Won’t get fooled again: The who, what, and why of fraud

Hosted by Neil Amato

Kelly Richmond Pope, CPA, CGMA, is a professor at DePaul University and the author of a book scheduled to be published later this month on fraud. Fool Me Once: Scams, Stories, and Secrets From the Trillion-Dollar Fraud Industry is designed to help people "see themselves or see their businesses in the stories" so that they can improve their defenses against fraud.

Pope details an interactive game related to the book that can help educate business owners about fraud and the motivations of fraudsters.

Here are Pope's previous appearances on the JofA podcast:

What you'll learn from this episode:

  • An alternate title that Pope considered for her book.
  • A recap of Pope's fraud-focused documentary, All The Queen's Horses.
  • An explanation of accidental perpetrators and righteous perpetrators of fraud.
  • The "roller coaster of emotions" that Pope mentioned when interviewing fraudsters.
  • The relationship between a lack of internal controls and the opportunity to commit fraud.

Play the episode below or read the edited transcript:


— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.


Neil Amato: Welcome to the Journal of Accountancy podcast. This is your host, Neil Amato. Joining me on the show today is a repeat guest, Kelly Richmond Pope. She's a CPA. She is a professor at DePaul University in Chicago. Kelly has been on the podcast before to talk about fraud. We're going to talk more about fraud today. Kelly, you have a book scheduled for publication March 21. The short title is Fool Me Once. First, tell me a little bit about that title, and also welcome back to the podcast.

Kelly Richmond Pope: Well, thanks, Neil. It's great to talk to you again. I'm super excited about the launch of the book. I feel like I'm birthing another child. But Fool Me Once, as you said, comes out March 21, and it's being published by Harvard Business Review Press. I'm a title person, so I like to think of something that is memorable, that sticks with people.

When you say "fool me once," it almost has a double meaning because you want to be fooled only once, but you almost never want to be a fool. And so the saying was made famous by then-President George W. Bush. I remember when he made the mistake, and it just stuck with me. When I was doing this book, I wanted the book to be story-driven, but I also needed a clever title.

If you know me or have heard of me from this podcast before, I've been on here talking about my documentary, All the Queen's Horses. Again, another title that I wanted a play off, the nursery rhyme, all the king's horses and all the king's men couldn't put Humpty Dumpy back together again. I like to think of titles that resonate with people. It took me a long time to come up with this. I worked with a developmental editor, Abby Ellin, who helped me come up with the title. We were going back and forth for months on just different sayings and I almost landed on the title, Mind Your Business, but then we just stuck with Fool Me Once.

Amato: That's a good insight into it. You're right, titles do matter because they do need to stick with people and, certainly, All the Queen's Horses is a great example of that. One section of the book in the intro is "Fraud Affects Us All." Yes, this is an accounting podcast, but I like to think we draw in a general audience as well, and especially on the topic of fraud, I think there's a lot of interest. Explain a little bit more about that for the audience, "Fraud Affects Us All."

Pope: Well, fraud affects us all because you think about the different components of it. You have the perpetrators, you have the victims, and you have the whistleblowers. All of us fit into one of those categories. Now we hope we're never a perpetrator, but we can think about being either victimized or blowing the whistle on fraud. There's no part of our lives that we're not vulnerable to fraud. There's no part of our lives where we don't need someone to blow the whistle on fraud.

When I talk about "Fraud Affects Us All," it affects our industries, it's global, it's local, it's national, and it doesn't matter the amount. Sometimes you read about smaller frauds, maybe $10,000, maybe $10 million, maybe $100 million. The broken trust is the same regardless of the dollar amount.

Amato: Also in the book's introduction, you cite several reports that mentioned fraudsters taking advantage of world events. Obviously, the pandemic is one of those. Maybe a little bit more, could you explain about how the pandemic opened up new fraud opportunities or maybe any other examples of those world events?

Pope: Fraudsters, or people in general, are impacted by world events. But what's interesting about the world event that we've just lived through and sort of are still living through with COVID-19 is it birthed a new group of fraudsters. That group is just ordinary people, professional people, doctors, nurses, pharmacists, entrepreneurs, people that saw a loophole that they could just exploit.

You saw a lot of this with entrepreneurs not being honest about the number of employees that they had so they can receive funding in the [Paycheck Protection] Program. You just saw the birth of people that you never would ever think would break the law. What that shows us is that world events allow or expose people's vulnerabilities, and when people's vulnerabilities are exposed, that just makes fraud right, that just makes you just a victim in the waiting. I think that when you see world events, whether it's COVID, whether it's the war in Ukraine, whether it's a food crisis, a water crisis, anything that is exposing a vulnerability makes us susceptible to fraud.

Amato: You mentioned earlier that there are three categories of people. They are the perpetrators, the victims, and the whistleblowers. You said, you don't want to be a perpetrator, but is there a chance that someone can be an accidental perpetrator? Where I'm going with that is you mentioned in the book that there are intentional and accidental perpetrators of fraud. So could you explain the difference between those?

Pope: Well, what I've done over the past probably 12 to 15 years is I've gone around the country and done on-camera interviews with white-collar offenders, whistleblowers, and victims of fraud. When I think about the white-collar offender category, I started doing some self-reflection and asking myself, "Why do I have this roller coaster of emotions when it comes to reading about these cases or doing interviews?"

What I mean by that is sometimes I'm just very angered by the case or the story or the interview that I'm doing. Other times I'm very empathetic as to the perpetrator that I'm talking to. What that forces me to do is think of a way to categorize various perpetrators. What I believe is all perpetrators are not created the same, and movies are made of intentional perpetrators.

In my documentary, All the Queen's Horses, Rita Crundwell was an intentional perpetrator. Somebody that knew all of the weaknesses in the system and intended to exploit the system into fraud. But then there are these other two categories. They really strike us differently, and that is accidental perpetrators and righteous perpetrators.

There's a distinct difference between the two. An accidental perpetrator is a person that is doing their job. The boss may ask them, "I need you to book this entry, you can reverse it next quarter. We just need to do this just to meet Wall Street expectations," for example. You know it's wrong. You don't think it's illegal. You're not going to gain anything from it, besides keeping your job, and you do it.

You're a people pleaser. You want to keep your boss happy. You're a team player. Now that might sound like you, and it maybe sounds like a colleague of yours, but that's the accidental perpetrator. What I started to notice, is when I would do these interviews or invite that category of the perpetrator to come to the class, and they would share their story, I, along with my students, would empathize and say, "I might not have done the same thing that you did, but I understand how it happened."

That's the accidental perpetrator. Now, the righteous perpetrator is a person that is in a position of power within their organization, and they are able to use their power and privilege to help a person outside of the organization. You might be the CFO, and you have control over some financial aspects of the accounting process, and you know if you're able to fudge the numbers, you can help a spouse, you can help a cousin, you can help a friend get a contract.

That's a righteous perpetrator. Again, when those categories of perpetrators have come to my class, students empathize with the story in a different way than they do with the intentional perpetrator. Intentional perpetrators, you're just angered by them. I wanted to create an archetype system that allowed us to understand the various categories. I have categories for the victims, and I have categories for the whistleblowers as well, but we're just talking about the perpetrators right now.

Amato: You also write in the intro that you hope the stories and cases will help readers understand the pitfalls of not paying enough attention, not installing the proper internal controls, and not empowering the right people to protect organizations. Could you give some advice on each of those aspects — not paying enough attention, not installing internal controls, and not empowering the right people.

Pope: Sure. What I was hoping with the book, is by focusing on characters and story, I wanted people to read it and see themselves or see their businesses in the stories that are depicted in the book, so sometimes, we overlook the obvious. A lot of times we ignore the red flags for a lot of psychological reasons. It may be a friend of ours. We may be overtrusting, so I think that through the stories, I hope people can understand their own missteps and their own ways that they can overlook the obvious. That was the first thing.

The second thing that I hope that readers would understand through the stories and through the cases was the issue of not putting in the proper internal controls, and I think that where there's fraud, there's always a lack of internal controls, and it's really simple. I think we see that so often because we overtrust, and we have to stop doing that.

I wanted to make sure that readers would see these cases and one, understand how the red flags are missed, but two, understand how just introducing internal controls correctly could have prevented the fraud. Now, the last piece of not empowering the right people is really going back to the importance of effective compliance and ethics training, and I believe that it's every employee's role to mitigate fraud.

If you have effective training, if everyone knows that it is their job to police it, then everyone is empowered. So I think sometimes the problem is you just put it into one department, and that's never going to be a great fraud police person. You want to make sure everyone's empowered. So what you'll notice through the stories is that a lot of fraud happens in front of everybody's eyes. If everyone is empowered, and they know the red flags, and you have the internal controls there in place, most of these cases never would have happened. So through storytelling, through humor, through engagement, I hope that readers understand and find value in the book.

Amato: We've mentioned the documentary about fraud, All the Queen's Horses. You've created an interactive game, Red Flag Mania, and now you have this book. So what's next for you when it comes to educating about fraud?

Pope: Neil, that's a great question. The book might be one of the last things I have in my toolbox. But one of the things that I wanted to do from the book, is I created an interactive game. It's completely free called the Fool Me Once Fraud Experience, and what I wanted readers to be able to do was, a lot of times when you read the book, it's a passive experience.

You're reading something. You read these stories, and you're just like, "Yeah, this is good." But what I wanted to do is create an experience where readers could go in and determine what type of perpetrator would they be if they were ever to be one, or what type of whistleblower would you be if you were ever to be one? When you play this game, you go through these various scenarios, and the scenarios are modeled out of the cases mentioned in the book and pops up an answer.

Then it'll say, Neil, you are an accidental perpetrator, or Neil, you tend to agree more with intentional perpetrator traits, or Neil, you might be righteous perpetrator. It will tell you that, and then it tells you the characteristics of each. Then under the whistleblower category, you go through that scenario, and it'll say, Neil, you either are an accidental whistleblower, a noble whistleblower, or a vigilante whistleblower.

I wanted to create an active reading experience. You read about these people, and sometimes people are able to say, "Oh, look at them, look what they did." But wouldn't it be valuable for you to learn something about yourself and about your own choices to see what you may identify with more. You know, Neil, we should actually play the game.

Amato: Yeah, I think it would be fun, and I definitely think that as we've talked about in previous podcasts, people learn better when they have games to play. Kelly, this has been great. Thank you very much for being on.

Pope: Thanks for having me, and I hope that people will go out, read the book, play the game, and if you play the game and it tells you what type of perpetrator or whistleblower you are, let me know. We can talk.

Amato: That's great. Kelly Richmond Pope, thank you.