“You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.” ~ Abraham Lincoln
Sam E. Antar isn’t the kind of guy that minces words. He’s the kind of guy that skims off the bull.
“Look it doesn’t matter if it’s business, non-profit, government or a person. Fraud is fraud and the one common element is deceit. Here’s the problem that comes into play- it’s called trust. Trust is unfortunately an inherent part of our society. You go to the bank and you trust that your accounts will be debited and credited properly. You read the newspaper and you trust that you’re going to get accurate information. You hire consultants, experts and you trust that they will do effective due diligence and work. Trust is a professional hazard.”
Mr. Antar doesn’t come at the issue of fraud from a lofty perspective. Back in the 80’s he was at the top of the con game bilking millions in skimmed profits, laundered cash, tax evasion and fudged inventories in one of the most impressive security frauds of its’ era. A mega mind by his own right, Mr. Antar cooked the books as the Chief Financial Officer for the Crazy Eddie franchise.
The scheme collapsed in 1987 and Mr. Antar avoided jail time by cooperating with the authorities. Since then he has worked alongside law enforcement agencies and professionals imparting his insider information about fraud, and also utilizes his fine accounting wizardry to conduct forensic accounting services for law firms and various clients.
When it comes to con artists and the art of hustling Mr. Antar knows all the moves- he even made up few of his own. He’ll hammer a dead horse to death on the point that at the root of all fraud is the abuse of trust. Regardless of the level of crime –entry level or highly organized, all scams are planned upon a foundation of deception.
“In my case Crazy Eddie was an organized crime operation run by my family. The most successful organized crime groups are made up of people that share the same race, religion, ethnicity and heritage. Now affinity crimes are committed against people like yourself. In other words, Jew on Jew, African- American on African-American and so on. People tend to trust people that share the same common heritage. It’s always the people closest to you that disappoint you the most- either in your personal life or your professional life.”
Regardless of what camp a fraudster belongs to they know that their potential victims have a personal boundary that they won’t cross. Fraudsters consider the morality of their victims as an exploitable weakness. Morality constrains behavior, but the fraudster doesn’t live by those same constraints.
Experts assign five personality traits that are foundational to an individual’s behaviour: conscientiousness, agreeableness, emotional stability, openness to new ideas and extraversion. It has been found that when the qualities of conscientiousness and agreeableness are lacking that a greater risk to be dishonest is present.
In a chapter from his book, Dishonest Dollars: The Dynamics of White- Collar Crime, Terry Leap addresses potential underlying disorders that could influence an individual towards crime. “Popular belief holds that most criminals, including white- collar offenders, have some sort of personality disorder that drives them to embezzle, cheat on their expense accounts, misrepresent their organization’s financial condition, engage in insider trading. Few white collar criminals are diagnosed with full-fledged personality disorders. However, there are two disorders that psychologists and other experts believe can explain the behavior of some fraudsters – an antisocial personality disorder and/or a narcissistic personality disorder.
But Mr. Antar boils it all down to two types of criminals: those that can be rehabilitated and those that can’t.
“Everybody in the world is capable of committing crime. Otherwise we wouldn’t need religion, we wouldn’t need laws, we wouldn’t need government and we wouldn’t need enforcement. Most people don’t set out to go into society and commit some kind of crime. We all break some rules here and there. Ninety percent of criminals are one-time criminals where they make that one mistake in life under pressure and sometimes they pay the price. They make a rash decision under pressure to cross over to the other side of society. Now, there is another type of criminal that you call a hardcore criminal –like myself. We committed crime not just for the money but for the game. We committed the crime not just as an ends to a means but as a lifestyle.”
Serial white-collar criminals, or as Mr. Antar referred to them ‘serial deceivers’ or ‘serial fraudsters’, are fraudsters that return to the scene of the crime. The venue might change but the setting is created over and over again. Usually through some sort of ill-begotten means, the fraudster charms their way into a new position of authority where there exists an opportunity to manage an entities books or to play with money. As Mr. Antar put it “serial fraudsters get the job under false pretenses and gravitate towards jobs where they can manage money.”
Of the serial fraudster Mr. Antar issued a bleak prophesy. “These kinds of punks are always going to be looking for their next score. They’re never going to stop unless there are some severe constraints put on them. They’ll never stop. You’ll hear about them five years, seven years, ten years from now- unless some victim puts a bullet in their head.”
The fraudster isn’t a lone wolf. The fraudster can’t pull off the scam alone. The fraudster is always grooming and herding the trusting sheep.
“Every fraud needs a conspirator, enablers and the victim,” theorized Mr. Antar. “Enablers are the people in-between the victims that fraudsters prey on. Enablers are duped by fraudsters and fraudsters gain credibility from their potential victims.”
Cohen and Felson state in their 1979 paper entitled Social Change and Crime Rate Trends: A Routine Activity Approach that, “From a criminology perspective, white collar crime, like other crime, can best be explained by three factors: a supply of motivated offenders, the availability of suitable targets, and the absence of capable guardians- control systems or someone ‘to mind the store’ so to speak.”
As stated in this review about the issue of conspiracy, “One important behavioral insight is recognizing that high-level fraud is frequently a team sport and often involves collusion.” In fact, the 1999 COSO Fraud Study found that in 83 percent of the frauds examined, the CEO and the CFO had colluded. The cases examined in the COSO study reinforce that it is utmost to segregate the responsibilities of senior management as well as to enforce a workplace policy regarding the ‘fraternization’ of senior management.
The report goes on to explain that at the Board level “the well-known groupthink bias should be guarded against” and that submitting to this influence could lead “to sway the group into making a ‘feels good’ decision, because maintaining group cohesiveness and solidarity is seen as more important than realistic appraisal of the facts at hand.” Groupthink is described as “a psychological phenomenon that occurs within a group of people, in which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome.”
So how do you catch a fraudster? Well it isn’t easy. Even the international auditing firm, KPMG, couldn’t catch Mr. Antar’s hand in the cookie jar.
“KPMG certified Crazy Eddie’s financial reports and gave us clean audit opinions. They didn’t have a clue about our schemes. A group of investors who relied on Crazy Eddie’s audited financial reports took over the company in a proxy fight and uncovered our crimes. KPMG was an enabler in the Crazy Eddie fraud. Their audited financial reports helped us gain the trust of gullible investors,” disparaged Mr. Antar with a slight degree of exasperation. “If you hire KPMG to find out if somebody has been pilfering the company you can’t assume that they’re going to do a competent job. KPMG’s record is riddled with failed work. Work where they don’t uncover nothing, where they fail to uncover all sorts of things. As Mr. Antar explains on his website, in 2013, the Public Company Accounting Oversight Board inspected various audits conducted by KPMG finding that 23 out of 48 cases were found to contain serious deficiencies in their final audit reports.
As Mr. Antar explains on his website, in 2013, the Public Company Accounting Oversight Board inspected various audits conducted by KPMG finding that 23 out of 48 cases were found to contain serious deficiencies in their final reports.
Unless by extreme intervention, stopping the serial fraudster at the game is impossible. And they’re not just law breakers but they’re rule breakers too. A fraud will lie, cheat, manipulate, exploit and patronize.
“You can’t stop a fraudster. You can’t prevent a fraudster from doing what they want to do. If they can’t defraud you then they’ll find someone else to defraud.”
The onus of preventing white collar crime falls on the due diligence of the corporation. “The best thing a business can do is to prevent themselves from becoming the next victim. Never assume the competency of the people that you contract or hire. Always double check the competency of anyone who is working for you. That’s called professional paranoia. Don’t trust. Verify. Don’t trust people just because somebody else says that they are who they say they are. That’s an unpleasant life to live but that’s the way that you’re going to protect yourself.”
By his own admission Mr. Antar admits that the walking the good walk can be tough. After all, you can take the fraudster out of the game but you can’t take the game out of the fraudster.
“Everybody lives with certain temptation. I’m sure that you do and everybody else does. It’s just in my situation my sins and temptations are much more greater than yours. So yes- I do think about going back to doing what I was doing. Absolutely. To tell you otherwise would be a lie. Anybody in a similar position tries to tell you otherwise that would be a lie too.”