More than £45bn of fraud was perpetrated last year, mainly by senior business managers. That we will do nothing about this is predictable; that we don’t even seem interested in talking about it is surely an accommodation too far.
This can’t be right. On page eight of the Herald, tucked away at the very bottom of the page, well below the “£6m for PE” story, in a handful of sentences we read “Fraud in private sector at £45.5bn” (I can’t even find it in the Scotsman). It seems that this can’t be right because, well, fraud is illegal. Which is to say it’s a crime. A forty-five-billion-pound crime. And according to the National Fraud Authority we know who did it – private sector managers.
So we get the Institute of Directors explaining that this could be a reflection of “challenging financial times”. More specifically “it goes without saying that fraud is likely to increase in difficult times” (although to be fair they do tag on at the end that this isn’t an excuse). Meanwhile, with some audacity, KPMG points out that a 74 per cent increase in management fraud is simply far too easy for senior managers to get away with because of “the ease with which they are able to override internal controls avoid scrutiny”. This is audacious because the Big Four accountancy firms are not known for the rigour with which they make sure that their clients are properly internally accountable on everything from paying tax to reporting profits. In fact, it is important to remember that until fairly recently the Big Four was a Big Five, until one of their number (Arthur Anderson) was caught up to its neck in perpetrating the massive fraud which was The Last Days of Enron.
In fact, this is the crucial point about this whole issue – far from treating corporate fraud as a problem it has generally been perceived as some sort of solution. That might sound an unlikely claim but since all corporate sector lobbying is for ‘reductions in regulation’ (never increases) and regulation is precisely the kind of ‘scrutiny’ that managers are so able to evade, one can only assume that the business sector wishes to be better able to perpetrate fraud (and undertake risky business practices) as a core mission.
And of course the politicians all go along with this conception – that businessmen are unique among humans in that their actions are inherently beneficial to all and therefore beyond question or scrutiny. Only with businessmen is the assumption made that the less they are prevented from doing bad things, the more good things they will do. And this political dogma continues even as we discover a crime of gargantuan proportions taking place in a society reeling from the impact of their previous actions when scrutiny was insufficiently effective.
This contrasts with any form of illegal activity by the poor. I cannot recall the Institute of Directors responding to the riots in England last year by pointing out that, after all, these kids are facing “challenging financial times”. It is no surprise that when the poor steal a pound it is a threat to society but if businessmen steal a billion pounds it isn’t. So rioting kids is front-page news and crime of a value beyond anything a brick and a lighter could ever cost makes the bottom of page eight. The riots could happen every night, forever and they wouldn’t cost society what business fraud is costing.
So parenting classes for managing directors, fines for accountancy firms who have failed to teach their clients respect and punitive, deterrent jail sentences all round? Or will we just look the other way?