THE MORAL AMBIGUITY OF FRAUD 1

The Moral Ambiguity of Fraud:

Devin Kelly

Neumann University

Program

Masters of Accounting w/ an Emphasis on Fraud & Forensics

Dr. Jannet Massey, Department of Business, Neumann University

1 Neumann Drive, Aston, PA 19014

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Abstract

The purpose of this study is to provide an in depth analysis into the reasoning behind fraudulent

crimes and why they occur. Many textbooks and courses only offer the basic information

regarding white collar crimes and why a person or group decides to carry out the criminal act.

Most notably, the fraud triangle. So in order to break the mold in a sense, research was gathered

with the intent to provide a different, more elaborate explanation for these crimes. Criminal

psychology, human nature, and ethics and morals in terms of business were all researched to

gather pertinent material regarding the subject matter. Rather than retread old territory, this

paper will try to give conductive distinguishments and a complex perspective as to why people

may be motivated to desert a lifetime of ethical and moral learnings in order to obtain a few

dollars more.
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Introduction

Unlike most other crimes, fraud always tends to be the most complex in its execution.

Whether or not the perpetrator is an intelligent individual usually does not matter. Most cases

involve people being in the correct positions at the right time. In addition to being a multifaceted

crime, there are a plethora of ways that a criminal can execute an act of that nature. Financial

statement manipulation, pyramid schemes, insider trading, bribery, extortion, money laundering,

and identity theft are just a few of the countless fraud related wrongdoings that occur on a daily

basis around the world. However, despite being such an involved crime, the explanation as to

why these things happen is very basic at least to those who have an understanding of accounting

or the business world in general. Obviously as learned throughout countless classes and courses,

the fraud triangle encapsulates most of the elements that come into play in regards to fraud.

There needs to be an opportunity presented, pressure for the decision to be made, and finally a

period of reasoning or rationalization before carrying out the act. Most if not all fraud cases

could be boiled down to that paradigm and/or model. Again, that seems to be basic reasoning as

to why these white collar crimes occur in the first place. Aside from general knowledge,

research and deeper studies into the deduction and rationalization behind financial crimes is

extremely scarce to the point it is almost non-existent. Why do people seemingly abandon their

moral and ethical learnings throughout a lifetime of experience just for the sake of monetary

gain? This question is one that needs answering for not only future fraud investigators but for

any person affected by business activities. With that being said, this paper will give an in depth

analysis of the elements of fraud, the moral implications involved with committing fraud and

what causes people to do so.

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The Fraud Triangle

Despite stereotypes played out in the many forms of media available in today’s society,

fraud is a crime that does not discriminate. Much like the grandeur and lure of El Dorado (the

ancient city of gold), many people of all shapes, sizes, creeds, and age are enticed by the

possibilities that this crime can offer. So long as the dirty deed goes unseen. As research shows,

fraud perpetrators usually cannot be distinguished from other people on the basis of demographic

or psychological characteristics (Albrecht, Albrecht, Albrecht, & Zimbelman, 2012). More often

than not, white collar crime offenders are just like the rest of the working class. Honest,

educated, and morally driven people who want to excel at their trade or craft. Obviously there

are exceptions to this perception just as any other however, those seem to be very few and far

between. Since there is commonality among these criminals, it is near impossible to anticipate

which type of person will eventually become dishonest likely leading to fraud (Albrecht et al.,

2012). When that dishonesty is discovered, many are shocked to find out that a person whom

they thought abided by the ethical standards of the company betrayed that trust. Despite being

surprised, internal personnel accounts for almost 80 percent of an organization’s fraud losses

(Boyle, Boyle, & Mahoney, 2015).

Adding upon the frustration of having trust betrayed within the organization, fraud is

never just a one time and done type of incident. In fact, it is quite the opposite. White collar

criminals are often likely to be repeat offenders (Perri, 2011). Most people believe that a first

time lawbreaker has only done so once. That could not be farther from the truth, especially in

regards to fraud. Many financial crimes are a result of months of scheming and are not the result

of one particular fraud on one specific day which goes unnoticed for a substantial amount of time
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(Perri, 2011). This results in damages that severely cripples the entity causing a ripple effect in

the economy (either local or perhaps bigger). The age old story of the Enron collapse perfectly

captures the sentiments of continuous offenses and it’s after effects. For months, and even years,

company officials were cooking the books shifting debt around to shell organizations to make

Enron look strong for potential investors (Levi, 2011). In order for a fraud of this scale to

happen it could not only happen just once. By continually manipulating financial information,

Enron effectively quarried their way to an endless grave in which there was no escape.

Consequences for these actions led thousands of employees without any retirement plans or

work, investors lost everything they had put into the company, and the national economy was

dealt an austere setback (Levi, 2011).

In an attempt to explain and quantify these crimes, Donald Cressey, a world renowned

criminologist, created the Fraud Triangle (see Appendix A). A basic, easy to follow diagram that

covers the three main elements of any fraud case. A perceived pressure, rationalization, and an

opportunity. Just as the term suggests, perceived pressure would be any situation in which a

person needs to (in his or her mind) commit fraud (Albrecht et al., 2012). More often than not it

is a constraining influence on an individual’s mind that causes the incident. For example, many

times excuses such as “I have a family to feed. I do not have a choice” are used. That being

said, the opportunity to commit fraud is seemingly ever present for financial managers no matter

the position or state of power of an employee (Boyle et al., 2015). It is a situation where in a

person believes there is a favorable combination of circumstances to commit fraud and not be

detected (Albrecht et al., 2012). With situations of white collar crimes, most of the time it is

people being at the right place, at the right time, and the knowledge of how the company systems
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work. Devoid of having that knowledge, a perpetrator probably would not be able to pull off

such a heist. Arguably the most important part of the triangle would be rationalization. A list

the size Gibraltar could be made and it still would not encompass every reason that has been

made as to why the crime has happened. Generally speaking, rationalization is when a person

devises self-satisfying but incorrect reasons for his or her behavior (Albrecht et al., 2012).

Unlike the other elements of the triangle, rationalization cannot be controlled, measured, or

standardized. Involving the ability to throw away the moral and ethical rule book simply is not

measurable on any standard (Boyle et al., 2015). There may be ways to teach people to know

when rationalization becomes a fretting issue, but human nature is simply unpredictable. As

previously stated, every person has the ability to execute a fraudulent act. As Boyle et al. (2015)

asserts, the sooner people understand that fraudsters are not typically black cloaked villains

petting a cat whilst watching from a monitor inside a secret underground volcano lair, the easier

it will be to combat this crime.

Analysis of the Fraud Triangle

Ever since the creation of Cressey’s analysis, many professionals from every crevice of

the world have used the triangle to explain various cases. In its almost 50 year existence, there

seems to be no other model that captures the essence of fraud. Could it really be that simple?

Would trying to find something else just over complicate an already winning formula that has

helped countless business and organizations? The old adage of “if it isn’t broke why fix it?”

seems to hold true when it comes to the fraud triangle. However, all because something is not

broke does not mean that improvements cannot be made. Especially with the huge

advancements that the crime of fraud has made in those nearly 50 years. But, just like the
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differences of people committing this crime, variations and additions to the fraud triangle seem

to be quite small in numbers. Perhaps the sentiments regarding the model hold true.

According to economics professors Novita Puspasari and Eko Suwardi (2016), the only

thing that further studying the elements of fraud have done is reinforce Cressey’s work. Fraud in

its essence, when broken down to the core of the matter, is consistent of the three elements of

pressure, opportunity, and rationalization. Each element is unique to each case and to the person

behind the crime but, the varying stories do not change the foundation of fraud in any way shape

or form (Puspasari & Suwardi, 2016). The only variable in the situation of fraud would be

someone’s moral conditioning. A violation of ethics and/or morals, honesty, and responsibility

is at the core of fraud. Ethical problems caused by rationalizations, and with some expansion,

the pressure factor, are associated with fraud by looking at those who perform the crime

(Puspasari & Suwardi, 2016). Predicting and trying to quantify human nature and an

individual’s morality is just unfathomable. Puspasari and Suwardi (2016), use Lawrence

Kohlberg’s stages of moral development as a method of trying to determine a person’s aptitude

to commit fraud; pre-conventional, conventional, and post conventional morality. However even

in that theory there is not one solid answer let alone a summarization of how a crime of that

nature would play from an ethical standpoint. Even Kohlberg stated that each person is prone to

their own way of thinking when it comes to doing the “right thing” (Puspasari & Suwardi, 2016).

Having said that, the theory of a varying moral degree circles right back to the fraud triangle in

terms of rationalization, being the element of white collar crime where a perpetrator’s moral

justifications come into play.

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Professors Gregory M. Trompeter, Tina D. Carpenter, Naman Desai, Keith L. Jones, and

Richard A. Riley, Jr. take the fraud triangle and expand upon the elements already presented by

Cressey. The one added element would be that of incentives. Although SAS No. 99. 99/AU

Section 316 and the fraud triangle refer to pressure and incentive as interchangeable, the blurred

lines between the two leaves a vast grey area to be explored (Trompeter, Carpenter, Desai, Jones,

& Riley Jr., 2013). Just taken at base value, pressure by definition is the feeling of stressful

urgency caused by the necessity of doing or achieving something, especially with limited time.

Incentive on the other hand is a thing that motivates or encourages one to do something. On one

hand, pressure in itself could be taken as an incentive but incentive does not have to be taken as

pressure, rather it could have no relation to pressure at all in some circumstances (Trompeter et

al., 2013). For example, in a large amount of cases, greed is a huge factor of fraud which lies

more in the realm of incentive than pressure. Wanting something for the sake of just having it,

like money or a bigger home, like most fraudsters does not indicate any real sort of pressure

other than on themselves to get what they want. Pressure in terms of fraud would be more along

the lines of a scenario where an individual is forced into an unfavorable predicament from an

external influence (Trompeter et al., 2013). According to the authors, this area expands the

fraudster’s perception of the environment and leaves a great deal of discussion open in terms of

delegating the reason as to why people go down this road (Trompeter et al., 2013).

Falling in line with the previous writers’ line of thinking, certified public accountant

David T. Wolfe and professor Dana R. Hermanson created the fraud diamond with the added

element of capacity (see Appendix B). In this sense, capacity is the personal traits and abilities

that play a major role in whether fraud will actually occur even in the presence of
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the other three elements (Wolfe & Hermanson, 2004). The capability of fraud entails two

aspects. Required traits and the necessary abilities. Supporting the theories of Wolfe and

Hermanson, authors Don Rabon and Tanya Chapman suggest (2010), abilities and traits are not

mutually exclusive, they must be working in tandem in order for the individual to go through

with the crime alongside the other elements. More often than not, the traits of fraudsters are

those consumed by greed and wanting more, a weakness of character in the moment

(moral/ethical integrity), excessive pride and unbridled ego, and dishonesty (Wolfe &

Hermanson, 2004). The abilities these people need to carry out the crime are a knowledge of

business of operations and culture, and the control systems (Wolfe & Hermanson, 2004). Being

able to get away with fraud is almost like maneuvering the body to get past a laser security

system. Without knowledge of where those lasers are, it would be nearly impossible to pull off

the job. Supporting the general hypothesis of capability would be the “10-80-10” rule. This rule

states that 10 percent of the population would never commit fraud, 80 percent of the population

is toying with the idea of fraud if the other elements are in place, and 10 percent of the

population seek ways to outsmart the system businesses have in place to prevent incidents

(Rabon & Chapman, 2010).

Over the years since Wolfe and Hermanson created the fraud diamond, many

professionals and scholars have adopted it as the new model for the elements of fraud. Doctor

Thanasak Ruankaew (2016) argues that although perceived pressure might exist along with an

opportunity and a rationalization to commit fraud, the crime is less likely to take place unless the

element of capacity is there. Aside from the other three elements, a fraudster must have the skill

and ability to actually pull of the crime (Ruankaew, 2016). All white collar crimes occur
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because the person executing the act has the particular position that will give him or her the

authoritative power to manipulate the company system just enough to carry out the intended

deed. Having this intelligence of the accounting system and weakness in internal controls opens

up a small window for ethical procedures and practices to be thrown out. In those moments,

before and after the crime has happened, the person must have the capability to deal with the

stress due to the risk of being caught and manage the fraud over a long period of time

(Ruankaew, 2016). This includes knowingly accepting the consequences of the actions. Meeting

the challenge of doing the right thing is paramount in times of stress and difficult life moments.

Having the capability to commit fraud gives a person the ability to bypass this ethical and/or

moral conditioning. As Ruankaew asserts, “Opportunity opens the doorway to fraud, and

incentive and rationalization can draw the person toward it. However, the person also must have

the capability to recognize the open doorway as an opportunity and to take advantage of it”

(Ruankaew, 2016).

Taking the position of the fraud diamond further, a number of professionals and scholars

in the field of business have argued that the new model, not only be expanded, but should replace

the triangle all together. Basing all fraudulent behavior and analysis from an out of date model

does not seem like a beneficial decision for the longevity of business. Accountants Jack W.

Dorminey, Scott Fleming, and others have pointed out some of the flaws with Cressey’s original

model. Of these shortcomings is the fact that the triangle is mainly non-observable since most of

the elements are from the perspective of the criminal (Dorminey, Fleming, Kranacher, & Riley

Jr., 2011). A part of making the model more observable would be to relate to the fraudster in
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some way in order to understand the rationale behind the acts. Adding the element of capability

would open up a new avenue in terms of examination (Dorminey et al., 2011).

In addition, the other three elements of fraud are not without improvement. Pressure fails

to capture a complete picture of the fraudster’s motivations. Understanding pressure in a more

thorough manner would involve expanding upon the element by adding “M.I.C.E”; money,

ideology, coercion, and ego/entitlement (Dorminey et al., 2011). Once determined, the acronym

gives a better exploration into a possible offender’s financial status, belief system, moral

integrity, and motivations, all of which play huge roles in the overarching component of

pressure. According to Dorminey et al. (2011), opportunity does not address the collusive

behavior that can occur in positions of power within an organization. Management override is

something that happens all the time within business, for better or for worse not taking that into

account when considering opportunity would be dangerously ignorant. A way for the model to

tackle this issue would be to focus on the anti-fraud environment, such as culture, tone at the top,

and corporate governance, in addition to internal control systems (Dorminey et al., 2011).

Understanding collusive practices better prepares professionals for the challenges of

management override and abuse. Rationalization is also something that the authors claim to be

unobservable. A way to make this element of fraud more clear would be to add on to it via

integrity (Dorminey et al., 2011). Employee integrity is much more visible than rationalization.

In the classic case of show do not tell, integrity always shows. Observing an individual’s

decision making process gives a clear picture as to the attitude a person has which in turn shows

the potential fraudulent behavior (Dorminey et al., 2011). Sticking to only one way of viewing a
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subject stifles a person’s ability to learn anything. Not updating an old way of thinking as time

goes by is incredibly naïve and dangerous, especially in the field of business.

Various Methods of Perspective

Upon reviewing the relative information provided by the sources, all of the opinions have

come from either scholars or accountants working in the public field of business. Fraud is a

topic that is taught to every single accounting student regardless of which college or university

one decides to go to. However, learning something from a course and experiencing it first-hand

are two completely different things. As credible as those individuals are, none are from or have

a criminal investigatory background. Having dealt with and been personally involved in

economic criminal cases gives an invaluable viewpoint in terms of the elements of fraud and

how they are in play when the offence takes place. In order to better understand this topic from

another angle, two professionals were interviewed, both working in the Economic Crimes Unit

for the Criminal Investigation Division of Delaware County, Pennsylvania.

Detective Michelle Deery

Detective Deery has been working in law enforcement for 22 years, graduating the police

academy in 1996. Shortly thereafter, she was awarded the rank of detective. A graduate of West

Chester University, the detective majored in criminal justice while taking paralegal courses

having considered going to law school upon receiving her undergraduate degree. Once getting

hired by the County of Delaware District Attorney’s office, Detective Deery worked within the

Child Crimes Unit for 12 years. Handling the horrific situations of child crimes and abuse left an

emotional impact. Wanting a necessary change of scenery, she requested a transfer to the

Economic Crimes Unit where she has worked for 8 years.

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In those 8 years, she has seen almost every fraudulent crime imaginable. Whether it was

theft, extortion, conspiracy, or any other fraud for that matter she has most likely dealt with it in

some way. Each case is unique to its own story, but the underlying methodology remains the

same. Over time, certain cases seem to stand out for various reasons. The two Detective Deery

mentioned standout for very specific reasons. One due to the fact the defendant could have cared

less about the damage that was done while the other showed complete remorse for his decisions.

The first case involved a county fire department that was in financial shambles. Quite

literally a small look into the bank statements of the organization and the entire place would have

collapsed like a Jenga tower. Some of the fireman contacted Detective Deery with complaints

that the pecuniary state of the department was not well and they believed it was due to someone

manipulating records. Upon looking into the complaint, the detective found that there was no

real oversight or internal control procedures in terms of the money being used by the department.

That gave way for one of the fireman and his wife to freely exchange money from the company’s

account into personal credit card accounts promptly labeled as “supplier” in the department’s

books. It was a cash back scheme. Unfortunately, since there were no real checks and balances

this went on for a longer period of time. Once the two were caught, there was no empathy for

what they did. As a part of rationalizing the theft, it was almost as the two accepted what was

going to happen without even thinking about the ramifications it would have on the entire

department.

On the opposite end of the spectrum, a local township tax collector decided to do some

day trading with tax money. The older man took a portion of the real estate, school, and sewage

taxes in hopes to double the money so he could make something on the side, put the stolen
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amount back, and no one would be the wiser. However, that is not how it worked out as the man

kept loosing from the trades made. He set up different accounts from various banks and would

transfer the tax money over into the account. Once he was arrested, the man was mortified. For

30 years he was known to be an honest, straight shooter individual from all of those that knew

him. Like many before him, the elder man was victim to financial pressure. Shortly before this

happened his wife died leaving behind a gargantuan debt that practically drained his monetary

worth. All he wanted to do was to leave something for his children. Two cases. Similar in

execution. Different in justifications. Why?

According to Detective Deery, fraud never starts out with the intention of getting rich.

It’s just a little here and there until the fraudster realizes that he or she is in a deep hole. Never

has she encountered a case where the intention was to get rich then bounce off the map so to

speak. That, in most cases, seems highly unrealistic. More often than not these cases involve an

employee of a company or maybe a subcontractor who is in a position making financial

manipulation readily available if that person ever decides to carry through with the act. Also, she

notes that many cases she has had involve the person being an educated person living middle to

upper class coming from a good family. Rags to riches in fraud is not something that she or

colleagues have seen yet.

In terms of why these things happen, that is something she believes is entirely unique to

the person. Each person has a story and moral conditioning. As stated previously, she attests to

the fact that human nature is unpredictable. However, when the crime is in motion, those ethical

and moral codes learned over a lifetime are thrown to the way side. The only morals that are

considered is when the criminal is justifying his actions for breaking the law. A situation that
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holds true for all crime not just fraud. Not until the person is caught are the ethical and moral

values brought back into the picture. The lying goes on for so long that the defendant believes it

which causes a dissonance between themselves and reality. Some fraudsters want to try and fix

the mistakes to the best of their abilities realizing the actual implications of what was done.

However, some show no shame in what was done. They could care less as long as they got what

they needed despite being put behind bars. Humans themselves are very ambiguous in terms of

why these crimes happen. Obviously in today’s society, technology makes things easier to

access and creating more opportunities in economic crime.

Once considering all of the factors in the cases she has worked, Detective Deery does

believe that the fraud triangle encapsulates the elements of fraud. Again, she stated that each

person is different but when breaking down the primary elements involved in the cases, the three

Cressey created hold true. Taking the tax collector’s case for example, the detective points out

that his trading addiction and medical debt crushed his financial stability and ability to leave

some sort of inheritance for his children. Pressure arises. Being the tax collector, the man had all

of the access to accounts in which the money was being held. An opportunity peaks its head.

Despite what his conscious might have thought, he had to do this in order to pay off the debt and

provide something for his kids. Rationalization of the crime. As Detective Deery points out,

when put into an uncomfortable situation, fraud will become easier to justify.

Forensic Analyst Ed Lowitz

Before working for the Criminal Investigation Division as a forensic analyst, Ed Lowitz

was a special agent at the IRS for 25 years (Internal Revenue Service). Lowitz attended La Salle

University where he majored in accounting then went on to receive his M.B.A. in finance. Upon
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graduation, Lowitz went to the Federal Law Enforcement Training Center to become a Special

Agent for the IRS. While working for the federal agency, he earned multiple certifications in

computer diagnostics and forensics. As regulations would have it, federal law enforcement has a

mandatory retirement statute of 25 years of service. Following his career with the IRS, Lowitz

took the position of forensic analyst with the Criminal Investigation Division of Delaware

County where he has been for the better part of 4 years.

Having been part of law enforcement for almost 30 years, Lowitz has been around in

terms of seeing all of the aspects of white collar crime. Whether it was tax evasion and/or

manipulation, or it was a family member stealing money from a relative, he has seen plenty of

bad deeds in the financial world. All of which are compounded by the fact that the core elements

of these crimes remains the same. Reinforcing what Detective Deery had stated, Lowitz believes

that each case is sole in its intent almost to the point of being called inimitable. Nothing new

arises from the conclusions that are reached at the end of the case other than the same revelation

countless investigators have discovered before; greed.

Using the context of a case to prove a point but in reverse, Lowitz specifically remembers

an elder fraud where greed almost got an innocent individual put in jail. A daughter of a man

lived outside of the country while he was in a nursing home living out the rest of his days. No

other family was around to care for him as his wife had passed away some time prior while the

daughter left the country for work. While in the nursing home, this man grew attached to a

nurse. Every day the two spent time together. The nurse became like family to the man as no

one else would ever care to come visit. Unfortunately the man passed away but in his wake he

left most of his monetary wealth to the nurse. Having found this out, the daughter flew back to
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the country in an attempt to press charges against the nurse for emotional coercion. Rightfully

so, the nurse claimed to do no such thing other than create a friendship that lifted a man’s spirits

in a bittersweet time. After proper investigation, the nurse was thankfully not charged with any

crime other than seeing the true intent of people in today’s society; greed.

Throughout his years of service, Lowitz associates fraud to the equivalent of the healthy

options on a restaurant menu. Not as many ingredients are required to make this crime work so

long as the defendant has the right tools. With the advancement of technology making it easier

to gain access to sensitive information, more people would be motivated to use a computer to do

all the dirty work. As the forensic analyst clarifies, it is not a requirement of necessary skills in

terms of understanding business operations, principles, theories, and practices rather than being

at the right place at the right time. It more so comes down to the understanding of the business

operations and culture of a particular entity; specifically the one in which the culprit works or

commits the crime. Unlike most crimes that are highlighted on media, fraud at the smaller level

is about the opportunistic nature of a person letting their greediness overtake the moral compass.

If there is a gap in the internal control structure of a business there is a much higher chance of a

person manipulating that system for his or her own selfish needs. Compounded by the fact that

penalties are less severe than that of other crimes, it is almost as though the criminal justice

system is motivating those to lean towards fraud because most may just get a slap on the wrist

and some probation.

Taking all of these things into consideration, Lowitz contests that the main motivator

behind fraud is a very simple one. Greed. Human nature is something of a personal Rubik’s

cube. Every individual no matter their history builds their own world. But one thing that is
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consistent in all people is voraciousness to succeed from a financial standpoint. Some people do

it the honest way, others resort to more illicit tactics. It is that drive that creates the foundation

of fraud in Lowitz opinion. Now the motivator behind that greed can be very different

depending on the situation. On one spectrum a person could be down and out on their mortgage

payments or paying for the children’s education. Flip the coin and a person just wants more

materialistic things to possibly fulfill a desire to look better in public. Only after their initial goal

is complete will a person realize that he or she are in a very big whole with the potential

consequences that are eventually coming. It is all different just as Detective Deery stated.

However, when looking into most of his cases, Lowitz believes that being greedy is the spark

that lights the fire of fraud.

Building upon that foundation that Lowitz suggests, he also believes that Cressey’s

model offers a good portrayal of the elements of fraud. Nonetheless, the forensic analyst tends to

be more on the side of the fraud diamond when accurately describing the components of fraud.

Primarily because of that added element of capability. Just as Wolfe and Hermanson suggested,

there needs to be necessary traits present in order for financial crimes to come to fruition. It

would be fair to say that everyone is greedy to an extent but whether or not people let that take-

over is an individual choice. Fraudsters need to be able to throw away any redeeming qualities

about themselves in the moment such as integrity, responsibility, and reasonable thinking.

Perhaps as Lowitz implies, maybe since it is a non-physical crime people with those capabilities

are able to rationalize it. Stealing money is an activity ultimately non-effecting the human body

dissimilar to robbing a store or someone on the street. Additionally, just as the creators of the

diamond and Detective Deery theorized, in those instances when the crime is about to happen or
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occurring, any moral learnings or ethical viewings have to be skewed or completely ignored.

Performing an act such as that falls in line with Wolfe’s and Hermanson’s capability notion of

having the ability to do so. This idea is something that Lowitz agrees with wholeheartedly. In

his experience the ethical rule book most people carry with them is only present in the aftermath

of the crime when the perpetrator is caught. He thinks that most stick to their guns so to speak

despite the negative consequences. They find out the ride they are going on rather quickly then

accept it for better or worse. Every person has a pressure, opportunity, and a thinking pattern

that allows them the chance to commit fraud but it does take a certain individual with the

capabilities to go through it all the way until the jig is up. Despite Lowitz thinking people are

inherently good, there will always be those to test the boundaries of themselves causing adverse

circumstances.

Vice President Brent Whitig

Unfortunately, for every offense committed in the world of white collar crime there will

always be a victim. Rather than continue with the same perspective of a fraud investigator, it

would be beneficial to learn from the people who have been victimized as their viewpoint may

support the theories of the law enforcement professionals or skew in an entire different direction.

In order to better understand the topic from the angle of the victim, a company executive

graciously offered his time for an interview

Brent Whitig is the Vice President at the Aston, Pennsylvania branch of Iron Workers

Bank. Before embarking on his banking career, Whitig earned his bachelor’s degree in

economics followed by his M.B.A in the same subject. In addition, he also earned his masters of

science in information systems shortly after starting his profession. Whitig has worked at a few
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other companies before starting at Iron Workers Bank but that became his homestead within a

few years of earning his first master’s degree. For 20 years now he has been the Vice President

of the Aston branch carrying out the day to day operations and overseeing 35 employees.

Throughout his tenure with Iron Workers, Whitig has dealt with a good number of

fraudulent cases most of which he stated were small in terms of scope. A few customers tried to

scam the bank for extra money (whether it was on loans or check to cash schemes) and some

employees thought they were clever enough to maneuver around the rules of the organization to

put some extra money in their pockets. Nothing that was ever detrimental monetarily or even

reputation wise. However, one particular member of the staff changed that leaving an

everlasting impression that did drastically change the procedures and systematic culture of the

bank.

In September of 2014, one of the local branch managers was approached by an attorney

regarding the estate of one of their members. The member had passed away in July of that year

but transactions were still being made out of the account. Upon looking at the information under

the account, the manger found that an employee out of the Aston branch had switched her

address with that of the deceased woman. She contacted Whitig to inform him about the

situation. The Vice President then called the employee to have a meeting while the two were at

work. After hearing the news, and most likely knowing that the scheme has run its course, the

employee left the building and did not return. However, she did call a short time later confessing

to Whitig that she had stolen the money. Specifics of how much was taken and how long this

scam had been going on was left out of the conversation on her behalf. After a cooperative

investigation between Whitig’s staff and law enforcement, startling revelations were uncovered.
THE MORAL AMBIGUITY OF FRAUD 21

Over the course of 10 years, the fraudster had stolen an exponential amount of money from 8

other customers of the bank. All of which were elderly invididuals, some of which were also

deceased. Just as the first victim, the employee would change the information under the account

that way she would receive retirement, medical, or social security payments and be able to use

the money still left over. Approximately $375,000 was stolen over the 10 year period. Various

amounts from the multiple victims with no real pattern behind the theft. Fortunately for Iron

Workers, the one-time loss has since been fully recovered through insurance policies enacted and

reserves for situations such as this one. Each of the victims were also paid back interest in order

to recoup what had been stolen.

Having only hindsight in a situation like this, Whitig had to go back to find out how and

why this happened in order to prevent a potential catastrophic mistake from happening again. A

main contributor to the success of the operation was the fact that the former employee was a

master manipulator. On the surface she seemed to be this innocent soccer mom who got along

with everybody at the bank. She used her kindness like a puppeteer on those who thought she

was doing this out of genuine nature. As Whitig explained, whenever information is changed

under a person’s account, one of the teller’s must sign an exception form verifying that

everything is “kosher” so to speak. The fraudster would ask the teller to sign the form either

distracting them from reading the fine print or find another excuse that sounded official enough

not to question. Somehow, some way this charade carried on for 10 years. Unlike most cases,

she started off by taking a large amount of money from multiple accounts. Whitig noted that as

he learned throughout his time dealing with fraud on a first hand basis and education he was

expecting it to be the opposite. Just as many do with this type of crime, it starts of small and a
THE MORAL AMBIGUITY OF FRAUD 22

tumbleweed effect occurs growing uncontrollably larger. The Vice President tends to believe

that reality caught up with the perpetrator realizing what she was doing was wrong but not

enough to stop stealing completely.

In the aftermath of this scam, Whitig realized that the bank had to tighten up on its

internal controls and the processes that lead to the woman getting away with these crimes. The

accounting department of the bank has now taken a larger role in terms of watching over the

company’s financial status, account transitions, asset shifts, and other basic day to day

operations. For example, Whitig made it a point to make sure that any exception reports are now

not only signed off by the tellers but ultimately approved by the head of the accounting

department. Even then, upper management must now analyze these decisions, checking for

authenticity and verifying these deals with the matching parties. As taxing as the state of affairs

was, Whitig more so took it as a learning experience focusing on the positive outcomes which

were improving the company internally as well as maintaining the positive relationship with the

customers despite going through a highly worrisome set of circumstances.

Taking a step back from the technical aspects of the crime and how it occurred, Whitig

was not immediately sure why all of this happened. Not until the case had closed was he able to

fully process the information and events to form any type of conclusive judgment on the matter.

In his opinion, she was a prime example of a sociopath. Obviously it was a nonphysical crime

but to blatantly ignore the ramifications of those actions and in some way try to justify it was

something the Vice President could not comprehend. During the investigation she was highly

uncooperative even though she had admitted guilt in stealing some of the money. When Whitig

would sit in on interviews with law enforcement she would always have an excuse to validate her
THE MORAL AMBIGUITY OF FRAUD 23

choices but at the same time contradicting those notions saying she felt terrible. Perhaps there is

a middle of the road being torn on felling culpable and detached from negative consequences.

However, Whitig believes that she had no comprehension of what guilt could feel like.

Continuously telling lies and stealing $375,000 over a 10 years period seemingly eliminates any

moral conditioning that may have previously existed. It was as she acted from an amoral

standpoint. The offender’s actions were defined by a disbelief or suspension of any moral or

ethical principles preventing harmful events. Just as the previous professionals interviewed had

stated, sometimes the ethical “rulebook” comes back into play for the defendant after the fact,

but Whitig attests that this particular criminal never owned one.

Fraud is, as Whitig states, as simple or complicated as one wants it to be in terms of

explanation. Taking this case as an example, it could be broken down as a woman taking

advantage of others (both working for the bank and its customers) in order to get more money for

selfish reasons. That being the simple explanation. The Vice President at first considered the

fraud triangle to cover all the elements of the crime but after discussing the diamond model,

Whitig believes that paradigm would be a more accurate depiction in describing the components

of white collar crimes. A large part of that has to do with the added feature of capability.

Without that fraud really could not happen in the first place. As the man asserts, it takes a

certain kind of individual to carry out these immoral acts. More specifically aligning with the

view of Wolfe and Hermanson, personal traits and abilities play a major role in whether fraud

will actually occur even in the presence of the other three elements. Moving on from the simple

explanation that Whitig suggested, he began to piece together the model using the case as a

paragon. The outside pressure, he believes, was an abusive boyfriend who just so happened to
THE MORAL AMBIGUITY OF FRAUD 24

work at a bank. Again, this is speculation on Whitig’s behalf as none of this could be proven

with solid evidence. Since he was the one coercing her to do this, both physically and mentally,

the rationalization behind the constant justification came from doing this to please her lover

(even after being arrested). Another part of the rationalization would be that some of the victims

were deceased so the money was just sitting in the account collecting dust. Obviously the

opportunity came from working at the bank having access to all of the information and

equipment necessary to pull off the scheme. Now taking that all into consideration, Whitig

argues that this may not have happened had she not had the capability. More specifically, the

dishonesty, egotistical manipulation, and the knowledge of how the business worked. Take away

that element of fraud and ignoring those specific character traits stifles the reasoning behind why

crimes such as these take place. Moving forward, Whitig plans on implementing the fraud

diamond in terms of investigation whenever developments of such crimes happen again within

the company.

Ethical Codes of Fraud?

Considering all of the information previously stated, a person could come to an

overabundance of plausible conclusions regarding the elements of fraud. However, one topic

covered seemingly cannot be confined to the limitations of a model or follow a set of principles.

That would be the moral and ethical conditioning of human beings. From all the testimonies

given by the interviewees and other professionals in the field of fraud investigation, that would

be the only logical conclusion to one aspect majorly effecting the elements of fraud. Crimes are

“autonomous if wrongdoers freely choose to commit them on the basis of their understanding

and evaluation of moral significance of the alternatives among which they choose” (Kekes
THE MORAL AMBIGUITY OF FRAUD 25

2011). Trying to take into account the reasonable assumptions behind a person’s crime is not

exactly easy. It can be equated to throwing darts at a target blindfolded. One possibility would

be the individuals whom have lost their sense of morality. “Moral monsters” as author John

Kekes describes it (Kekes 2011). However, that would only account for a small percentage of

criminals as the “moral monsters” are often rare types of people and would not accurately

represent the frequency at which illegal offenses are committed (Kekes 2011). Extending an

olive branch, perhaps a more plausible explanation would be that most crimes are done by those

who know their actions are wrong and acknowledge it. What causes them to do so would be the

reasons or motivators behind the fraud. Much like the rationalization stage in both the fraud

triangle and diamond, the fraudster accepts that normal moral requirements are overriding, but

believe that in their particular circumstances there are more important matters to justify a

violation (Kekes 2011). Despite the masses knowing that any reasoning to break the law is

massively mistaken, these people think otherwise. Just as Detective Deery and Lowitz stated,

it’s as though the morality of good nature gets tossed to the side in the moment leading up to and

during the act. In order for these crimes to happen it is as if this is an essential step very much

aligning with Wolfe’s and Hermanson’s idea of capability. It takes a certain type of individual to

go through with these crimes. Having the ability to abandon the ethical or good moral values

taught by ways of the Franciscan tradition, for example, is a core aspect of committing fraud.

Values of reverence, integrity, service, excellence, and stewardship get pushed to the way side

for that attempt of financial gain via false justifications. Again, a lot of that has to do with the

concept of capability. Ignoring the reverence for other people who will be negatively affected

and disregarding any amount of existing integrity is something that takes a specific type of
THE MORAL AMBIGUITY OF FRAUD 26

person to do. With all of that being said, all of these generalizations can be made after the fact,

as in the crime has already happen.

Perhaps the statement that resonates the most throughout the research was the explanation

that Detective Deery gave when it comes to the predictability of these crimes; human nature is

unpredictable. Human nature has a dark side, but to determine when that side of person will be

shown and how it will be revealed is entirely futile in explanation (Lee &Theol 2014). Each

person has different stories. The circumstances set in motion during life, biological make up,

and other factors hold a tremendous role in ultimately determining how a person will react to

situations, in particular committing crimes (Lee &Theol 2014). But every single combination of

those conditions are unique. Very rarely are there exact replicas to which a person behaves

exactly the same as another person naturally. Sin is something of a human phenomenon as it

clearly has similarities spanning all cultures but each person will have their own interpretation

(Lee & Theol 2014). A major point that educators and professionals in the field of fraud

examination emphasize is the idea that anyone can commit this crime. Looking back at the cases

cited by the professionals interviewed, each of the perpetrators had the appearance and attitude

of normal, everyday people. There were no real indicators that they had the capability to go

through with these crimes only adding to the erratic nature of fraud itself. Establishing

beforehand who specifically will not only go about breaking the law but how that person will

morally justify that decision is almost, if not entirely, impossible.

Conclusion

Comparable to weeds in a garden, fraud will never go away. Pluck one up and another

grows in its place. All of the precautionary measures can be taken to prevent the weeds from
THE MORAL AMBIGUITY OF FRAUD 27

growing (like spraying weed killer, putting fertilizer down, and laying mulch) but those seeds of

unwanted vegetation still find a way to break past the slightest cracks to live a life. Not much

else can be said other than continuing the tactics to combat fraudulent crimes from happening.

Because despite the fact most would like to live in a world devoid of crime all together, it is

simply a reality that may not come to pass. Using that realistic stance on things, it does not give

way to not improving measures making sure the innocent, hardworking people are protected and

cared for on a regular basis.

While studying fraud, most students or professionals will encounter the fraud triangle.

The most commonly used model to explain the elements of fraud. However, after firsthand

accounts and countless research on the subject, it seems that Cressey’s model may be out of date

or even inaccurate in its attempts to explicate the crime. Obviously the original three elements of

white collar crimes (rationalization, opportunity, and pressure) will be prevalent, but one key

aspect of fraud is left out of the triangle; capability. Wolfe and Hermanson began the idea of

capability to further detail why it is that these crimes happen. Per their definition, capability is

the necessary character traits and skills that an individual would need to perform a fraudulent act

even in light of the other three factors. Violating the law takes a unique personality to do so and

ignoring that fact is not beneficial to those who are trying to protect society from being victims

of financial crimes. Most people who operate within the field of business will always have an

opportunity to steal something, an outside pressure that causes them to do so, and a way to

rationalize the actions. Nevertheless, not every person is going to do it. This is where the ethical

and moral facets of human beings comes into play. Noticeably, each culture is different but a

vast majority of society have the same inclinations between right and wrong. These rules and
THE MORAL AMBIGUITY OF FRAUD 28

teachings are what causes those with the greatest chance to commit fraud not to do so. Infringing

upon those moral regulations, which the criminal knows all too well will result with others being

harmfully effected, requires a person with the capability to throw away the “ethical rulebook” for

the duration of the crime. Despite human nature and the ethical outlay of an individual’s

thinking to be near impossible to predict, this scenario is one that has to be taken into

consideration when discussing fraud.

Nonetheless, the fraud diamond seems to be a more accurate model for the representation

of fraud. By expanding the shape of the triangle to include one more side, capability in this

instance, it opens a plethora of doors for discussion. Most importantly, these doors that will be

unfastened are necessary not choice. In order to better understand the crime itself, investigators

and professionals must be willing to go deeper. Not stopping at the act but figuring out the

people behind it.

THE MORAL AMBIGUITY OF FRAUD 29

References

Albrecht, S., W., Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2012). Fraud

Examination (5th ed.). Boston, MA: Cengage Learning.

Boyle, D. M., Boyle, J. F., & Mahoney, D. P. (2015). Avoiding the Fraud Mind-set. Strategic

Finance, 97(2), 41-46.

Deery, M. (2018, March 1). Personal Interview

Dorminey, J. W., Fleming, S., Kranacher, M., & Riley, R. A. (2011, September). Beyond the

Fraud Triangle. Retrieved March 17, 2018, from http://www.fraud-

magazine.com/article.aspx?id=4294970127

Kekes, J. (2011). The Dangerous Ideal of Autonomy. Criminal Justice Ethics, 30(2), 192-204.

doi:10.1080/0731129X.2011.592676

Lee, J., & Theol, M. (2014). The Human Dark Side: Evolutionary Psychology and Original

Sin. Journal Of Religion & Health, 53(2), 614-629. doi:10.1007/s10943-013-9805-z

Levi, M. (2011). Social Reactions to White Collar Crimes and their Relationship to Economic

Crisis. Economic Crisis and Crime, 16, 87-105. Retrieved January 28, 2018.

Lowitz, E. (2018, March 6). Personal Interview

Perri, F. S. (2011). White-Collar Criminals: The 'Kinder, Gentler' Offender?. Journal Of

Investigative Psychology & Offender Profiling, 8(3), 217-241. doi:10.1002/jip.140

Puspasari, N., & Suwardi, E. (2016). The Effect of Individual Morality and Internal Control on

the Propensity to Commit Fraud: Evidence from Local Governments. Journal Of

Indonesian Economy & Business, 31(2), 208-219.

THE MORAL AMBIGUITY OF FRAUD 30

References (cont’d)

Rabon, D., & Chapman, T. (2010). Fraud Related Interviewing. Durham, NC: Carolina

Academic Press.

Ruankaew, T. (2016). Beyond the Fraud Diamond. International Journal of Business

Management and Economic Research, 7(1), 474-476. Retrieved March 18, 2018.

Trompeter, G. M., Carpenter, T. D., Desai, N., Jones, K. L., & Riley Jr., R. A. (2013). A

Synthesis of Fraud-Related Research. Auditing: A Journal Of Practice & Theory, 32287

-321. doi:10.2308/ajpt-50360

Whitig, B. (2018, March 29). Personal Interview

Wolfe, D. T., & Hermanson, D. R. (2004, December). The Fraud Diamond: Considering the

Four Elements of Fraud. The CPA Journel, 38-42.

THE MORAL AMBIGUITY OF FRAUD 31

Appendix A

The Fraud Triangle

Developed by criminologist Donald Cressey, the fraud triangle is a model that explains the three

elements of fraud; opportunity, pressure, and rationalization. Opportunity being the chance a

person gets to steal from a company or person. Pressure being an outside factor that influences

the fraudster to commit the act. Rationalization is the justification of the actions.
THE MORAL AMBIGUITY OF FRAUD 32

Appendix B

The Fraud Diamond

Created by certified public accountant David T. Wolfe and professor Dana R. Hermanson, the

fraud diamond is an expanded version of the fraud triangle with the added element of capability.

Capability is the personal traits and abilities that play a major role in whether fraud will actually

occur even in the presence of the other three elements. The capability of fraud entails two

aspects. Required traits and the necessary abilities. Traits, for example, being narcissism and

dishonesty while abilities are knowing how to manipulate financial statements.