It’s the summer, finally!! Are you feeling happy? Really happy? Well, guess what? Unless you are currently committing white collar crimes and have invested heavily in bribes and dirty lobbying practices, your little joy-bender is about to end right here. If you do happen to be a corporate criminal, though, that joy bender is about to turn into an epic, I-totally-don’t-remember-getting-this-smiley-face-tattooed-across-my-left-ass-cheek kind of rager.
Florida State University researchers Sarah Fulmer and April Knill have conspired with business researchers Frank Yu and Xiaoyun Yu, as well as habitual Debby-Downer Dan Ariely, to publish a trifecta of depressing findings on political and corporate corruption recently.
First up, Fulmer and Krill, whose paper, “Political Contributions and the Severity of Government Enforcement,” reveals that executives at firms who made contributions to political action committees (PACs) get lighter sentences than those who don’t. They also find that “contribution from a PAC in the first year of the fraud results in the accused individual being banned [from the SEC] for 2.90 fewer years, having probation for 4.99 fewer years, being imprisoned for 5.81 fewer years and 75% less likely to receive both prison time and an officer ban.” Criminals, take note: if you are an executive who gives to a PAC directly, your punishment will be even lighter! The SEC ban for an officer who donates directly will be 3.64 years less, probation will be 1.59 years less, prison time will be 4.11 years less, and the probability of both prison and a fine will be 56% less. And naturally, CEOs who contribute the largest amounts of money get off the lightest of all. Do you hear that? That’s the sound of the tattoo needle being warmed up as Gordon Gekko removes his pants.
Still feeling kind of okay about the world? There’s more: killjoys Yu and Yu have released a paper entitled “Corporate Lobbying and Fraud Detection,” which shows that firms that engage in lobbying evade detection for fraud almost four months longer than non-lobbying firms and are 38% less likely to be detected for fraud as compared to non-lobbying firms. As The Sunlight Foundation reports:
The “Corporate Lobbying and Fraud Detection” paper studied lobbying from 1998 to 2004, comparing the 239 firms that had committed financial fraud with those who hadn’t. The researchers found a few very interesting things:
In other words, Yu and Yu have proven what we had hoped was not true but always kind of knew was the case: corporations use lobbying to avoid detection for fraud, and it works.
But…maybe fraud doesn’t happen that often? Maybe white collar crime is only the exception, not the rule? Maybe it doesn’t happen as often as the media would have us believe? Maybe??!! No. In Dan Ariely’s new book, The Honest Truth About Dishonesty: How We Lie To Everyone — Especially Ourselves, we learn that Ariely and his colleagues ran some experiments on some congressional staffers in Washington, D.C. and bankers in Manhattan. You think politicians are bad? Turns out the Wall Street guys cheated at twice the rate of the D.C. contingent. (But, as Ariely points out, “you should take into account that the politicians we tested were junior politicians— mainly congressional staffers. So they had plenty of room for growth and development.”)
Enjoy your summer.
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