Why They Do It: Inside the Mind of the White-Collar Criminal

by Eugene Soltes

Overview

“This fascinating book reads like a fast-paced novel that details the motivations and consequences of white-collar crime.”―Arthur Levitt, former chairman of the US Securities and Exchange Commission

From financial fraud to Ponzi schemes, the failings of corporate titans are regular fixtures in the news. In Why They Do It, Harvard Business School professor Eugene Soltes draws from extensive personal interaction and correspondence with nearly fifty former executives, as well as the latest research in psychology, criminology, and economics, to investigate how once-celebrated executives become white-collar criminals. Never before have we been able to peer so deeply into the minds of the prominent perpetrators of white-collar crime.

Product Details

ISBN-13:	9781541774179
Publisher:	PublicAffairs
Publication date:	03/05/2019
Edition description:	Reprint
Pages:	464
Product dimensions:	5.40(w) x 8.10(h) x 1.40(d)

About the Author

Eugene Soltes is the McLean Family Professor of Business Administration at Harvard Business School and the founder of Integrity Lab, a compliance analytics and advisory firm, His research on corporate malfeasance has been extensively cited by the Wall Street Journal, Financial Times, New York Times, and The Economist.

Table of Contents

Introduction to the Paperback Edition: Why We Do It vii

Prologue Managing in the Gray 1

Part I The Struggle to Criminalize

1 "Not…bucket-shop operators, dead-beats, and fly-by-night swindlers": Pillars of the Community 13

2 "Guys…don't drop out of windows for no reason": Creating the White-Collar Criminal 33

Part II Nature or Nurture? Reasoning or Intuition?

3 "Inherently inferior organisms": Bad People Making Bad Decisions 47

4 "I thought it was all going to pass": A Press Release with Consequences 65

5 "If you don't take it then you will regret it forever": The Triumph of Reason 81

6 "I never once thought of the costs versus rewards": Intuitive Decisions 99

7 "I never felt that I was doing anything wrong": Overlooking Harm 115

8 "If there was something wrong with this transaction, wouldn't people have told me?": The Difficulty of Being Good 131

Part III The Business of Malfeasance

9 "You can't make the argument that the public was harmed by anything I did": Misleading Disclosure 165

10 "Unfortunately, the world is not black and white": Financial Reporting Fraud 175

11 "You go from just being on top of the world": Insider Trading 201

12 "I thought we were freakin' geniuses": Deceptive Financial Structures 227

13 "You couldn't stop because YOU would wreck everything": The Ponzi Scheme 257

14 "When I look back, it wasn't as if I couldn't have said no": Bernie Madoff 287

Conclusion Toward Greater Humility 309

Acknowledgments 331

Illustration Credits 337

Notes 339

Bibliography 397

Index 435

Editorial Reviews

[Soltes] has done a great service with Why They Do It. Not only does he draw on psychological research to dissect the way white‑collar criminals think‑or fail to think‑before they act. But he also interviews several of the most famous white‑collar criminals of our time, among them, the corrupt lawyer Marc Dreier and the financial swindlers Allen Stanford and Bernie Madoff. He presents what he has found in a spirit of understanding rather than condemnation.”—Wall Street Journal

“[Soltes] takes a unique approach, looking for the connections between what motivated these men ‑ and yes, they are all men ‑ and asking not what they did but why they did it....Soltes creates some fascinating portraits.”—Washington Post

“This fascinating book reads like a fast-paced novel that details the motivations and consequences of white-collar crime.”—Arthur Levitt, former chairman of the US Securities and Exchange Commission

“A landmark study of business gone wrong.”—Andrew Lo, MIT School of Management

“A deep and important analysis of one of the most important and least studied problems of our times: corporate crime. But it is also a page turner.”—Luigi Zingales, University of Chicago

“A rare, intimate, and fascinating glimpse into the series of decisions, each one mundane enough, that lead by steps to high crime. Leaves you wondering, could it happen to you?”
 —John Coates, former trader and author of The Hour Between Dog and Wolf

“Groundbreaking...[an] impressive debut...A forcefully developed and documented contribution to our further understanding of high‑level criminality in lightly regulated free markets.”—Kirkus

From the Publisher

2016-08-10
A groundbreaking study of the psychology and motivations of white-collar criminals.Using interviews, correspondence, and phone calls over seven years with, among many others, Bernie Madoff, Enron’s chief financial officer Andrew Fastow, and Tyco’s Dennis Kozlowski, Soltes (Business Administration/Harvard Business School) provides special insight into insider trading, violations of financial reporting requirements, and pyramid schemes. In his impressive debut, the author has gathered in one place the thoughts and reflections of this group of criminals, many of whom have become well-known thanks to extensive media exposure. Soltes begins with a theoretical discussion of the roots of human behavior in an intriguing attempt to discern how propensities for ethical misconduct and criminal behavior occur. The subsequent discussions with the perpetrators concern their crimes, motives, and rationalizations. The author refutes the contention that white-collar criminality is distinct from criminality at large as essentially a race- or class-driven argument. He emphasizes instead how the business environment and the incentives for management to succeed foster white-collar crime. Management decisions, he insists, involve moral choices since they involve “the potential to help or harm another person.” Soltes prefers to “consider the possibility that illegal business decisions—moral decisions in their own right—are actually made much like any other kind of decision.” The interviewees’ rationalizations and “euphemistic labeling” are quite illustrative. Fastow, Enron’s financial wizard, said, “I was doing exactly what I was incentivized to do. We wouldn’t have gone through all this trouble if we just wanted to cheat. We were finding ways to get around the rules but going through a complex process to find the loopholes to allow us to do it.” Madoff preferred to view the fraudulent scheme for which he was convicted as “something closer to oversight than to recklessness.” The author also discusses the regulations related to white-collar crime and corrects some popular misconceptions—about insider trading, for example. A forcefully developed and documented contribution to our further understanding of high-level criminality in lightly regulated free markets.

Kirkus Reviews