"کنترل کلاهبرداری" به عنوان شکارچیان فوق العاده مالی: چگونه "پاتوژنها" بازار های مالی را ناکارآمد می کند؟

White-collar criminology scholarship shows that “control frauds” (frauds led by the CEO) use accounting fraud to deceive (or suborn) sophisticated financial market participants. Large control frauds cause greater financial losses than all other forms of property crimes combined. Weak regulation, supervision and ethics produce epidemics of control fraud that cause systemic economic damage. As with the natural world, these financial super-predators act like pathogens that take over a firm and act as a “vector” to cause ever greater damage. Control fraud theory poses a major challenge to the efficient markets hypothesis and the resulting praxis that devalues financial regulation.

I coined the term “control fraud” to describe situations in which those who control firms or nations use the entity as a means to defraud customers, creditors, shareholders, donors or the general public (Black, 2005 and Black, 2003).1 In the United States and many other nations, private sector (for-profit and not-for-profit) control frauds cause greater financial losses than all other forms of property crimes combined (Black, 2005). Public sector control frauds, also known as kleptocracies, cause enormous losses that can keep entire nations locked in poverty for generations. This article deals only with control frauds in for-profit firms. It shows why markets, regulators and criminal enforcement bodies have severe difficulties preventing such frauds. The inherent difficulty of dealing with control fraud and our lack of understanding and resultant inattention to control fraud explain why such frauds produce the great bulk of all financial losses from property crime. In the context of blue-collar crime it has become common to refer to certain criminals as “super-predators” (Bennett et al., 1996: 26–34). America is now home to thickening ranks of juvenile “super-predators”—radically impulsive, brutally remorseless youngsters, including ever more preteenage boys, who murder, assault, rape, rob, burglarize… (Id. 27). There has been a sharp rise in the number of child and teen criminals who commit extreme violence. The crimes they commit are a major social problem. These criminals, however, as the authors’ own description shows, are not true super-predators. Being a “radically impulsive” pre-teen is a very poor strategy for a human predator, it usually leads to either prison or early death at the hands of a more competent predator. These so-called super-predators live in the richest nation in the world but prey overwhelmingly on the poorest citizens and are rarely even seen in middle class neighborhoods. The emphasis on toughness and remorselessness reflects our usual bias in discussing predators. The true super-predators are pathogens. They deal death in vastly greater numbers than do carnivores (Diamond, 1997). Their host is a victim, and a weapon that spreads disease. The same bias towards “macho” predators that long dominated zoology has shaped the dominant criminology metaphor for major corporate crimes. Wheeler and Rothman's seminal article (1982) on the corporation as a “weapon” and “shield” in white-collar crime was a major advance. Its imagery, however, calls to mind the armed warrior who triumphs by hacking victims or intimidating terror. This imagery suggests that corporate frauds operate openly. The public and the government know who the frauds are but the corporate frauds are so powerful that can plunder with impunity. I offer a revised metaphor in which control frauds are the pathogenic super-predators of the United States. As the former savings and loan commissioner of California, William Crawford, explained: “The best way to rob a bank is to own one” (U.S. Congress 1988: 34). The chief executive officers (CEOs) who commit control fraud do not look like predators. They want to appear to be pillars of their communities and their firms to appear healthy. Control frauds can use the firm as both the victim and weapon of fraud. They subvert the firm's legitimate structure and objectives to the short term advantage of those who control them. In the process, they typically follow one of two paths. Some control frauds deceive customers. George Akerlof's famous 1970 article about “lemons markets” (which led to his Nobel Prize in economics) first identified this form of fraud in the economics literature. These frauds were possible because information was asymmetrical. The seller knew far more about the true quality of the goods than the buyer, and the seller exploited that information advantage by misrepresenting the quality of the goods. Akerlof showed that this could produce (initially) supra-normal profits for fraudulent sellers and make it impossible for reputable sellers to compete. Over time, the market would become dominated by fraudulent sellers of poor quality goods. Most of the white-collar crime literature dealing with corporate fraud deals with this kind of control fraud and assumes that the firm is defrauding customers in order to produce real increases in profits. Enron engaged in this form of control fraud for a time. It conspired with the other large electrical energy trading companies and devised a fraudulent scheme to take electrical generating capacity off line during times of high (but far from record demand) and create artificial capacity overloads in electrical transmission. The fraud caused extraordinary increases in electrical energy costs in California, bankrupted two major utilities and causes several blackouts (FERC, 2003). This fraud produced real profits for the conspirators. But the largest losses from control frauds frequently come from CEOs who use their dominant position to loot the firm and its shareholders and creditors (Akerlof and Romer, 1993, Calavita et al., 1997 and NCFIRRE, 1993: 3–4; Black, 2003 and Black, 2005). Indeed, these cause such enormous losses because the optimal looting strategy typically involves making deals that create fictional accounting profits and real economic losses. These accounting gains, if blessed by a top tier audit firm, allow firms that are deeply insolvent to grow because creditors and shareholders want to provide funds to profitable firms. Control frauds that loot typically report extremely high profits in early years of the fraud and are able to get clean audit opinions from top tier firms. Control frauds that loot grow rapidly to bring in new cash to pay the interest expense on prior debts—they are Ponzi schemes (Calavita et al., 1997; NCFIRRE, 1993: 3–4; Black, 2003: 34–35; Black, 2005). This article focuses on control frauds that loot. Control frauds that loot use accounting fraud as their weapon of choice (Akerlof and Romer, 1993 and NCFIRRE, 1993: 3–4; Black, 2003 and Black, 2005). Accounting fraud is an optimal strategy because it simultaneously produces record (albeit fictional) profits and prevents the recognition of real losses. This combination reduces the risk of detection and successful prosecution because the CEO can use normal corporate mechanisms (e.g., raises, bonuses, stock options, dividends and appreciation in the value of the firm's stock) to convert the creditor's funds to his personal use. The blessing by the top tier audit firm of the fictional profits provides “cover” to the CEO against fraud prosecutions that would never exist were he simply to embezzle funds. The false profits also aid the CEO's ability to enlist political aid and provide immense psychic value. In sum, control frauds that loot seek to “mimic” legitimate firms (Easterbrook and Fischel, 1991: 280). They do use the firm as both a weapon and a shield to commit fraud and try to escape detection and prosecution. But the sword and shield must be invisible to outsiders for such frauds to work. Control frauds must act more like viruses that take control over the body and turn it into a “factory” to reproduce and spread their infections. And like viruses, control frauds must find ways to defeat the economic “immune system”. The economic system has equivalents to our body's immune systems. As with the natural world, these complex economic immune systems (which are costly to maintain) exist precisely because infections (fraud) have been such a recurrent problem. The most important of these are rules that require competition, demand transparency, regularize accounting practices, and reinforce market discipline. Internal and external controls, corporate governance provisions, business and professional ethics, licensure and disciplinary requirements for allied professionals (e.g., auditors, attorneys and appraisers), tort laws, financial regulatory bodies, the criminal laws against fraud and even whistleblowers all function in part as elements of this complex analog to the body's immune system. Law and economics scholars tend to dismiss the importance of control fraud because they assume that market mechanisms can and do police effectively against such abuses (Easterbrook and Fischel, 1991). Viruses defeat immune systems through a wide range of tactics, but they can be boiled down into three dominant strategies. They fool the immune system by causing it not to identify the virus as a danger, they corrupt or destroy the immune system by targeting it; or they overwhelm it. As this article explains, control frauds flourish and cause extensive damage because they use analogous strategies to defeat market detection mechanisms. I do not want to push this metaphor too far. Viruses do not think or plan. Their evolutionary strategy takes advantage of their inherent tendency to mutate, their very small size and their ability to subvert cells to produce enormous numbers of diverse viral particles. If enough viral particles of a particular genetic structure survive the immune system's response because they (randomly) happen to fool or subvert the immune system that variant may become dominant in the body and the infection will persist. The infected host becomes a “vector” that can spread the infection. CEOs do plan. They know the firm's internal and external controls. Worse, they can shape those control mechanisms and make them ineffective. But the worst aspect is that control frauds can subvert internal and external “controls” and use them to assist the fraud. When control frauds loot their most important ally is almost invariably a top tier audit firm that blesses the accounting fraud. The reputation of the top tier firm and the claims by neo-classical law and economics scholars that a top tier firm would not bless the financials of a control fraud (Easterbrook and Fischel, 1991: 282; Prentice, 2000) combine to make the auditor an extraordinarily effective aid to the control fraud's effort to “mimic” a robustly healthy, legitimate firm. Control frauds are dynamic; they have the ability to adapt to society's efforts to detect and defeat them. Recognizing how such frauds use the protective coloration of legitimate firms, and win the blessing of regulators, accountants, and other legitimating professionals is therefore an important part of the understanding of their destructive power (NCFIRRE, 1993: 3–4; Black, 2005). To this point, I have been discussing individual control frauds, but epidemics of control fraud can occur (NCFIRRE, 1993: 3–4; Calavita et al., 1997, Akerlof and Romer, 1993 and Black, 2005). For example, industries in systemic economic crisis can suffer from an epidemic of control fraud. While government agencies are generally expected to police the economic system's anti-fraud protection, government officials may respond to systemic crises, e.g., the savings and loan (S&L) crisis, by corrupting the systems designed to constrain control fraud in order to cover up the scale of the crisis and their own policy failures (Kane, 1989, NCFIRRE, 1993 and Black, 2005). Once an epidemic of fraud arises, strong government measures are almost always necessary to bring it under control (Calavita et al., 1997, NCFIRRE, 1993 and Black, 2005). This article briefly discusses two of these epidemics—the savings and loan debacle of the 1980s and the ongoing, larger epidemic of control fraud, most famously in high tech industries. But control fraud can also be endemic. Parasites such as malaria and worms are endemic in many parts of the world and they harm economic development and the quality of life. Endemic control fraud is also a major bar to economic and political development. Indeed, it is such a major obstacle that it can cause severe health problems. There are three major variants. One is kleptocracy. The ruler uses the nation as a victim and loots much of its wealth through corruption, fraud and crony capitalism. A second variant is nations with very low trust (Fukuyama, 1995). The defining element of fraud that separates it from other forms of theft is deceit. Fraud involves the creation of trust in the victim—and its betrayal. As such, fraud is the most effective means of eviscerating trust. Akerlof's original article on lemon's markets showed that control frauds that targeted consumers could become endemic and that this would impair trust, drive honest sellers from the market, and leave a deeply suboptimal market system (1970). The result can be widespread, persistent privacy. Russia's flawed “privatiziation” exemplifies a third variant of endemic control fraud. The fraud was so severe that it discredited not only the privatization effort but the entire Russian government. It also led to such a sharp fall in the economy that life expectancy fell sharply (Wedel, 1998). This article does not focus on these endemic forms of control fraud because developing the argument fully would require a much longer article—but this is probably the form of control fraud that causes the worst suffering. This article makes two broad points. First, it develops how “looting” control frauds operate and why they uniquely destructive. Academic observers have long dismissed the importance of control frauds because they insist that control frauds are irrational (Easterbrook and Fischel, 1991: 133; O'Shea, 1991: 279). They assume that the failure of a company means the failure of the fraud. CEO's in charge of failing enterprises in fact enjoy perverse incentives to engage in fraud in order to extend their time at the top and to increase the share of corporate expenditures that go to their personal benefit at the expense of the creditors ultimately left holding the bag. Control frauds succeed because they convince observers – regulators, investors, the press, academics, and their own employees – that they are legitimate. They take on and use the presumption of legitimacy that accompanies conventional businesses. They manipulate symbols of corporate health such as glowing profit statements or clean bills of health from the most reputable accounting firms. Like viruses, their strength comes from the ability to convert their host's resources to their insidious purposes. Second, the article demonstrates how circumstances can create control fraud epidemics. Like “vectors” that spread viruses, control frauds can infect outside professionals, politicians and regulators, weakening the immune system controls against them and magnifying the size of the ultimate loss. I briefly present three examples of such epidemics—the S&L debacle, the ongoing wave of corporate looting in the United States, and privatization in the former Soviet Union. My discussion of the last example is very limited due to space limitations and the fact that it has been covered so well by others. This article concludes that control frauds should be recognized for what they are: the conversion of legitimate organizations to instruments of theft on a massive scale. It also concludes that deposit insurance and analogous government guarantees may shape epidemics of control fraud, but they are not a sine qua non for an epidemic of control fraud.

Control frauds are the most pernicious form of fraud. In the United States, firms offer the best victims and weapons of fraud. Control frauds that loot and become Ponzi schemes cause the largest losses and are less likely to be prosecuted than those that target consumers. Ponzi schemes rely on accounting fraud as both their primary weapon and shield. They create massive, false “profits” while hiding huge real, huge losses. This allows control fraud to persist for years and inhibits effective enforcement. In industries where creditors are protected from loss by governmental guarantees, there is no private market discipline. The regulators are supposed to provide the necessary discipline, but in the case of systemic crises, regulatory hazard is maximized and regulators may take actions that enhance control fraud (NCFIRRE, 1993: 62–67). Thus, governmental guarantee programs can increase the risk of an epidemic of control fraud but such epidemics can occur even if there are no governmental guarantees.