Chapter 3. Systematic Deception

The previous chapter presented story after story about how corporate executives made money (or tried to make money) by misleading investors. It’s a major challenge to investors to understand what actually went on in each company and how these situations are alike or different from each other. In some instances there’s fairly simple dishonesty; in others there’s very complex accounting fraud. In the most extreme cases, the complexity of the financial accounts is so great that even professionals are tempted to accept at face value the assertions of top executives that they themselves didn’t understand what was going on in the company. It’s an interesting defense, after all, when a CEO says something to the effect ...

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