"Alex W." <
ing...@yahoo.co.uk> wrote in message
news:10oobmizixo5i$.mna5ewf7ild3.dlg@40tude.net...
especially the financial services industries
http://www.philly.com/philly/columnists/joseph-distefano/20120311_PhillyDeals___Broken_windows___Saving_U_S__from_financial_fraud.html
JOSEPH N. DISTEFANO
PhillyDeals: 'Broken windows': Saving U.S. from financial fraud
Back in the fat years, before so many of its heavy users went broke, the
credit card industry down in Wilmington recruited a string of former FBI
officials. Bankers wanted their anti-Mafia experience - to fight fraud and
to sell more credit cards to law enforcement pros.
Over breakfast at the Hotel du Pont one morning in the late 1990s, former
FBI Deputy Director William J. Esposito and former New York boss
investigator Jules Bonavolonta, newly hired by the former MBNA Corp., told
me one reason their Federal Bureau of Investigation had lately managed to
break up long-standing ethnic gangs: The end of the Cold War freed the
agency from a lot of domestic political monitoring, so it could
systematically pursue gunmen, industrial shakedown artists, and their
professional enablers.
What about white-collar criminals? I asked. They're next, they told me.
Then the Sept. 11, 2001, terrorist attacks sent a lot of FBI resources back
to watching a new generation of potential radicals.
Meanwhile, financial fraud has thrived, to where some bank-watchers say it's
a national security threat.
Busted windows
The political scientist James Q. Wilson, who died March 2, is remembered for
his "broken-windows" theory: Suppress graffiti, vandals, streetwalking
prostitutes, window-smashing burglars, and you'll find violent drug gangs
and stickup men go away. It seemed to work, at least in Rudolph Giuliani's
New York.
Financial crime needs a similar approach, argues University of
Missouri-Kansas City professor William K. Black, who used to fight mortgage
fraud for the Federal Home Loan Bank Board.
Wilson didn't take white-collar crime too seriously. But to Black, in a
column published last week by UMKC's New Economic Perspectives, the
parallels are clear: "Anticonsumer frauds are a direct assault" on the
public. A little leads to a lot: Bosses, financial officers, and salespeople
who cheat and get away with it "erode peer restraints on misconduct."
Look what happened to the home-loan business, says Black: "It was
overwhelmingly the lenders and their agents" who put the lies in the
so-called liar loans that blew up giant banks and stalled the home-building,
home-finance, and homeownership machine that used to power the U.S. economy.
At the corporate level, "earnings management" corrupts financial staff,
auditors, executive compensation consultants, sales managers. The State of
Delaware, legal home to half the companies on the New York Stock Exchange,
made things worse when its business-friendly courts agreed to let companies
weaken their old "fiduciary duties of loyalty and care." So, everybody does
it - and you end up with the recent financial crisis, and the next one.