We often think of fraud as the work of greedy masterminds, but the reality can be far more complex. Forensic accounting expert Kelly Richmond Pope, explains how ordinary people can be perpetrators, under the right conditions. 

Drawing from years of interviews with white-collar criminals, whistleblowers, and victims, Pope introduces a framework that challenges our common assumptions about who can commit this crime.

KELLY RICHMOND POPE: "Fool Me Once" came about because I did a documentary years ago about a woman that embezzled $53.7 million from a small town. And I learned so much about myself, about people, about victims, about whistleblowers. And once I did the documentary, I felt like there was something more that I needed to explain to the general public about fraud, how it happens, how people commit it, how people whistleblow about it. And so that was really the birth of "Fool Me Once." It really was a self-reflection because I've had so many experiences with fraud cases. And so fraud cases include a perpetrator, a victim, and a whistleblower. And so I like to refer to them as perps, preys, and whistleblowers. So those are really the three, my three indices of fraud. And so the book really dives deeper into what type of perpetrator, or the various types of perpetrators you could be, the various types of prey you could be, and the various types of whistleblowers.

- [Announcer] "The Fraud Triangle: Understanding why good people do bad things." One thing that a friend told me that I'm just gonna steal their line, and they said, "Fraud never sleeps." And it's really a global problem. Fraud is a trillion dollar problem, about $5 trillion today with that number increasingly rising annually. So it affects everybody, every industry, every country, you name it, there's fraud. If there are people, there could be fraud. And so for that reason, no one is immune to it. And so I think what attracted me originally to the subject is how universal it was. There's no one that you can walk up to and say, "Are you not concerned about fraud?" Everyone is. And so that just fascinated me, really, the behavioral aspects of fraud. So when I started studying fraud years ago, I was introduced to the work of Donald Cressey. And Donald Cressey is known as the criminologist that introduced the fraud triangle. And the fraud triangle has three indices, opportunity, rationalization, and pressure. And I was always fascinated by the rationalization component of the fraud triangle, and always felt that there needed to be more research there. A lot of times what Cressey's work focused on was embezzlement, which is one type of fraud. And he often talked about that the reason why people engage in fraud is a lack of morality. And it's more complex than that. And so that was really what my passion really drove me. And I started going around the country and doing on-camera interviews with white collar felons, whistleblowers, and victims of fraud, because I wanted to understand more about that rationalization component because it explains so much, it helps us learn about how we can protect our organizations or we can understand how a person rationalizes these types of behaviors. I think fraud is a victimless crime because we often have a definition about what we think a crime is. So I physically attack someone, or I physically steal some something from someone, we think that's a crime. A lot of times fraud is victimless because there's some research that talks about the psychological distance between an act and a crime. So if there's more distance between you and what you are stealing, then you sometimes think it's victimless. For example, I remember reading a study, I think it was Dan Ariely, his research, and he was talking about how people behave when they're thinking about cheating in golfing. And he surveyed some people, and what he found was people were more in agreement to cheat if they used a golf club to move the golf ball than if they used their hand. And so what he's describing is this psychological distance between what it means to cheat. So a lot of times people think making an entry or booking a false entry is not the same thing as stealing money out of someone's purse or someone's wallet. And so I think that's what allows us to say, it's okay for me to book this because there's no human being actually associated with it. We don't see them, we don't have to explain anything to them. So I think it makes it easier for us to say, "I wanna overstate revenue and understate expenses, and it's okay, because no one's really going to get hurt, it's just a company." But we don't think about that company leads to people, that leads to people's jobs, that then leads to people's ability to take care of themselves, take care of their families. We don't think about all of that, we think about that one number showing up on a financial statement. When I started thinking about my own experiences with fraud, and specifically perpetrators, I started to do some research. And the simple rationalization of crime is a really interesting concept because what it says is the bigger the reward, the more likely we are to steal. And I'll give you an example of what I mean by that. I remember one day in class, a lot of times before I talk about fraud, I don't use the "F" word, I don't say fraud, I'll give them an example. And so I went in class and I said, "What if you walked in today and you saw a bag of money sitting at the front desk? What would you do?" So everyone sort of looks around at each other 'cause no one wants to say anything at first. And so I said "Just tell me what your thoughts are. You see this bag and there's just money pouring out of the bag, what do you do, what do you think?" And they start thinking, and I start to write their answers on the board. And they'll say, "Well, how much money do you think is in the bag?" They'll ask, "Does the room have cameras?" They'll ask: How old am I? Have I passed a CPA exam? Am I married? Are my parents alive? And so what they're doing, what my students are doing, these are graduate students, is they're rationalizing if it's worth it for me to take. And so if that reward is big enough, then I'm gonna risk it, I'm gonna take it, I'm gonna try. And so that's typically how I introduce the rationalization component when I'm teaching students, because I want them to see how relatable it is for any of us to rationalize why it's okay to take something. So when I read a good fraud case, I think about what type of perpetrator it is, because there's this misconception that all perpetrators are the same, people still for greed, and that's not true. There are different reasons why people can engage in fraud, why people become perpetrators. And so when I was thinking about the book, I was thinking about my rollercoaster of emotions that I've had. I have interviewed perpetrators and I just empathize with them. But then I've interviewed other perpetrators where I'm just angered by what they've done. And so that made me think how can I advance a theory where there are different types of perpetrators and force people to understand that all perpetrators are not the same? So I came up with these three: Intentional perpetrators, accidental perpetrators, and righteous perpetrators. Now, intentional perpetrators, is what we binge when we watch Netflix, when we watch Amazon Prime. I mean, it's what the movies are made of. You can name any show that you're watching now, that's a true crime show, it's about an intentional perpetrator. But the accidental and the righteous perpetrators, those categories should make you feel a little bit more uncomfortable, because you may relate to them in a way that you never imagined that you would. What I've noticed with the intentional perpetrators I've interviewed over the years is they're so likable, and they're charismatic, and they, like, they draw you in, and you just sort of get in this trance of hearing their story, you're sort of scared of 'em at the same time. But they're charismatic, so they can work a room. And a lot of times, I don't ask them if they're remorseful because maybe I don't believe what they're gonna say, but I don't ask that question because I think that a lot of times they're angered that they got caught. And so they may have continued whatever the crime was, but because they got caught was if it was a whistleblower, whatever the reason is, that tends to be the emotion that they're referring to. I mean, if you ask the question, "Are you upset that you did it?" They're gonna say "Yes," 'cause they're going to jail for 3, 10, 20 years. So I tend to not ask that question, especially if I understand the scheme that they were involved in. But one of the characteristics that I've noticed through the years is just how likable they are. And so all of the perpetrators I've interviewed over the years, they become like friends because you learn so much about their lives. And so the intentional perpetrators, their stories are wild, their personalities are big, and they're very forthcoming about, "Hey, this is what I did, this is why I did it. I'm gonna share it with you, I'll share it with your students. I wouldn't do it again, but maybe." You know, they sorta always say those kinds of things. And so you just don't understand it, but it's this wild feeling that you have about them, and it's why we're so addicted to the stories. So some of the most infamous intentional perpetrators, Bernard Madoff, the Enrons of the world, Jeff Skilling, these are people that set out to defraud. They know all the internal control weaknesses inside an organization, and they tend to be pretty savvy, pretty arrogant, pretty confident. And notice these are traits that we tend to admire in a corporate structure. But they are the type of people that they'll ask for forgiveness. They'll just go forward and ask for forgiveness later. That tends to be the profile of an intentional perpetrator. So they tend to have a significant level of authority in the organization because it allows them to advance whatever idea they're trying to advance. So when you think about Madoff, and you think about that fraud, Madoff was powerful, no one questioned him. Everybody wanted to be invested in his fund. And there were very little internal controls around him. What he said is what happened. And so he's a good, well-known intentional perpetrator. Now, in my documentary, "All the Queen's Horses," the perpetrator there was this woman by the name of Rita Crundwell. Now, she might not be as well known, but Rita Crundwell is known as the largest municipal fraudster in U.S. history. And so she's a primary intentional perpetrator, someone that knew the system inside and out. She was a city comptroller of Dixon, Illinois. And so everyone trusted her, no one questioned her. I think the way she lived, she was likable. She was that person that she would receive your invitation to your party, to your wedding, and she'd send you a nice gift. She was that employee that when she went on a trip, she'd bring you back a box of chocolates. So she was socially likable. No one ever said anything bad about her. And I've been to Dixon multiple times, so many times, I probably should have a place there, just a rental house. But she always was described as a likable person. And I think you have to be likable to some degree in a corporate structure to be able to engage and hide a fraud for a very long time. Now, in Rita's case, $53 million over 20 years, you gotta be a little likable to keep that going for so long, to keep people at bay. And so why did Rita need $53.7 million? For Quarter Horses. Not only did she buy horses, she owned over 400 Quarter Horses, 400, that's a lot of horses, it's very expensive to have an operation like that. She had real estate, she had cars, she had jewelry, just anything you can imagine. And this is the typical profile of an intentional perpetrator. They have an endless supply of money from the organization that they're stealing from, and Rita did it for 20 years. And so intentional perpetrators are different than conmen, though. So they don't set out to just think about how I can defraud every person that walks down the street. They know their organization well, they know the internal control weaknesses inside the organization, and they use that and exploit it for personal gain. That's an intentional perpetrator. And they are, in my archetype system, they're the most dangerous, because when they have power, they typically have access, and they can wreck havoc when they want to. So just think about how the Madoff scandal impacted thousands of millions, well, millions of dollars, thousands of people. Another well-known intentional perpetrator that you may have heard of is Sam Bankman-Fried, really classic, intentional perpetrator, someone who knew how to exploit the system, no one ever asked questions. People just invested in his exchange, and no one seemed to question anything. So those are examples of intentional perpetrators. And again, we are addicted to their stories. Now, the question is, why, why are we so addicted? Do we question, could we do what they did? Is it that they take so much? Is it that so many people just watch them do what they do and no one stops them? There's a reason why we're addicted, and there's a reason why these stories are so popular. But intentional perpetrators anger me because I don't understand why the auditors don't stop them, why the employees can't stop them, why the board doesn't stop them, why the audit committee doesn't stop them. I mean, why do they keep rising to the surface? And so it angers me. And so I have those intentional perpetrators come to my class, talk to my students. I go around do on-camera interviews with them because as much as they anger me, they fascinate me too. So we were talking about intentional perpetrators. We're gonna switch gears and compare the polar opposite kind of person, which is a righteous perpetrator. Now, granted, all perpetrators broke the law and they go to jail, we all understand that. But we're really thinking about why did they do it. And so the righteous perpetrator was a category that was inspired really from my own personal fraud story as a child. So I grew up in Durham, North Carolina. And years ago, when I was in high school, my neighbor was sentenced to federal prison for money laundering and embezzlement. And this family had everything. You know, he had a nice car, nice house, wife, kid, dog, picket fence, you name it, they had it all. And so when I overheard my parents talking about this fraud case, and I was younger, but I was even nosy back then, 'cause when my parents were talking, I was just like, "What did the neighbor do?" Anyhow, so when I started looking and reading about this case, what was really fascinating is his rationalization. The reason why he did it, not for personal gain, but to help a friend. He wanted to help a friend's business. So there are people that will engage in fraud to help a family member, help a friend, help a colleague at work. Granted, we know they committed a crime and they went to jail, but we're really talking about why they did it. What I've noticed about the righteous perpetrators, those stories, when those perpetrators come to my class, my graduate students are holding onto their every word, and they empathize with them in a way that they do not show with an intentional perpetrator. So intentional perpetrators, they may be angered, but that righteous perpetrator, their heart goes out to them, because, well, they were doing it to help a friend. They didn't mean to do it, they didn't even get any money from it, but they were just trying to help. I spent some time at a conference, and during the conference, I went to visit a women's prison. And I wanted to talk to some inmates who had engaged in fraud. And so I met this woman who, and her story's in the book, but I met this woman who was in prison for I believe, 6 to 8 years, because what she wanted to do was help the residents in her community. Because she looked at her boss, and her boss was a person that was charging really high rents and not giving her neighbors good quality living. And she felt like she had the power to right a wrong. And so what she started to do was to create fictitious invoices so that her friends, her fellow neighbors, could get jobs so they could survive. And so when the money didn't add up, and her boss was wondering, "Why don't I have enough money in my bank account? Where are things going?" and she couldn't really answer that question, he realized that she had created fictitious invoices and was embezzling from his organization. Now, why was she doing it? To help other people. And when I sat down with her, she was actually proud of what she did because she was helping others, sort of like the Robin Hood syndrome. You know, Rob steal from the rich to give to the poor, she was exactly that person, and she was proud. And this woman, she was married, she had kids, and yet she felt like she was doing a public service by doing this to help the community. Another example of a righteous perpetrator, and her story just sits on my heart, so close. This woman by the name of Kayla Ravelo, her story's in the book as well. And Kayla was a Wall Street corporate lawyer. I mean, she was an equity partner at some of the top law firms on Wall Street. And she had power, she had privilege within her organization, and people trusted her. And so Kayla had the opportunity to hire outside vendors to do some of the work that her law firm was engaged in. And what she decided to do was hire her husband. Now, some of us might not think, "Well, that's not fraudulent, maybe nepotism, but it's not fraudulent, I'm just gonna help a friend." You know, we refer business all the time. Doesn't seem wrong, right? Probably not, so she didn't tell anybody that the firm that she recommended was her husband's firm. So she had an inclination that probably I should keep that a little bit secret. But what happened is he was awarded a contract, it was a printing contract because her company was doing litigation cases, and so there was a lot of photocopying involved. And so her husband's copying business got the contract. Things were going fine until he started submitting phony invoices for work that had not been done. So Kayla was in a tough place because "I didn't tell my partners that my husband was doing the work, and now my husband is not doing the work, and I'm trying to save my marriage and keep everything together at home. What do I do?" Kayla had the power to approve the invoice. Should she approve or should she not? So what do you think she did? She approved the invoices, the fictitious invoices. Now, this is a really long story, and my only point here is the only reason why she did this is to help her husband. She was an equity multimillion dollar partner, she didn't need the money, and she was trying to preserve her marriage. And long story short, he was arrested for something outside, you gotta read the book to find out, he was arrested for something else he was doing. And when he was arrested and the police started looking into his life, they noticed, "Hey, your wife..." First of all, her husband had this business that was making millions of dollars, and his wife was an equity partner, in these law firms, at this law firm, and they started looking into her life, and realized that this embezzlement scheme was in the making, and that's how they both ended up going to federal prison. Now, why did she do it? To help her husband. That's the only reason why she did it, because she didn't need the money. Righteous perpetrator. And what's interesting is a lot of us may do something to help a friend, to help a family member, to even help a colleague. And we might not think initially it would lead to prison, but it can, that's the righteous perpetrator category. So as I've interviewed and met righteous perpetrators over the years, I tell you, there are times when my eyes are swelling with just like holding back tears because I feel so bad for them. But what I've also noticed is the number of people that will help them. So there was one righteous perpetrator I interviewed years ago, her name is Elise Dixon. And she was involved in a mortgage fraud scheme. And I won't go into the story, but what I will tell you is she had a great law firm offer pro bono services for her, because she was a good person, they understood how it happened. She was trying to help a friend. And so what I've noticed about the righteous perpetrator category is people will help them. And a lot of times when you talk to perpetrators, they'll say, "I lost friends, no one will return my phone calls." But when there are intentional perpetrators, that happens. But when they're righteous perpetrators, people come to their aid and help them and give them second chances. And so I've noticed, I've just watched my students interact with the righteous perpetrators. They're the ones, they're emailing them, they're giving them contact information. They even sometimes have given them like, "I saw this job announcement, maybe it's something that you could do." They just go out of their way to try to help. And I think it's because they can empathize with what they did. Not to say they would do the same thing, but they can understand how it happens. Now, if you were ever to be a perpetrator, and I know when I say that, that may make you feel a little uncomfortable. But if you were ever to be a perpetrator, it could be a righteous perpetrator or an accidental perpetrator. And those two categories should really scare you a little bit. Because the likelihood of you being an intentional perpetrator is probably slim to none. But the likelihood of you wanting to help a friend, turning a blind eye to a transaction and being righteous perpetrator, the statistics are higher there, and the accidental perpetrator should scare you even more. When I was thinking of this category, I was very strategic about using the word "accident", because an accidental perpetrator is somebody that... They're a team player, they are a people pleaser. They don't rock the boat, you ask them to do something, they do it. They trust, they trust blindly, they are loyal. And that sound like you. Think about this, if your boss, your supervisor, asked you to do something, and you trust them, you probably don't think twice about it. If they asked you, "Go and book this entry, we can reverse this entry next period, we just need it to make the financial statements look the way we need, we'll fix it later." You trust this person, you might do it. Now, that entry that you book in your financial statements could be fraudulent, and you're not thinking about that because you have 100% trust in your supervisor's command of you. But it could land you in prison. Now, that's the accidental perpetrator dilemma that they find, they wanna please, they wanna follow the boss' orders. But what if the boss' orders are faulty? What do you do, do you speak up, do you say something? These are the people that sometimes just stay quiet. And this has happened to all of us. We can probably sit and think on one or two hands the number of times that we've sat in a meeting, someone's asked us to do something, and you are just like, "Nah, I'm not signing off on that, I'm not putting my name on that." But there might be a time that you didn't do that, and you put your name on it and hoped that nothing will go wrong. That's the accidental perpetrator. And that could be any of us, any of us. And so there was a gentleman that I interviewed years ago, and the way I met him is his legal counsel reached out to me, and as part of his sentencing, they wanted him to share his story with students. And so somehow people knew that I was going around the country and doing these interviews with people. And his legal counsel reached out to me and I did this interview. And so Andrew Johnson was one of the nicest men I've ever met. I mean, the quintessential accountant. When you think of the word accountant, you would think of a picture of this man, khaki pants, like a collared shirt. I think he even had some pencils and pens in his shirt pocket. I mean, just what you would think an accountant would be, super nice. And I remember when he sat down and he started sharing his story with me, I said to myself, "How did he end up going to federal prison?" No, he was sentenced to a year and a day, and he served nine months, but he's still a convicted felon. And so I remember that story. And the impact that it had on me was this, his story was so scary to me, I never showed it to my students. I never even taught about the case because I was afraid that they would be so afraid and turned off from accounting that I never really taught and showed it to them. Because what Andy did, he didn't get any personal gain, he was following his boss' orders. And his bosses really weren't interested in learning about accounting, they didn't wanna know the details about accounting, they didn't wanna hear the accounting equation, they didn't wanna hear any of that. All they wanted to know was make the numbers work, we're trying to be acquired, just make it work. And that was what Andy's charge was. He was the person, he was the director of finance. And so they didn't want the details, they just wanted the summary. And so Andy ended up engaging in what we know today as earnings management. And he knew it was wrong, but he's trying to be a team player. He's trying to keep his job. At the time, he had a wife that didn't work, he was a sole breadwinner in the household. He had to keep his job and he had a pretty good job. I remember him telling me he just built an addition on his house, so this was not a time to get laid off. So Andy made a couple of entries, engaged in earnings management, and about a year and some change later, the FBI came knocking at his door because he was working at a publicly-traded company. And you can't engage in earnings management, like you can't lie about your earnings. Your earnings have to come from revenue-generating operations of your business. And so you can't smooth the earnings and say, "Oh, I'm gonna make 'em look better than they should in this period," you can't do that. So Andy found himself spending, or being sentenced to a year and a day in federal prison, served nine months in federal prison, but it destroyed his life. There's a lot of judgment that goes into the work of an accountant, especially the work of a CPA, certified public accountant. And so the way you might be turned off when you hear Madoff's story is not the way that you'd be turned off when you hear about an accidental perpetrator story, because you see yourself in their stories. You understand the business struggles that they have, you understand the meetings that they're sitting into, you understand their pressure. And so you see it. And so when they get to that point, that decision point of, "I'm gonna make this entry," or "I'm gonna keep quiet," "I'm not gonna push back," "I'm not gonna tell the safety team, we shouldn't do this because it could cost lives." When you don't do that, you can empathize with the shoes that that person is in. That's the accidental perpetrator. I think what's really important for all of us to do is pay attention to corporate culture. And I know that's one of the common buzzwords that we hear about, but it is so important. The corporate culture that is lived and the corporate culture that is written about can be two different things. So we might talk about, you know, we're environmentally, sustainably, you know, ethically, they may use a lot of these buzzwords, but how do they actually act, what happens? And so when you are in an environment, especially an environment where there's rapid growth and expansion, and that's the focus, sometimes the powers that be, the C-level, the C-suite executives, may be willing to cut corners. They may not have sound internal control policies. They may not even have a sound accounting system to trace and track all the transactions. If you see that, be careful. You think about Sam Bankman-Fried, think about the organization there. If you walked into that organization and you knew that there was no policies, there's no expense reimbursement policy, you can just use an emoji and submit your request, your reimbursement, that is a red, red, red flag. I don't know what's more redder than red, but that is a red flag that you should be very careful of because that's telling you something seriously about corporate culture. Now, FTX might have talked about, "Oh, we're innovative and we're providing opportunities for banking outside of banking." They might have said all that, but how they actually operationalize their mission is very different. There were no controls, there was no accounting system. When you see things like that and you have a intact moral compass that you wanna live by, be careful of engaging with an organization like that, because they are going to push you. They're gonna ask of you things that you may not feel comfortable doing. And so I'll use myself as an example. I'm a professor at DePaul University. And DePaul is the largest Catholic university in the United States. And so knowing that, there are things that I know that the university supports and there are things that I know the university does not support. If I don't support the same things that they support or don't support, maybe that's not the organization I need to be in alignment with. So you have to think about what you're getting yourself into when you align with certain organizations. So just pay attention, because red flags wave in our face all the time. Sometimes we close our eyes, sometimes we turn a blind eye, but they're there, and they're there in every organization. Thinking about Andy, he was in an organization where no one wanted to hear about accounting. Now, I love accounting, I think everybody needs accounting in their life, just like you need water, air. I mean, I think it's like a thing we all need to know. But he was in an organization that no one cared, they didn't wanna hear the details. And so when you are a officer and you have a fiduciary responsibility, being in an organization like that could be challenging. So you have to be aware and pay attention.