Q&A

Jim Ratley and ACFE: Going Broad on Fraud

Five years post-Enron, corporate fraud and white-collar crime continue to make headlines. Jim Ratley of the Association of Certified Fraud Examiners checks in to talk about corporate fraud and effective investigations.

By Scott Berinato

have a problem? And when we asked them what her job position was and we told them what we

thought was happening, it took them less than 10 minutes to find the evidence in the lap drawer of her

desk while she was gone to lunch. They recovered the car but for the rest of it there was no recovery.

You could sue her but that's throwing good money after bad.

But if the perp knew they'd get caught, why would they do something like that?

I asked a fraud perpetrator, Walt Pavlo, who went to prison for stealing money from MCI, "How did you

ever think you were going to get out of this once it started?" And he had already been to prison so he

could smile from time to time. He looked at me and smiled and said, "That's a great question. I never

thought about it until after I started the fraud." Dr. Donald Cressey, who studied white-collar crime, had

the fraud triangle where he laid out the three elements of financial crime. One is the opportunity. The

next is the financial need, which the company has no control over. I mean I've heard one story of a

person who stole because his financial need was his neighbor had two Mercedes and he only had one,

so [he] felt like less of a father. So it can be ridiculous, but in their heads they think it's a financial need.

But the third and most controllable element is the rationalization. We perceive ourselves as we intend to

be. I perceive myself as an excellent driver, yet on the other hand my wife, who rides with me all the

time, has a much more accurate perception of my driving ability. I cannot tell you how many fraud

perpetrators I've talked to who tell me, "You know, they've never paid me overtime." I had one person

who saved his company $40,000. He was a claims adjuster for an insurance company. And he told me,

"They never gave me my piece of the rock, so I took it." And his piece of the rock eventually turned out

to be $2.5 million. And you talk to some of these people and it's a rude awakening for them. It's almost

like they've been in a trance or something and they break out of it right there and say, "You know, $2.5

million is too much for saving $40,000."

It seems like a psychologist could be a valuable partner to a CFE.

The fraud examiners themselves know this stuff. Usually a psychologist has three months to get

• Email
• Print
• Comments
• Digg This
• SlashDot

• Anatomy Of A Fraud
• Choke Point: Preventing Credit Card Fraud
• How to Prevent and Detect Fraud
• The Fraud Squad
• Further Reading about Fraud