Justin Paperny, former fraudster turned author, speaker and consultant, has the inside perspective on what makes white collar criminals commit their crimes. And he feels that greed isn’t the main reason. In fact, he thinks that greed is overplayed and that criminals commit crimes for much more complicated reasons.

“I’ve come across those from all types, from the most ambitious to lazy, to introverts to extraverts,” he says. “If you feel mistreated, if you’re out for vengeance…  if you’re not feeling appreciated, you will find a creative way to get even.” That’s the rationalization element of the fraud triangle and it’s one factor that Paperny felt was present when he embarked on a life of crime.

Fraud Triangle

The fraud triangle theory, developed by Donald Cressey, a criminologist whose research focused on embezzlers, says that ordinary people commit fraud when the following three elements coexist:

• Opportunity
• Pressure
• Rationalization

Paperny says that not only did these three factors contribute to his decisions to commit fraud, but they are also common among the white collar criminals he consults.

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Opportunity

The element of opportunity is the one that employers have the most control over. Opportunity can be reduced through:

• Random audits
• Separation of duties
• Forced vacations
• Rotating duties

But these anti-fraud measures weren’t in place where Paperny started committing his first crimes.

“I took matters into my own hands by taking commissions to which I wasn’t entitled,” he says. “So a client would call in to execute a trade, I was only entitled to 25 per cent of the commission. I found a way to take 100 per cent of the commission.”

Pressure

“And as a young stockbroker I worked hard, and I succeeded, and I made more money than most of my peers,” says Paperny. “But I looked around that office and saw guys making more, women making more… I didn’t factor in that they could be 20 years ahead of me. I wanted to get there quicker. That factored into my decision-making, the inability to delay the process and very hard work.”

Paperny felt pressure. He felt a strong desire to advance more quickly and for the recognition of a privileged position. The desire to be recognized, to be seen as successful, is part of the pressure element of the fraud triangle.

Employers who are watching out for fraud would be well advised to look for status symbols and a strong desire for recognition among employees. That new Porsche in the parking lot may be a sign.

Rationalization

One common characteristic that Paperny has found among fraudsters has been a desire to get even for whatever may be frustrating them. “I have represented clients who worked for a decade without a raise… felt that they were responsible for the growth of the company and the owner wouldn’t give them a large share, wouldn’t promote them…. good people, honest people for much of their career, yet [because they were] not being recognized, they cheated,” he says.

Paperny also examines his own rationalization. “I convinced myself I was in a world full of sharks who were only out for themselves... I reasoned that to succeed you act like others act and you behave like others behave, which is aggressive, pressurized tactics, advancement. Those were the brokers who got rewarded, the bigger office, got paid the most,” he says.

Every white collar criminal rationalizes that it’s the culture, or it’s grey, or everybody’s doing it,” says Paperny. “And I fell victim to that.”