Look up the definition of fraud. You ll find a person who

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ook up the definition of “fraud.” You’ll find “a person who pretends to be what he or she is not in order to trick people,” and “intentional perversion of the truth to induce another to part with something of value or surrender a legal right.” This begs two questions. Are people born with fraudulent tendencies or do they acquire these? And if the latter is the case, can someone ever stop being a fraudster?


Once a Fraud, Always a Fraud?

Experts Weigh In

by Neal H. Levin


As part of an upcoming seminar

at the 25th Annual Association of

Certified Fraud Examiners Global

Fraud Conference, our fraud

team leader, Neal Levin, took an

informal poll. He asked other

professionals, “At what point is a

fraudster no longer a fraudster?”

The results were compelling.

While most people believed

“once a fraud, always a fraud,”

this opinion was more strongly

held by men than women—

who were evenly split on the

issue. In addition, an offshoot

conversation—discussing genetic

predisposition to committing

fraud—showed examiners

discounting this idea.

Neal H. Levin, Team Leader of the Firm’s Fraud and Internal Investigations Practice Group, is an internationally known expert in this field. He will present a seminar at the 25th Annual Association of Certified Fraud Examiners (ACFE) Global Fraud Conference on June 15-20 in San Antonio, Texas. His session is entitled, “The Psychology of Fraud: How Knowing Your Enemy is the Best Way to Prevent, Investigate and Recover from Fraud.” In advance of this, Neal recently polled other ACFE members on the


CFEs Take An Even Harder Line

Those who hold the Certified Fraud Examiner designation were even more likely to believe that people won’t change their fraudulent behavior:

“It is very simple that a fraudster is a fraudster until the fraudster dies.”

Fraudster Forever?

Most fraud examiners believe that people who commit fraud once inevitably continue down this path. Here are some highlights of their comments:

“There is something missing either morally or mentally with fraudsters, and I don’t believe that is something that gets ‘cured.’” “… the point at which a fraudster is no longer a fraudster is that point where the EFFECTIVE and EFFICIENT CONTROL and all contributing and compensating powers to commit fraud are disabled.”












Men More Likely To Believe Fraudsters Can’t Change

The majority of men believe that fraudsters, like tigers, can’t change their stripes:

“If you are one who has the mental capacity to absolve yourself of guilt and look past what is right and wrong, you always will. Even if you commit fraud only once, it shows you have that capability and all it takes is the right opportunity or rationalization to push you into committing your next scam.”

Here is an example of the minority opinion:

“There can indeed be a path toward a normal life, but it requires an enormous amount of work—and the new ‘normal’ life may well be one that keeps third parties safe, prohibits handling of cash or securities, and doesn’t take advantage of the prior life’s education or experience.”

Women were evenly split on the question:

“You need look no further than Barry Minkow to realize that once one has larceny in his heart, it pretty much stays there.”

“… my personal answer would be it depends upon the type and amount of fraud, whether there was a civil or criminal sentence, any restitution paid, and how generally egregious the case was. If you forced me to pick a time period, I would choose 7-10 years of being ‘fraud free’ as I would say something similar to the bankruptcy laws after it is no longer reported on credit reports.”






A Parallel Between Fraud and Addictive Behaviors?

An interesting side conversation developed around the idea that there is a similarity between fraudsters and alcoholics:

“It is somewhat similar to asking the question: At what point is an alcoholic no long[er] considered an alcoholic?”

“I would think of this as I would of alcoholism, as a long-term chronic condition. While I do not think it is curable, I do believe it is manageable. However, I would not [have the] one with the condition working with money or recording and prepar[ing] financial statements.”

Is Fraud in the Genes?

Another inquiry that arose was about the genetic predisposition to anti-social personality disorders—the kind that can lead to fraud. The experts, however, pooh-poohed this:

“To say ‘being predisposed to fraud is genetic’ is like saying [you] were born a vampire and therefore, if you murder someone and drink their blood, you cannot help yourself. Entertaining … gory … temporarily rewarding … but still unethical.”

“[The book The Fatal Shore] describes with some amusement how there was a belief in eighteenth century Georgian England that criminals were innately disposed (I don’t think the word ‘gene’ existed then) to commit crime, and that if they were transported to Australia, England could rid itself of crime forever. Clearly this idea was false … It turns out that the crime rate in modern Australia is apparently a lot lower than in the UK, which wouldn’t be the case if the ancestors of modern Australians were genetically disposed to crime …”

“I believe that it is a person[’]s circumstances that lead them to commit fraud be it for greed or need.”


Neal Levin’s Position on Fraudsters

When asked what his own research and experience indicated, here is what Neal had to say.

“Studies of the psychology of fraudsters revealed that most can be diagnosed with anti-social personality disorder. There is growing evidence that markers for this disorder can be found on the brain scans of people as young as 15 years old. However, many behavioral scientists still subscribe to the theory that environmental influences may play a significant role in the development of a fraudster, or as the catalyst for resorting to fraud.” “If you accept that genetics plays a foundational role in developing the fraudster, then it must follow that this person is always a fraudster—even when not committing fraud. To be more politically correct, anti-social personality disorder seldom just disappears. This would be especially true where the only intervening factor is getting caught. I believe it’s safe to conclude that while fraudsters are not always committing criminal acts, the propensity surely remains.”

We look forward to sharing highlights from Neal’s ACFE presentation in a future Client Alert. In the meantime, if you have questions or concerns about fraud-related issues, please contact him.

Neal H. Levin

Team Leader of the Firm’s Fraud and Internal Investigations Practice Group and a member of both the Litigation and Bankruptcy and Financial Restructuring Practice Groups

Chicago Office (312) 360-6530 nhlevin@freeborn.com

Often compared to Mr. Wolf from Pulp Fiction, Neal is frequently summoned when the case “stinks.” Known fondly as “The Fraud Guy,” he contends with a litany of fraudsters and fraudulent transactions, including those stemming from bankruptcy fraud, occupational fraud, corporate governance fraud, government corruption, insurance fraud, bank fraud, mortgage fraud, asset concealment, so-called asset protection plans, offshore financial centers and, of course, Ponzi schemes. His practice is international in scope and he has appeared in dozens of different tribunals over the course of his nearly 23 years in the business. Neal and his team also spend considerable time on the study of fraudsters as a way to leverage their success. He frequently lectures, writes and is interviewed on the psychopathy and sociopathy of a fraudster as well as on Ponzi schemes, bankruptcy fraud, investigations and recovery practices. ABOUT THE AUTHOR



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