Desperate times call for desperate measures. Warren Buffett’s classic quote seems very timely in today’s environment: “It’s only when
the tide goes out that you learn who’s been swimming naked.” Even in good times, there are those who are dishonest and driven by
greed. But during tough times, typically honest applicants can be driven by need. In this economic environment, it is more important
than ever for companies to protect themselves. In a competitive job market, once honest candidates can be pushed to further stretch
The Wall Street Journal article “Test for Dwindling Retail Jobs Spawns a Culture of Cheating” (January 7, 2009) reports on desperate
measures for online applicants that have to take personality tests:
“Today, many retailers’ are cutting their work forces, but that just makes the test even more critical. So many people now are
seeking what jobs remain in retail that the test’s maker says it processed about 29 applications for every opening in 2008, up
from 22 in 2001. Meanwhile for retailers, it has become doubly important now to employ only the most productive people...The
more critical the test has become to getting a job, the more applicants are trying to game it. They do so by repeating the test
several times, by comparing notes, by consulting an online cheat sheet or by having a friend take the test for them.”
According to the Wall Street Journal, more than 500,000 Americans lost their jobs in December. In January six CEOs of publicly held
companies were replaced in just eight days (CEO Firings On the Rise As Downturn Gains Steam, The Wall Street Journal January 13,
2009). With job market conditions never before seen by most employers, and headlines of massive fraud, now is a good time to
consider your hiring practices and how you can properly screen any new hires or people you conduct business with.
Perhaps the Bernard Madoff $50 billion Ponzi scheme illustrates the importance of due diligence even in good times. He wasn’t
exposed until the tide went out. During more prosperous times, countless intelligent and wealthy individuals gave tens of billions of
dollars to Mr. Madoff. Literally thousands of institutions, nonprofit organizations and individuals are counting their losses. Some of
them are grappling with issues that they actually profited from another loss.
Ironically, you can enter a Ponzi scheme legally through lack of due diligence, but you cannot exit the scheme because of proper
diligence. If you leave because of knowledge that something is illegal or fraudulent, you are yourself complicit.
The recent impeachment of Illinois Governor Rod Blagojevich shows that even those in public service can quickly turn to abusing
power for private gain. Blagojevich was arrested after federal prosecutors alleged that he attempted to sell the vacant U.S. Senate
seat left by President-elect Obama. There are also allegations that he withheld state money from a children’s hospital until a campaign
donation of $50,000 was received.
Also within the last month, the World Bank disclosed that it had blacklisted three Indian Outsourcing firms, Wipro Technologies,
Megasoft Consultants Ltd. and Satyam Computer Services. Ramalinga Raju, the co-founder of Satyam admitted to falsifying the
company books by over $1 billion. All three companies were barred because of improper relationships and benefits, including stock,
provided to bank employees (World Bank Blacklists India’s Wipro, The Wall Street Journal January 13, 2009).
India’s government fired all of Satyam’s board members and began an accounting review of it’s largest publicly traded company. Eight
additional companies related to Satyam are under investigation.
Among the global economic crisis, more U.S. fraud cases continue to develop. Law.com outlines the latest regarding jailed attorney
Marc Dreier’s $380 million fraud case:
“Charged with securities and wire fraud, the only equity partner of the now-shattered 250-member Dreier LLP is accused of
hijacking the identity of New York City development company Solow Realty to sell fictitious promissory notes to hedge funds in
New York City and Connecticut.” (http://www.law.com/jsp/article.jsp?id=1202427323972)
With consumer and taxpayer confidence near all-time lows, skepticism of corporate leaders maybe at an all time high. With stunning
revelations about AIG executives’ lavish retreat weeks after receiving federal funds, the scrutiny and distrust of corporate executives
As more bailout money continues to go into the nation’s largest financial institutions and auto makers, taxpayers’ anger and the media
attention on executive compensation has grown as well. An AP study shows that $1.6 billion has gone to executives of banks that have
received federal bailout funds:
“Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits
last year, an Associated Press analysis reveals. The total amount given to nearly 600 executives would cover bailout costs for
many of the 116 banks that have so far accepted tax dollars to boost their bottom lines. The AP compiled total compensation
based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received
$188 billion in taxpayer help. Among the findings: The average paid to each of the banks' top executives was $2.6 million in
salary, bonuses and benefits.” (http:/news.yahoo.com/s/ap/20081221/ap_on_bi_ge/executive_bailouts_3 )
As the tide has gone out, it has become evident that fraud and abuse of power can’t be entirely eliminated, regardless of how much
regulation or government involvement takes place. It is even more important in challenging economic times to protect your own
organization from individuals who are dishonest about their past or qualifications.
To review your background investigations policy or to see how you can further protect yourself and your company, contact a CI
FOR IMMEDIATE RELEASE
Michelle Pyan, Commercial Investigations LLC President
|CREDIBILITY CRISIS CONTINUES:
MADOFF, BLAGOJEVICH AND RAJU
COMMERCIAL INVESTIGATIONS LLC (CI), a full service licensed private investigative agency, offers thorough
and affordable employment BACKGROUND INVESTIGATIONS. CI provides accurate, timely, cost effective and
fully compliant reports supported by high standards of customer service. CI also offers consulting services to
assist organizations with reviewing and auditing their BACKGROUND INVESTIGATIONS processes for compliance,
effectiveness and efficiency. CI provides the PROACTIVE TRUTHTM regarding applicants, thereby reducing
turnover and limiting exposure to civil liability.
DATE: January 2009
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