Assignment: Cognitive Aspects of Criminal Behavior

Feb 22, 2018,01:06pm EST

White-Collar Crimes -- Motivations and Triggers

Roomy Khan

Roomy KhanContributor

Personal Finance I give insight into decisions that lead to white-collar misbehaviors.

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GERMANY, BONN - FEBRUARY 05: Symbol photo on the topic’s telecommunications security, computer crime... [+] mobile phone, hacker, computer security, internet, etc. The picture shows a padlock on a mobile phone. (Photo by Ulrich Baumgarten via Getty Images)

GERMANY, BONN - FEBRUARY 05: Symbol photo on the topic’s telecommunications security, computer crime... [+]

Each time one reads a report on white-collar crime, and there always is a newer and bigger one getting exposed, one is forced to ask the question – why do they do it? Why do individuals engage in such self-destructive misbehaviors?

Nonviolent crime committed by employees in the course of their occupation is defined as “white collar” crime. Such crimes include fraud, bribery, Ponzi schemes, embezzlement, insider trading, cybercrime, intellectual property infringement, racketeering, money laundering, identity theft, and forgery, etc...

According to the FBI, the annual cost of white-collar crimes is over $500 billion, which far exceeds the estimated cost of $15 billion from personal property crimes.

What are some of the motivations behind these white-collar misbehaviors?

Individuals have various degrees of tolerance towards conscientious and ethical behavior. Academic research shows that environmental signals and cues can nudge individuals to behave

differently when faced with ethical choices. Most white-collar misbehaviors occur due to the perceived ambiguity in the environmental signals and cues. Work environments can elicit good or bad behavior out of individuals. Ambiguous cues subtly nudge individuals towards the slippery path of compounding ethical transgressions, leading to criminal acts. Certain individuals succumb to temptations and compromise their ethical values in this grey area. Rarely, is there a direct order to break the law.

Below are some of the environmental cues that can create white-collar misbehavior:

Poorly designed job incentives: Finance professionals are compensated and rewarded for short- term superlative profits. To maximize their performance-based compensations, some proceed to circumvent the existing laws. Bradley Birkenfeld, a federal co-operator in the UBS tax fraud case, stated to the Judge at his plea hearing,” I was incentivized to do this.” In the Enron case, Executive Stock Options Plans (ESOP) intended to 'maximize shareholder wealth," in fact motivated employees to create the massive accounting fraud. In the Wells Fargo scandal, CEO Tim Sloan stated, “we had an incentive plan in our retail banking group that drove inappropriate behavior,” leading thousands of employees to cheat.

Management nonchalance towards ethics: Many investment firms use expert networks to legitimize the use of inside information for stock trading. Such cues lead analysts at these firms to breach securities laws. In one of the largest accounting scandals - MCI-WorldCom management gave the directive to its accountants, “make the debt go away.” Thus, the employees proceeded to cook the books. Each year, Siemens management used sophisticated accounting methods to organize $20 to $50 million as bribe payments. A spokesperson for the criminal investigation expressed, “bribery was Siemens’s business model.” In the Volkswagen (VW) emission scandal, management orchestrated the creation of a “defeat device” that was installed in numerous VW automobiles for many years, to evade the emission standards.

Unethical behavior perceived as harmless: Many stock traders engaged in insider trading view it as a victimless crime (which is not true!). An insider trader does not see who is being cheated. Salespeople bribing their clients feel they are doing their job by putting the deal together, while not harming anyone. Many individuals committing accounting fraud start with the justification “it is a one-time event.” Many embezzlers think, “I am taking a loan and will put the money back,” causing no long-term harm.

Aggressive goals without goalposts: Aggressive goals are the hallmarks of a merit-based culture. However, “do what it takes,” management directives to achieve aggressive goals open the possibility of unethical tactics. Company management tends to delegate ambiguous directives to others in their organization and turn a willfully blind eye to consequent questionable/unethical behaviors. Wells Fargo management set aggressive new account quota goals leading employees to create millions of fake accounts. At Volkswagen, employees were afraid to admit that VW automobiles could not meet the emission standards and hence decided to cheat. Theranos, the unicorn medical-technology startup infamously manipulated and inflated the capabilities of its blood testing devices. Another unicorn startup, Uber, instead of working with the regulators to get operating licenses in new cities, created a tool called “Greyball” that helped it evade local regulations.

The goals need to be delineated with clear boundaries that define what is not allowed.

Moral Hazard: When others bear the downside, risk takers have incentives to undertake riskier decisions. Comprehensive health insurance creates an incentive for doctors to overprescribe medical procedures. Personal property insurance policies can create incentives to file false claims. The government bailouts of the financial institutions encourage excessive risk-taking. In corporate cases, prosecutors are increasingly offering Deferred Prosecution Agreements (DPA)s, which usually entail executive immunity. Companies pay huge fines and are buying “get-out-of- jail-free cards” for the executives and employees. Management at these companies chooses to overlook misbehaviors because they garner only the upside from this coordinated cheating and face no downside or personal repercussions.

Disregard for the law and a false belief that everyone misbehaves: Many executives disagree with the existing securities laws, the federal bribery laws, or the doping prohibition rules in sports. Many finances professionals state, “show me the victim or the law is stupid.” Sports doping is systematically supported by the coaches and the training environments. The “group think” mentality encourages these misbehaviors and downplays the harsh consequences.

Disagreement with the law does not exculpate the misbehaviors from criminal consequences.

Hubris due to success: Hubris can lead to a feeling of invincibility and magnify the effects of decision-making biases. One starts to think that laws do not apply which can lead to dubious and even criminal behaviors. These attitudes can create and foster a culture of “tolerance for breaking the rules.”

Motivated Blindness: Failure to acknowledge unethical behavior to avoid consequential self- harm. Paid and retained accounting firms with oversight responsibilities of client company financial statements have an incentive to overlook accounting transgressions. Rating agencies such as Moody’s, S&P, etc., who rate financial instruments as paid services, also have a perverse incentive to bias their ratings favorably. A lenient stance in the direction of those who pay the bills can be responsible for unethical behaviors in many such quid pro quo domains.

Pilfering public or private entities: Stealing from a large company or government can be alluring. There is a big pile of cash to steal from and no guilt of hurting “a person.” According to the Centers for Medicare and Medicaid Services (CMS), national health spending is projected to have reached nearly $3.5 trillion in 2017. That is a lot of money and opportunities to misappropriate! Doctors, pharmacists, and patients at times conspire to defraud the system. Examples of frauds include billing for services not rendered, overutilization of services, kickbacks, over-prescription of addictive drugs and colluding with pharmaceutical companies. Military contracts are also rife with kickbacks, overpricing and waste. Non-governmental and aid organizations are also ripe grounds for global misappropriations and mismanagement of funds.

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White collar criminals are physically distant from their victims. Many times, such victims are shapeless and amorphous. Hence the human instinct of “visceral guilt” which guards against causing harm to others never kicks in. Nonetheless, the damage white collar criminals cause to the society can be massive. Such perpetrators are smart, in the position of power, and know how to avoid getting caught. They are driven by greed, invincibility, and a desire to win at all costs.

Many would never think of shoplifting or engaging in petty crimes. But would the voice of conscience be ignored, if the opportunity for a hugely profitable fraud comes along? Especially if the expected probability of getting caught is minimal. There always is a price!

Roomy Khan

Roomy Khan

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I have over 20 years of professional experience with technology industry and hedge fund industry on Wall Street. I was intimately involved in the Galleon Group insider… Read More

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Oct 15, 2021,06:15pm EDT

How To Refresh Your Home For Fall, According To A Luxury Hotel Designer

Forbes Vetted

Jane SungForbes Staff

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Fall tends to bring about changes big and small, from transitions in the weather and the anticipation of holidays to wardrobe shifts and a growing preference for pumpkin spiced everything. And there’s nothing like the turn of seasons to make you want to hunker down at home—and maybe along with that, spruce up your space.

While interior design isn’t generally about fast-moving trends, there tend to be shifts toward certain styles and aesthetics based on the season and general mood of our lives and the world around us. Interior designer Tara Bernerd, who runs her eponymous interior architecture studio and is known for meticulously designing the spaces of cool hotels, houses and yachts would

agree. “I’ve never really believed in trends, which, by their nature can be so transient, and instead I revere those designs that stand the test of time,” she says. “Having said this, I sense that without a doubt, interiors matter now more than ever before. The consequences of what we have been through over the past year and a half have put a real emphasis on our homes and our interior environment.”

Classic interior design: living room

Greenery, sculptural pieces, artfully styled accessories, and midcentury modern furniture make for a ... [+] CRATE & BARREL

Most recently, Bernerd designed the interiors of the newly opened Thompson Hollywood hotel, mixing the old school glamour of the neighborhood’s history with contemporary touches, rich textures, and midcentury accent pieces. She finds inspiration in a vibrant array of sources that range from various eras to locales in vastly different time zones. “My influences come from architecture, film and indeed sometimes fashion,” she says. “The early palettes of Yves St. Laurent, the Bauhaus movement and mid-century furniture design are all constant sources of inspiration, as well as an intrigue in design emanating from Scandinavia and Brazil.”

We asked Bernerd to share her favorite interior design themes for creating a warm, inviting space this season. From textured accessories and splashes of color to sculptural shapes and verdant accents, here are the best furniture styles and decor items for a timelessly designed home.

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Dashes Of Bold Color

Neutrals are nice, but there’s nothing like additions of color to inject some personality into a room. “I think we will see the use of color re-emerging and perhaps in a bold manner, which brings a real confidence to a room or a space,” says Bernerd. “[I’m] drawn to blocky, stronger colors that are somewhat monogamous to that color, so for example we may use a different shade of green and different textures, rather than going for a more rainbow inspired palette.”

A Timeless Accent Chair

Classic interior design: West Elm chair

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West Elm Mid-Century Show Wood Chair

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Available in myriad colors, fabrics and wood finishes, this accent chair provides a great way to add a dose of color to an otherwise muted living room.

Added Texture For Visual Interest

Classic interior design: Cognac 20″ Washed Cotton Velvet Pillow Cover + Reviews

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“When using blocky colors, vary the shade of your chosen color and bring in different textures, mixing tweeds with velvets, linens with corduroy,” says Bernerd. Along with a fall-worthy hue, the subtle flange and soft velvet provide added texture to this copper-hued pillow. Pair it with similar colored pillows in different fabrics (as pictured above) for some layering oomph.

Monogamous Colorblocking

Classic interior design: Anthropologie rug

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Anthropologie Handwoven Meryem Rug

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Besides adding depth and dimension to your space, this handwoven wool rug is just plain cozy— perfect for the cooler season.

Midcentury Styles As A Timeless Classic

“I have a passion for the midcentury because of its character and personality,” says Bernerd. “This can also be found in looking for interesting shapes or organic structure...in the form of furniture, such as over-scaled, chunky tufting.” She recommends finding vintage pieces and making them your own by re-covering the cushions or adding new varnish to a credenza, but there are also plenty of unique pieces to be found whether new or pre-loved.

Chunky Tufting

Classic interior design: Alexis 89″ Fabric Sofa, Blanc Boucle

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The exaggerated tufting on this couch makes it that much more inviting, along with the on-trend cozy bouclé fabric (that happens to hold up nicely despite how delicate it looks). Plus, the included pillows add a fun, youthful touch to balance out the elevated look.

Architectural Planters

Classic interior design: Bendo Mini Plant Stand

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Bendo Shrub Mini Plant Stand

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It’s never not a good idea to bring greenery indoors. “Planters, so typical of mid-century design, bring the feeling of arriving in a very glamorous oasis in the heart of the city,” says Bernerd.

Industrial Edge

Classic interior design: Sculptural Gear Side Table

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Norr11 Sculptural Gear Side Table

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Besides being a total statement piece, this industrial-inspired side table helps ground the look of even the most whimsical living room.

Statement Pieces On Display

Whether you’re a minimalist or collector, personal accents help make a home feel, well, like home. “For me, good design is all about layers and one of these important final layers is dressing the space,” says Bernerd. “[You can do this] by curating and displaying your favorite objects on your bookcase, credenza or coffee table.”

Everyday Shapes Made Larger Than Life

Classic interior design: Lulu and Georgia Sin Overhand Knot

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Just as you’d do with clothing for fall, thoughtful layering is key for sophisticated home design. “The key to dressing a bookcase is all about the mix of objects,” says Bernerd. “I like to mix books with vases, photo frames and bowls, or other objet d’art. Group the books together, three or four at a time, laying larger books flat on the shelf.”

Gold Accents In Various Sizes

Classic interior design: Tom Dixon bowls

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“This is your moment to have fun and show off your most cherished pieces,” says Bernerd. Available in a set of five for endless tabletop mixing and matching options, these gilded bowls are like jewelry for your bookcase.

Colored Glass For Dressing Up Flowers

Classic interior design: LSA vase

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LSA Rotunda Vase

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The elegant shape and hue of this mouth-blown vase makes it worthy of a spot on your shelf, whether filled with flowers or not.

Terrazzo Touches For An Industrial-Chic Aesthetic

“With our love of industrial finishes, terrazzo is something of a design theme that has been used in various forms throughout the hotel,” says Bernerd. “[It gives] the space a true sense of laid- back luxury.” Fortunately, you don’t need to renovate to incorporate this eye-catching material into your home—add it via lighting, furniture, and accessories to juxtapose against softer, more feminine pieces.

Fun Yet Functional Lighting

Classic interior design: Contemporary Table Lamp '8' in White Terrazzo

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Bentu Design Contemporary Table Lamp '8'

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The slightly enlarged terrazzo pattern gives this lamp an artful vibe that comes across whether with the soft, ambient lighting turned on or left off.

A Versatile Table

Classic interior design: Terrazzo Indoor/Outdoor Bistro Table

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Anthropologie Terrazzo Indoor/Outdoor Bistro Table

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Organically speckled verrazzo is by nature very sturdy, so it makes sense that in furniture form it works just as easily both indoors and out, like this version from Anthropologie.

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Jane Sung

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May 19, 2020,03:42pm EDT|28,836 views

MoneyStamps Of South America - As Investments, They’re Different – Part 1

Richard Lehmann

Richard LehmannContributor

Investing

Richard Lehmann blogs on Income Investing and Philately

The stamps of South American countries have been of interest to me because of their huge potential for appreciation. Unlike most third world countries, the countries in the region gained their independence from Spain before the invention of postage stamps. Stamp issuance was mainly in locally printed stamps used for internal communications in countries with limited interaction with the outside world and low literacy rates. This is unlike most other third world countries which became colonies of European powers who sent people into their colonies to govern, develop industry, infrastructure, and trade. They printed stamps in Europe mainly for use in trade and to satisfy home country collectors. The difference is that stamp print quantities are smaller and surviving quantities smaller still given a lack of collector interest. As MoneyStamps, these countries are a treasure trove of current and future investment picks.

Having traveled extensively in the region for a decade while also being a collector, I can attest to the paucity of dealers in even the largest cities. Things have changed in the last two decades as prosperity and middle-class population growth has given rise to more collector interest locally. With the rise of the Internet, this rise in collector interest is being met, albeit in an inconsistent way.

The lack of locally produced Spanish language catalogs has been an obstacle and country supplements by Scott have not been forthcoming even in digital format. The regionally produced catalogs I acquired in my travels are from Argentina, Brazil, Colombia, Uruguay, and Venezuela. They serve to identify varieties of stamps not recognized by any of the global catalog companies. Numerous studies have been published privately covering the various nations, but these do not attempt to price the items. In fact, pricing is a major issue since the catalogs I cited are many years out of date on pricing since currency stability is unknown in the region. They do however provide a guide to varieties not covered elsewhere. Note that there is a Michel catalog for South America, and it comes in two volumes at a cost of $160 each, but it is three years old and out of print. Stanley Gibbons offers regional catalogs for something as finite as the Falkland or the Leeward Islands but has apparently not published a South American catalog since 1989.

In this and future articles I will address just why these countries offer the best opportunities for investors to purchase MoneyStamps at price levels well below the price profiles for other more widely collected countries. The country that stands out most clearly is Colombia. It was, by far, the most prolific issuer of stamps at the national, state, and private level. From its first stamps in 1863 until 1940 it produced over 600 different stamps at the national level, over 400 by regional states and over 300 stamps by the private air carrier Sociedad Colombo-Alemana de Transportes Aereos (SCADTA) which operated for a brief period in the 1920’s. I think only the USA and Russia issued more stamps in this time period.

Regarding the Moneystamps for Colombia, they have 1079 mint or used issues which qualify with 611 rated MSR 5 to MSR10. Below is a selection of these stamps.

The MoneyStamp ratings are assigned based on weighing the various factors and then measured on a scale of one to ten with the designation MSR 1 to MSR10. Stamps rated MSR 1 to MSR 4 are issues which meet the value and time criteria to be considered for investment purposes but have so far demonstrated low appreciation rates or lack other attributes that would point to above average future performance. They are however judged likely to hold their value going forward or they would not be rated at all. Stamps rated from MSR 5 to MSR10 are those judged likely to appreciate at greater than the rate of inflation.