A Fish Story—or Not?

Not all liars are fraudsters, but all fraudsters are liars.
BY JOSEPH T. WELLS

ehaviorists tell us that lying is innate to the human species and comes about for two genetically programmed reasons: to receive rewards and/or to avoid punishment. Whether we lie depends on our calculation of the reward/punishment equation. This is called “situational honesty.” Because most of us are conditioned to believe lying is wrong, it creates stress. (That’s not true with very young children and pathological liars.) The degree of emotional discomfort is determined by two factors: the adverse consequences of the lie and our perception of being caught. Experienced interviewers know that stress causes most people to react differently when they lie. How to recognize the signs of stress and detect lying are skills auditors need to acquire.

Some lies create little internal conflict and negligible stress. For example, when we tell “white lies” (“Boss, I really love that psychedelic necktie.”), the lie creates no internal conflict. But when the CEO of a major company, who sees his or her future riding on the outcome of an audit, is forced to lie about a financial statement fraud, he or she is likely to feel a great deal of stress.

An experienced interviewer begins by asking easy, nonthreatening questions (“Where did you go to college?”) while discreetly observing the person’s behavior. Then, when the questions get tough (“Is there any reason someone would say you have been cooking the books?”), the interviewer will look for telltale behavioral changes. This process is known as “calibration” and is a vital part of detecting deception.

Kant’s Quandary

Situational honesty is illustrated in a classic parable by philosopher Immanuel Kant, who described how he might react if he encountered a suspected robber on a lonely road. “(He) asks me, ‘Have you any money on you?’ If I fail to reply, he will conclude that I have; if I reply in the affirmative, he will take it from me; if I reply in the negative, I will tell a lie. What am I to do?”

VERBAL CLUES

When under stress the dishonest person normally displays a range of verbal and nonverbal clues. Most of the verbal clues will be exhibited when the individual is asked a particularly distressing question. For example, consider the case of Delbert, an employee of a Fortune 500 company. At the time, I was consulting with the company on fraud detection and deterrence policy. Because of labor problems, the CEO started receiving a series of threatening handwritten letters from a company worker. With each letter, the threats escalated. Clues had led the security director to narrow the search for the errant employee to one department with about a dozen workers. We decided to retain a handwriting expert to examine their signatures on file in the personnel department and compare them with the threatening notes.

Because we had just signatures, the handwriting expert was only able to narrow the list to four possible suspects. For no particular reason, we began by interviewing Delbert. After a half hour of softball questions, Delbert betrayed himself with these telltale behaviors:

Repetition of the question

Q: Do you know why anyone would write the CEO a threatening note?

A: Do I know why anyone would write the CEO a threatening note?

Liars frequently repeat a question, gaining time to concoct a false answer. Of course, any single response is not indicative of deception.

Selective memory

Q: Do you remember whether you were working on the date this last letter was mailed?

A: I might have been working, or I might have been off; I just don’t remember.

If Delbert had been the writer, he would know very well where he was when the letter was mailed. But he hedged his answer to avoid being caught in a lie.

Oaths

Q: Delbert, what would you say if someone claimed you mailed these letters?

A: You have to believe me; I swear to God I didn’t do it.

Delbert’s testament to the Almighty is called an “oath” and is used frequently by liars to add weight to their falsehoods. If a person is telling the truth, there is little reason to embellish it. Other oaths include “Frankly,” “To be honest with you,” “I swear” or “To tell the truth.” Remember though, many honest people use such phrases out of habit.

Character testimony

Q: What would happen if I had trouble believing that you did not write these letters?

A: I’m a very honest person; you can check with any of my friends.

This answer was supposed to convince me that Delbert wasn’t a very good suspect. The only problem: Character testimony is a common ploy used by liars. They also suggest you check with their minister, family, spouse and parents—to name a few I’ve heard.

Answering with a question

Q: Delbert, would you have the motive to send threatening letters to the CEO?

A: Why would I have a motive to do something like that?

Deceptive people frequently answer your question with one of their own.

This technique has two purposes. First, they would prefer not to lie if they have another choice; it could lead to discovery. Second, they are engaging in a fishing expedition; they wish to know what the interviewer knows.

Overuse of respect

Q: Delbert, I’m not accusing you of anything; I’m just trying to find the truth.

A: Sir, you obviously have a difficult job here. I greatly admire what you’re trying to do.

The real truth is that truthful people are rarely overly polite when they believe they’re being accused of something they didn’t do. More likely, they will be offended and let you know it.

Avoidance of emotive words

Q: Delbert, did you write these threatening letters?

A: No, I didn’t write the (pause) letters. I swear.

Dishonest people sometimes have trouble with blunt descriptions of their behavior. Miscreants rarely use words such as “embezzle,” “steal” and “defraud.” They much prefer more genteel terms such as “borrow” and “take.” Or as with Delbert, they avoid using an emotive word like “threatening” altogether.

BODY ENGLISH

The nonverbal clues of deception are rooted in our physiology. When threatened, humans react with a “fight or flight” mentality. So when placed under emotional stress, the body has trouble remaining still; movement acts as a catharsis. That’s why when you’re stressed out, vigorous physical activity is one of the best antidotes.

Because of the “fight or flight” reaction, some people, when asked difficult questions, subconsciously assume a fleeing position. It happened with Delbert. While his head was facing me, his feet were pointed in the direction of the door as if he were ready to dart from the room.

Another way to relieve stress through movement is to change positions. When I was chitchatting with Delbert, he had remained relatively motionless. But when I asked him a difficult question, he visibly shifted his position in the chair, moving his whole body in the process.

A similar reaction to stress involves crossing motions. When people feel threatened, they can subconsciously use their arms for protection. I noticed that in response to some questions, Delbert crossed his arms as if to protect himself from assault.

As childish as it seems, some liars cover their mouths when uttering a falsehood. That’s because in times of stress, many people instinctively revert to their childhood emotions. In the case of Delbert, he frequently concealed his mouth with his hand as if his lie would escape, quietly, like a slow leak in a tire.

REACTION TO EVIDENCE

The time finally came when I showed the threatening letters to Delbert. He was both attracted to and repulsed by the evidence. While trying to feign disinterest, Delbert carefully examined each piece of paper. When he had finished, he placed his finger on the pile and shoved them back across the table to me as if he was afraid to touch the documents. This reaction is common among those trying to be deceptive; they don’t want you to know they’re interested in the evidence that implicates them.

IT’S THE PATTERN THAT COUNTS

Experienced interviewers know they cannot count on any one indicator to deception; the pattern is the key. Since Delbert had exhibited so many classic signs of deception, I decided it was time to find out if we had our man. “Delbert,” I said, “the one way to clear up any suspicion is for you to take a pad and give me some handwriting samples. We’ll submit them to an expert.”

Delbert held his pen above the pad for a long time. Then his shoulders slumped, he dropped the pen and looked like a deer caught in the headlights. “You got me,” he said quietly. “How did you find me out of 20,000 employees?” I didn’t answer.

Management decided Delbert had to go, but they declined to notify the authorities, feeling it would just add controversy to their labor problems.

There are two valuable lessons from this story. First, if you observe and listen carefully, you can improve your ability to detect lies whether they involve fraud or not. And the second lesson will also answer Delbert’s question: On the fraud beat, sometimes you just get lucky.

JOSEPH T. WELLS, CPA, CFE, is founder and chairman of the Association of Certified Fraud Examiners, Austin, Texas. Mr. Wells’ article “So That’s Why They Call It a Pyramid Scheme” ( JofA Oct.00, page 91) has won the Lawler Award for best article in the JofA in 2000. His e-mail address is joe@cfenet.com .

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