A man who has never gone to school may steal from a freight car, but if he has a university education he may steal the whole railroad.
-Franklin D. Roosevelt (1882-1945) 32nd President of the United States
This blog is all about white collar crime. Whether it is popular to acknowledge or not, Canada is considered a prime target for white collar crime “professionals.” These pro-active crime practitioners relish “doing business” in this country because of; ease of corporate infiltration; our lax laws; minimal conviction rates and the blanket protection provided by The Canadian Charter. As well, the cost to a corporation to prosecute someone in order to capture losses is quite high. In fact, a colleague of ours recently spoke with a very prominent employment and litigation lawyer in Toronto. And the news wasn’t good. Without hesitation, he indicated that it was pointless to go after any losses under $200,000 – for cost/benefit reasons.
The Statistics
A survey done by PriceWaterhouseCoopers (PWC) confirms that white collar crime is quite prevalent. According to their research, in 2009, about 30%, of the more than 3600 companies they studied from around the world, had suffered from fraudulent acts – with an average loss of $2M. Having said that, there is no doubt that Canada is clearly surpassing the global percentages – by a significant amount. In that same year, about 56% of Canadian corporations reported being victims of serious fraud. And Vancouver might well be a special target. Forbes magazine calls the Vancouver Stock Exchange, now part of the Canadian Venture Exchange, “the scam capital of the world.”
And there appear to be some startling statistics as to why Canada has such a higher white collar crime rate. According to the crooks themselves, when compared to the United States specifically, Canada is a great place to do “business.” Martin Chambers, a former Vancouver lawyer who was disbarred and convicted of fraud, said “Canada is 20 times safer to carry out corporate criminal activity than the U.S.” While Canada is definitely moving towards stiffer penalties, including mandatory jail time for those convicted of white collar crimes, there is no question that Canada remains a fertile hunting ground. And it appears the raw statistics confirm this suspicion. Between 2003 and 2008, the U.S. arrested and prosecuted approximately 1200 white collar criminals. In that exact same time period, Canada convicted three – that’s right, just three people!
According to Craig Hannaford, a “white collar crime” prevention and investigation consultant, based in Toronto, “When it comes to white collar crime, it is worse than you think.” Formerly the head of the RCMP Stock Fraud Group, Hannaford confirms that the problem is definitely growing in this country – at an alarming rate. It is his view that this type of crime exists in almost every company – to some degree of the other.
When we spoke to him, Mr. Hannaford explained that many white collar crimes fit into the “GONE” theory –Greed; Opportunity; Necessity; Expectation. While it might be difficult to eliminate Greed or Necessity from the human being (many of these crimes are driven by greed or necessity because of gambling problems and the like), employers do have control over the other two words – Opportunity and Expectation.
Hannaford has spent a good portion of his career investigating and teaching numerous organizations how to ensure that the opportunistic white collar criminal is hindered or stopped completely in his or her tracks. He notes that organizations that are smaller, more entrepreneurial, with less structure are, especially easy to victimize. Proper controls, solid prevention methods and diligence are the key. In addition to proper internal controls, Hannaford also recommends that you consider putting in a “tips” hotline. As well, he advises corporations to watch for unusual activities that may seem quite harmless – like an employee who never takes a vacation. If you would like more information, you can contact Craig at Hannaford Partners Incorporated. Tel: (905) 399-5252. E-mail: csh@hannafordpartners.com.
The Professional White Collar Criminal
While, as previously mentioned, most white collar crime is opportunistic and need-driven, there is another kind of white collar crime; that which is carried out by people one might call “professionals.” These are the folks who are not merely opportunistic. Rather, they are proactive – a person who, from inside your organization, is actively attempting to find a way to cheat you every day. These people are the psychopaths – people who have no conscience and wake up every day of their lives with the firm belief that their only job in life is to cheat you out of as much as they can through fraud, embezzlement and every other means they can think of. Their view of life is that you are trying to do the same thing to them – so they are going to “get” you first. It is that simple. And they are incurable. There is no treatment, no medication, no remedial action, no mentoring or anything else on the planet that will get them to stop. Ever. They are relentless. And there are more of them running around than you might think.
Psychopaths have a lack of attachment to others; they lack remorse and empathy for their fellow man and have not the slightest bit of conscience. They are superb at blaming others, lying and rationalizing their own behaviour and never once think about the grievous harm they are inflicting on those around them. They can be unbelievably charming and manipulative and absolutely ruthless; they are usually very glib, able to “turn a phrase,” as it were, and frequently operate completely undetected by those around them. Further, they have no sense of right or wrong. They never think in such terms – the only issue for them is what they can get away with. They are cunning, untrustworthy, parasitic, shallow, extremely self-absorbed and completely remorseless. And many of these people can be viewed as leaders and “movers and shakers.” In fact, to the uninitiated, many of these people can look exactly like ambitious, take-charge leaders! No wonder so many of them actually get promoted into high-level positions!
Clearly, the worst part is that these human predators are complete chameleons and masters at “hiding in plain sight.” To give you an idea of how well they are able to blend in, consider that, statistically, 1 person in every 25 is sociopathic. That means if you have 100 people in your company, 4 of them likely fall into the category of demonstrating psychopathic behaviour. And those 4 are seriously trying to undermine and cheat you, one way or the other – every waking moment of their lives! Have no doubt; these people are difficult to spot. Dr. R. Hare, of the University of British Columbia, is considered the world’s absolute expert on the psychopathic personality. He has spent his entire career interacting with psychopaths, looking into their motives, understanding their behaviours and learning how to identify them. And with all that expertise, even he had to admit that he was taken “in” by one on his lecture circuit. As well, the Executive Source Partners team is specifically trained and steeped in recognizing corporate psychopathic behaviour –we frequently de-select many individuals with psychotic behaviour who attempt to get past our screening procedures. In the course of our day, we look for these people – all the time. And without a word of a lie, many psychopaths are so good at manipulating and conning that we have, knowingly, had psychopaths sitting right in front of us, in an interview, in our boardroom and we can almost be persuaded that the person sitting in front of us is the greatest guy in the world (the ratio of psychopaths who are men vs. women is about 7:1). Almost! Damn, these people can so often be exceptionally intelligent and good at what they do.
Detecting them in the hiring process
Professional white collar thieves can operate for a significant length of time, completely unfettered, once they find their way inside your corporation. Obviously, the best way to deal with them is to avoid hiring them in the first place. But as previously mentioned, they are usually very personable, charming and gracious in an interview. So detecting them at the interview stage can be tricky, to say the least. Having said, there are some basic ways to protect yourself and identify and de-select these types from the interview process before they wreak havoc on your organization.
Resumes
Ensure that you verify every piece of information contained in a resume. Remember, at least 1/3 of resumes contain lies and over 50% contain “sins of omission.” So, do not be blinded by an impressive resume. Dig deep. Focus especially on academics. Almost 20% of executives lie about their schooling achievements. So, pay particular attention to academics. It may mean you will need the candidate’s permission to do so. Many universities and other institutions will not release the appropriate information and verification without written permission. Most corporations do not go to this extent because they are too concerned that they might upset a competent candidate. Not so. Quality candidates do not mind in the least. As an aside, conducting such due diligence will identify and keep out a host of other “problem children” as well.
Your HR group
Do not assume that your HR group is screening out these kinds of people. Few HR types are qualified, or even psychologically “wired” to look for the psychopath or white collar criminal. Most are too “people” oriented and much too busy investigating the “positive” in candidates during the interview process – a forgivable sin given the focus of their position in the company. Nevertheless, relying on your HR department to screen these people out of your organization is fraught with risk. Assume nothing when your HR team sends along a candidate.
The Interview Itself
The inability to accept blame or responsibility is a major hallmark of the white collar criminal – and psychopaths. Watch for it in the interview. Get all candidates to talk about their failures, miscues and mistakes. And make sure you ask each candidate how these issues hurt them or the company. The smart ones will tell you all about their mistakes. But they almost always “give themselves away” when they refuse to acknowledge these errors had any negative impact on the company or themselves because of their actions.
Further, be especially on guard when you meet a candidate, especially a male candidate, who has flawless interpersonal skills throughout the interview process. Someone possessing outstanding interpersonal skills does not automatically imply that a person is a psychopath. But most men, at some point in the interview process, will have a few “rough edges.” Not all, but many will lack some tact at some point in the interview process.
Expert Help
Consider getting some expert help in this area. Clinical psychometric assessment, such as that provided by companies like Simpson Associates or Dr. Tim Clark in Vancouver, BC, is an in-expensive way to ensuring you avoid these predators.
Identifying them in your company
The truth is that your mid-level and junior employees are more likely to see the psychopath in action than senior management. Psychopaths mistreat underlings and those they have no use for, but they manage “upwards” brilliantly. So, there are times when the person you are least likely to listen to is the one you might want to hear out the most. They often have information that is vital to your company. But they don’t know where to turn to when their boss is a psychopathic thief and they are too worried about losing their job. After all, many corporations are “command and control” driven and punish people for going “above” their boss. But that is what these thieves count on. To combat the problem, consider providing a way for the lower level people in your company to be able to go above their boss without repercussions.
Recognize that these people really thrive in an environment that has a lack of structure or is experiencing a great deal of change. Smaller companies, others that are going through re-structuring, or growing very quickly, are especially susceptible to those who would perpetrate a white collar crime.
While the concept of white-collar crime has been around since Dr. E.H. Sutherland coined the phrase in the late 1930’s, there is no doubt that the term is here to stay. This “industry” is continuing to rise in both scope and magnitude. On a global scale, white collar crime is measured in hundreds of billions of dollars annually. And given the upswing that is currently taking place, it would seem reasonable to review your safe-guards that are in place to deal with the problem.
