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Fraud and infidelity: A match made in heaven?

posted Apr 27, 2012, 1:53 AM by Resty Manapat

What on earth do fraud and infidelity have in common? Quite a lot actually.

While there may be no scientific studies available that analyze the correlation between financial fraud and infidelity, anecdotal evidence obtained while working in the field of fraud investigation for more than a decade suggests there is a correlation.

A discovery of a corporate fraud has often led to the discovery of a secret addiction like gambling, alcohol, or drugs. Digging into the financial records of a suspected thief finds a spending problem, a secret source of income, or theft from another party. Discovery of fraud has also led to a spouse finding out about infidelity and the existence of a love child.

The reasoning behind the theory that fraud and infidelity are often related is simple: Fraud does not happen in a vacuum. It takes a certain mindset to be able to commit adultery and to be able to commit fraud. I have rarely seen extremely deceitful acts being confined to simply one part of a person’s life.

It’s easy to see how the rationalization of dishonest behavior at work is transferable to the rationalization of other unacceptable behavior. In this regard, it’s not a stretch to think that an employee capable of theft at work is also capable of lying to a spouse and committing acts of adultery.

There are also the simple logistics related to carrying on a secret love affair. It costs money. And typically this money must be unnoticed by the spouse. If the spouse is uninvolved in the family’s financial affairs, this may be easy. But if the spouse is well aware of the financial situation of the family or keeps tabs on all the money, there needs to be a source of funding for the affair. Defrauding an employer may be a simple and logical option.

Why does anyone really care about the correlation between infidelity and fraud, if there is one? First, the issues of infidelity and prostitution have been in the forefront of many minds with the shenanigans of former New York Gov. Eliot Spitzer.

But this issue is more than tabloid material. If companies are to have any chance at curbing fraud committed by employees and other trusted associates, owners and managers must be aware of signs pointing to fraud. And sadly, dishonest behavior in one area of a person’s life may be a telltale sign of dishonesty in other areas.

Every workplace fraud is made up of three parts: opportunity, motivation, and rationalization. The opportunity to commit fraud is largely controlled by the company, and fraud risks are reduced by having checks and balances in place. But motivation and rationalization are two pieces of the fraud puzzle that are very closely related to being unfaithful to a spouse.

In order to commit fraud against your employer, you must have a motivation. You must have a desire or a need that is filled by the fraud, you must get a certain thrill or satisfaction out of it or you must have some other underlying reason why you commit the fraud. Similarly, there is a motivation behind committing adultery. This too, could revolve around some sort of need, desire, or thrill.

A person committing fraud must also be able to rationalize the behavior and make the behavior “okay” within his or her own moral code. The same goes for infidelity. The thief or cheater needs to be able to tell herself or himself that the behavior is justified or okay.

When looking at fraud and infidelity in this way, you can see how they run along parallel paths. The only difference is really the ultimate act that is committed, but both are deceptive and damaging to the victims. A blurry line between right and wrong doesn’t stop with one’s personal life. It can easily filter over into the workplace.

A person who commits fraud is in a position of trust, just as a spouse is trusted to be faithful to the wedding vows. An employee is familiar with the operations of a department or the company as a whole, and is therefore able to effectively cover up a fraud. A spouse knows the family’s schedule and routine, and therefore is also able to conceal a pattern of cheating.

What can owners or managers do with the knowledge that fraud and infidelity have many points of similarity? If an employee is known to be engaged in infidelity, that employee likely should be eyed carefully in terms of trust and honesty issues. Never, ever ignore signs that indicate your employees are dishonest, or you may be their next victim.

Source: Wisconsin Law Journal