Anatomy Of A Fraud

Most fraud victims clam up. In this check-tampering case, the victim-a small-business owner-decided to speak out. The resulting cautionary tale offers a rare, detailed look into the mechanics and psychology of fraud. And its aftermath.

Eventually, every victim of fraud says that. Indeed, it is this very fact of refusing to believe anything else that enables the crime. In fraud, the prey is an unwitting and complicit partner to the predator, letting its guard down, allowing the predator to inflict deep wounds. The most obvious ones are material damages. The less obviousbut perhaps more lastingwounds are psychological. The psychologist Leon Festinger called it "cognitive dissonance"—when we have one notion in our head ("I am a successful entrepreneur") warring with an incongruent notion ("I allowed an employee to steal from me").

Fraud forces victims to confront their own bad decisions.

This creates deep psychological tension. Festinger's theory continues: Once we're in that unbalanced place, we enter a "drive state"similar to hunger or thirst—under which we will act with survivalist instincts to eliminate the dissonance.

Many people, ashamed by their poor judgment and feeling violated, simply suppress the event that created the dissonance. But a few people react the way Wendy Rosen didby venting. At first, Rosen directed her outrage at "the system," by which she means the banking and checking infrastructure, which is focused on efficiency and cost-cutting rather than customer protection. Automation has mostly robbed the system of human intuition. Rosen also questions why bank statements come on "cheap white paper" instead of watermarked heavy-bond paper, which, while more expensive for banks, is more secure for the client. And most of all, Rosen was ired by her bank's reaction to having to deal with a small business's problems at all. Rosen's bank, she said in February, "wasn't interested in recovering the costs."

But blaming the system wasn't getting Wendy Rosen the restitutionfinancial or moralthat she felt she deserved.

Restitution

In october 2003, rosen truly entered her drive state, approaching restitution with a remarkable combination of planning and ferocity.

According to Spherion, in October, after Chuck Geser had called and "belligerently yelled" at a Spherion recruiter, Rosen threatened to sue Spherionfirst for $160,000, then for $175,000and also informed the company of her negotiations with her bank, and suggested that Spherion join her in suing the bank.

Spherion's lawyers phoned and e-mailed Rosen's lawyers and said, essentially, to knock it off: "We will not be intimidated into paying your client the substantial sum of money she seeks prior to having had the opportunity to investigate and evaluate the claims."

The next day, Spherion claims that Rosen sent an e-mail to her own lawyer, Laurie Bortz, and copied Spherion as well. The e-mail read in part: "One week and we'll let the dogs out."