesn’t stop just because the company is doing good work, either. The average fraud loss discovered by a nonprofit was $639,000 in 2020. Still, private companies and small business are hurt the most, with 42% reporting fraud.

Despite what the perps often say, these are hardly victimless crimes. Taxpayers go without city services. The poor don’t get aid. Investment is minimized or put off. In some cases, firms are forced out of business, throwing employees onto the street. And in Russia it is crystal clear that hundreds of superyachts mean ordinary soldiers are living on rations that expired eight years ago, and air cover is unavailable for the tank corps.

There are some pretty easy ways to rein it in. Pope has all kinds of warning signs (which she herself sometimes misses). If a company has excuses for not implementing internal whistleblowing hotlines, there is likely a better reason than no one would use it. The fact is, the more a company uses whistleblower hotlines, the less it loses in fraud and the less it has to pay out in settlements. So standing in the way of that is a red flag.

Another tip is just open the mail. In so many cases, the founder or CEO hasn’t got the time or the interest to open the mail. They will often never even look at the financials, because they have people to do that, and they’re too busy building the company to bother with such finegrained detail. So they never see the letters from ripped off vendors, the IRS or – whistleblowers. They never notice their company’s financials are lopsided.

And finally, be suspicious. That highly successful, smooth-talking young executive has the perfect profile to be sliding millions off the desk and into his or her own pocket. Mostly by direct deposit. Even when you know someone well and for years, they could easily be embezzling millions and you’d never guess it. But the stats say that’s who’s doing it big time.

The best part of this whole experience is Pope’s style. It’s not only an easy, if not breezy read, but everything she has to say is accompanied by a story. For every kind of perp or whistleblower, there is a story. A rapid rise accompanied by some bad investments, direction from the owner to do something not strictly legal, helping out someone in need, hubris at not getting caught - it is all spelled out in the profiles she has constructed out of her research and interviews. It is at bottom a remarkable story collection of real people. Pope makes it simple and straightforward. And there’s no math!

David Wineberg… (meer)