The Real Victims of Fraud

It’s closer to home than you might think

The Calumny of Apelles by Sandro Botticelli, 1495 (Wikipedia - public domain)

“The poor man is ruined as soon as he begins to ape the rich.”— Publilius Syrus, c. 50 BC

When we talk about “the innocence of babes,” we tend to assign children an honorable persona, as if corruption doesn’t reach their angelic souls until some time later in life.

Most children begin to form full sentences when they’re two or three years old, and recent studies have shown that this is the same time they start to lie — usually to avoid punishment.

“When grown people speak of the innocence of children, they don’t really know what they mean. Pressed, they will go a step further and say, Well, ignorance then. The child is neither. There is no crime which a boy of eleven had not envisaged long ago. His only innocence is, he may not yet be old enough to desire the fruits of it, which is not innocence but appetite; his ignorance is, he does not know how to commit it, which is not ignorance but size.” — William Faulkner, 1962

We tend to be surprised about deception beginning so early in life, but most origin stories of humanity are what the ancient Greeks called the “noble lie.”

Noble Beginnings

In The Republic, Plato explains that by introducing a lie about humanity’s beginnings, it was more likely to bring harmony among the citizens if they thought they had a common bond. It was for the greater good of society.

It’s not terribly different from how the emperor Augustus commissioned Virgil to write The Aeneid as an origin story for Rome.

Yes, it was a series of stories and myths, but it was tied to long-held traditions and beliefs, and it legitimized his position. It made for a happy and satisfied public that needed to heal after years of conflict.

“Corruption’s not of modern date;
It hath been tried in every state.” ― John Gay, 1731

But the noble lie is a far cry from self-serving deception — the kind of swindle and fraud we see highlighted in certain wealthy and powerful individuals.

Artful Dodgers

While they don’t have a monopoly on it, the American power set managed to establish a “genius for the artful dodge”:

“the sales pitch, the résumé, the cost overrun, the subprime loan, the building of the transcontinental railroad, the credit default swap, the derivative, the balloon mortgage, the missile gap, the housing bubble, the annual report, the Laffer curve, the Facebook page, the campaign promise, the 2003 invasion of Iraq…” — Lewis H. Lapham, 2015

And in certain cases, the man-children who make use of these ruses make headlines for their perfidy.

The wunderkind Sam Bankman-Fried is a great example. So confident in his ability to pull the wool over investors’ eyes for so long, in an interview the founder of the cryptocurrency exchange FTX boldly stated, “I don’t think I will be arrested.”

He was arrested the next morning by authorities in the Bahamas (although he should have been taken into custody by the Dunning–Kruger Sittenpolizei Verein).

This young Bernie Madoff had undertaken a years-long fraud effort under the complex guise of cryptocurrency, losing billions of dollars of his clients’ money in the process.

“Here’s the rule for bargains—‘Do other men, for they would do you.’ That’s the true business precept.” — Charles Dickens, 1844

Our examples aren’t exclusive to the smoke and mirrors of financial instruments. Sometimes, successful executives with track records use their power to intimidate — or simply to play by their own set of rules.

Because they seem to think that there are Jonas Chuzzlewits and Seth Pecksniffs lurking around every corner waiting to use guile and deceit to outplay them, they strike first.

Donald Trump’s secret to success has been simple and consistent: don’t pay your bills. Along the way, he has stiffed municipal police public safety costs for his rallies; bilked a vendor for Truth Social platform out of more than $1 million; he even had a fraudulent “university.”

It’s almost incredible, but he still owes money to contractors for his Taj Mahal casino, built in 1990.

And now in October of 2023, he is beginning to pay the price for defrauding the state of New York.

And there’s a similar pattern that took root at Twitter: to cut costs, Twitter has skipped out on paying rent at its San Francisco headquarters, Elon Musk and his legal team have instructed employees not to pay vendors, and withheld severance pay from former employees.

“Oh, what a tangled web we weave,
When first we practise to deceive!” — Walter Scott, 1808

The Bottom Line for Decent Leaders

If we put SBF, Trump, and Musk on a ledger, what would our calculations find? And what would decent leaders do in their place?

Simply put, they’re men who’ve never grown up and understood that as leaders they’re responsible for other people — or at least that they ought to have a responsibility to treat others with dignity, respect, and empathy.

What if you find yourself tangled up in a similar web? Perhaps it’s a misdeed of your own, or it’s something you’ve witnessed.

Here are steps that you can take to guide your organization through things.

1. Tell the truth

The first step is admitting what happened. Simply coming clean and owning the error will allow you to get things out in the open and talk frankly about what happened and why it happened.

2. Commit to avoiding a repeat

Now that you know what happened, you can steer clear of any temptation to get lured into a similar situation in the future. Which is why being clear and honest in step 1 is so important.

3. Avoid revenge

It’s natural to want to strike back (yes, even if you’re the perpetrator of the deception — this is why whistleblowers need protection). But it’s not going to solve the problem and in fact, it might make the situation even worse. Move on.

4. Encourage honesty and communication

If you show that you value traits like transparency, inclusiveness, listening, respect, and clear, concise and candid communication, you’ll build a more cohesive team, which in turn can help steer clear of deceptive situations in the future.

5. Maintain your integrity

By taking the steps above, you’ll show that you have the leadership capabilities to guide your team through even the most difficult situations. Communicate honestly. Push for ethical business practices.

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All of this assumes that a deceiver is indeed interested in absolution and transformation.

For the better leaders among us, it’s perfectly human to admit fault, issue an apology, and seek to improve ourselves and our standing in the eyes of others.

But to a man-child? He’ll continue to deceive others — and himself. And that’s the greatest fraud.

Because someone who can’t be honest with himself has no hope of being respectable.

Thanks, and I’ll see you on the internet.