Chapter 2

Psychology of the Fraudster

Thomas W. Golden

Start with the pleasant assumption that most people are honest. It's a nice way to look at the world, and it summons up childhood memories about learning that honesty is the best policy and George Washington telling his father, “I cannot tell a lie.”

Sad to say, human history and human nature tell a different story, and so do the statistics that examine them. While most societies explicitly abhor violent crime and bodily harm, many societies hold financial fraud, whatever its scale, as a less reprehensible wrongdoing. Charles Ponzi, creator of the Ponzi scheme, was celebrated in some quarters as a folk hero and cheered by many of the people he helped to defraud. Financiers and executives, whose frauds can disrupt thousands or tens of thousands of lives, have historically been punished with relatively light sentences or serve their time at a low-security federal “tennis camp.” Some scholars have called this attitude toward white collar crime “a perversion of our general societal admiration for intelligence.”1 With the advent of the Sarbanes-Oxley Act in 2002 and recent increases in prison terms for certain financial crimes, there is the expectation that this perception will change and white collar criminals will begin to endure what many would deem just punishment for their crimes.

During much of the past century, psychologists and sociologists struggled to understand the inner workings of people who commit white collar crime. ...

Get A Guide to Forensic Accounting Investigation, 2nd Edition now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.