TED Radio Hour - The Age of Fraud

Episode Date: July 28, 2023

Fraud is everywhere around us — but not everyone steals for the same reasons. This hour, forensic accountant Kelly Richmond Pope explores the motivations and implications of why we cheat the system. TED Radio Hour+ subscribers now get access to bonus episodes, with more ideas from TED speakers and a behind the scenes look with our producers. A Plus subscription also lets you listen to regular episodes (like this one!) without sponsors. Sign-up at plus.npr.org/ted. See pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences.NPR Privacy Policy

This is the TED Radio Hour. Each week, groundbreaking TED Talks. Our job now is to dream big. Delivered at TED conferences. To bring about the future we want to see. Around the world. To understand who we are. From those talks, we bring you speakers and ideas that will surprise you.

You just don't know what you're going to find. Challenge you. We truly have to ask ourselves, like, why is it noteworthy? And even change you. I literally feel like I'm a different person. Yes. Do you feel that way? Ideas worth spreading.

From TED and NPR. I'm Manus Shumeroady. About three hours west of Chicago is a town called Dixon. It is the quintessential small town, a population of 16,000 people approximately. Dixon is known for its yearly Petunia Festival. It's also where Ronald Reagan grew up. It's this cute town that has this main street where there's a few shops and, you know, there's a jeweler, there's a banker, but it's this really small town, super cute. A place where you don't think people lock their doors at night, everybody knows everybody.

You know, your kids are outside playing in the front yard by themselves, and you have no concerns. That's Dixon, Illinois. This is Professor Kelly Richmond Pope. I like to describe myself as by day I'm an accounting professor. and by night, I'm a fraud investigator. For the last 20 years, Kelly has been specializing in forensic accounting, studying how and why financial crimes happen. It's the intersection between accounting, auditing, fraud, psychology, social psychology,

and just a dash of just being super nosy. One of Kelly's favorite cases is about a Dixon, Illinois resident named Rita Crundwell. Rita started working for the city right out of high school. And she rose up through the ranks and became the city cop-trollers, so the person that manages all the money for the town. And everybody trusted Rita. In her documentary called All the Queen's Horses. Kelly chronicled how Rita managed to embezzle money from the city coffers for 20 years

and dupe the entire town, including her colleagues at City Hall. She made it easy to work here. She would always say to me, if ever you make a mistake, don't worry, it can always be corrected. You know, you have a trusted employee, and it's human nature to trust them. What fascinates Kelly was how Rita openly flaunted what she did when she wasn't balancing the city's books. She was breeding champion horses. Congratulations, 2011.

World champion, good I will be. On the show by Rita Cronwell of Dixon, Illinois. Rita didn't have just one or two horses. She owned 400, which would clearly have been impossible on a civil servant's salary. She was leading a big lifestyle. I thought, and I think everybody in town thought, that it was all due to these horses. You know, there'd be stories in the paper that she's got another national champion, and she'd have pictures. Rita was very polished all the time.

She always had beautiful jewelry on. By day, she's wearing meek, you know, municipal clothes. And by night, she's dripping with jewels. I saw her pull up one day with a brand new custom-made sundowner trailer just to haul the horses in. And, you know, the word was out. It was $250,000. There were people that questioned. But when you question someone like that, then people start questioning you.

And so I think she created this barrier around her where she was really untouchable. why would a city comptroller that works every day nine to five own 400 horses and be showing them in such a lavish way? Everybody was like, how did Rita come across all this money? And we were told that Rita had a boyfriend that passed away and left all her money to her,

and it was believable. She told people that her parents were investors in Campbell Soup companies. I mean, certainly her parents, her parents could have owned many acres of farmland, which is very high revenue. When I'm teaching my fraud class, I use the term lifestyle fraud. It's because you live right out in the open. And sometimes when you are so brazen, people couldn't think that you're stealing.

Like, it doesn't make sense that someone would actually do that. So you tell yourself, nah, they're not stealing because who would do that? For Professor Kelly Richmond Pope, Rita Crundwell's case is a gateway to, to understanding the psychology of white-collar criminals. Because while we hear about big financial scams in the news all the time, Grace Theranos founder and CEO found guilty. Another scandal is rocking Wells Fargo. The bank has an organization guilty of all charges.

15 counts of tax frauds. Smaller, quieter cons are happening all around us every day. We've been trying to reach you concerning your car's extended warranty. Costing companies and individuals. an estimated $5 trillion a year. So today on the show, living in an age of fraud. The motivations and implications of why we cheat the system with accounting professor Kelly Richmond Pope,

TED speaker and author of Fool Me Once, scams, stories, and secrets from the trillion-dollar fraud industry. So back to Dixon, Illinois. Rita Cronwell had been embezzling money for two decades. But then in 2011, someone finally noticed something was wrong. So this is Kathy. Kelly Richmond Pope picks up the story from the TED stage. Kathy Swanson is a retired city clerk from the city of Dixon.

And one day, Kathy was doing her job just like she always did. And she stumbled upon a pretty interesting case. See, Kathy was at the end of the month, and she was doing her treasurer's report for the city. And typically her boss, Rita Cronwell, gave her a list of accounts and said Kathy called the bank and get these specific accounts. And Kathy did her job. But this particular day, Rita was out of town and Kathy was busy. She picks up the phone.

She calls the bank and says, fax me all of the accounts. And when she gets the fax, she sees that there's an account that has some withdrawals and deposits in it that she did not know about. It was an account controlled only by Rita. And actually, I had the opportunity of interviewing Kathy for my documentary of All the Queen's horses. I saw this one account that I had never heard of before. And what I noticed on it was three large deposits. And it was in care of her. It was RSCDA, city of Dixon, in care of Rita Crundwell. I didn't know who to go to. I sat on it for a couple of days. I hit it in my car.

So Kathy looked at the information. She reported it to her direct supervisor, which was then Mayor Burke, and this led into a huge investigation, a six-month investigation. I said, I think there's a cancer in City Hall, but I need to talk with somebody, and I took the bank statement along. The FBI secretly investigated Rita with the help of Mayor Burke and Kathy Swanson. Kathy keeps her mouth closed. She's providing information to the FBI and still working her regular job under her supervisor Rita Cronwell.

Until the final day when the FBI said to Mayor Burke, listen, we're ready. We have the information that we need to make an arrest. And that's sort of how everything blew up in Rita's face. In the end, how much had she stolen and how big was this case? Rita had embezzled $53.7 million. Whoa. And that, Manus, is a conservative estimate because some records were lost or not able to be confirmed. So $53.7 million that was stolen. This is known as the largest municipal fraud in

United States history. This case here that happened in small town USA Dixon, Illinois, 16,000 people. Stolen from under the noses of her unsuspecting neighbors. And stolen in plain sight, plain daylight. The thing that bothers me is how many projects and or services have not come about in the city of Dixon because the tax dollars weren't there. If people ask, well, who suffered because of this? Everybody in this city suffered. So Rita Cronwell was found guilty.

She was sentenced to 19 years in prison. She only served eight before being released early in the pandemic. But even though she committed the largest municipal fraud in American history, which when I heard this, I was like, whoa, this is such a crazy story. But what you have discovered in your career, Kelly, is that she's not actually that unique in what she did. Exactly. She's not unique in terms of do people steal from organizations.

She's not unique there. But a lot of them are small, you know. It's the person that abused the corporate credit card for a pretty significant. amount. It's some corporate executive, some person that has an MBA and is working on Wall Street that has manipulated the books. Or there's some person that may create an entry that overstates revenue or understates expenses. Fraud is built into our culture in a way that we just can't get away from it. I think what makes Rita's story unique is the amount of time and the amount of loss. I mean, it takes some maneuvering to take $53.7 million for 20 years.

It's pretty significant. So that's what makes her unique. In your book, you outline very clearly some recurrent themes that you've seen in your case studies. For example, you describe what you call three distinct types of perpetrators. Can you talk about those three categories, what they are? Sure. One of the things I do in my class with myself, graduate students is we have a lot of visitors, guest presenters, and we have various perpetrators

that would come to class. I realized that my students' responses to them were very different depending on their rationalization. And so it started me wondering, all perpetrators really are not the same. They're not the same. Everybody does not steal for greed. So how can I try to break down this rationalization component so that people can understand the why a little bit differently and perhaps even empathize. And so what I wanted people to realize, too, is everyone is not an intentional perpetrator.

If you are listening to any true crime podcast or if you're watching any crime shows, you're typically watching the lives and decisions of an intentional perpetrator. The Rita Crundwells of the world. The Rita Crundwells of the world. Somebody that knows a system inside and out and manipulates that system for personal gain.

But everyone's not like that. In a minute, more psychological profiles of white-collar offenders with TED speaker and accounting professor Kelly Richmond Pope. Everyone is not a Bernard Madoff who is just doing things for personal gain. There are some people that are either following the boss. orders, or there are other people that are using their organizations because they have the power and the privilege within an organization to help someone outside. And that was Kayla. That's who she was. The accidental perpetrator and the so-called righteous one, like Kayla Ravelo.

There were students that were crying as they were listening to what happened to her, because they could empathize and they could hear that she was a person. but did not receive any direct personal gain, was really truly trying to help her husband. I'm Anoush Summerodi, and you're listening to the TED Radio Hour from NPR. Stay with us. Friends, before we get back to the show, I want to let you know about TED Radio Hour Plus. When you become a plus listener, you get bonus episodes made just for you, with more ideas from TED speakers, and you'll go behind the scenes with our producers.

What you won't get, though, are those sponsor messages interrupting the show. And that's because you are directly supporting our work at NPR. So if you'd like to show your support, learn more and subscribe at plus.npr.org slash TED, or write in the Apple Podcasts app. It's the TED Radio Hour from NPR. I'm Manushe Zamorodi. On the show today, living in an age of fraud. My guest is Ted Speaker, Forensic Accountant, and Professor Kelly Richmond Pope.

Her book is called Fool Me Once, Scams, Stories and Secrets from the Trillion Dollar Fraud Industry. Kelly, according to the FDC, here in the U.S., fraud losses totaled nearly $9 billion in 2022, and that was up from $3 billion the year before. That's a big increase. What do you attribute it to? I think that there's a couple of things that have pushed a lot of people that would never, ever think that they would engage in fraud now to engage in fraud. Look at our most recent situation that we're dealing with, which is the pandemic. And one of the things that was really interesting is the PPP loan fraud.

There was a fair amount of first-time offenders, doctors, lawyers, entrepreneurs who realized that the rules were. were relaxed, the government have relaxed rules in order to get money in the hands of business owners. But when you relax those rules, it allowed people to say, hmm, I heard that the government really isn't verifying if I actually have four employees. I could probably say I have 40 employees. And money is going to be doled out based on the size of my organization. If they're not really confirming or verifying that and I heard my friend down the street did it and got money, I'm going to try it too. I mean, that seems pretty risky. From your interviews and research, why do you think people assume that no one will notice that they won't get in trouble? So I think that there's this

spread of fraud where everyone is willing to try it because they think, eh, I'm just going to get a slap on the wrist anyway if I get caught and things will be fine. So I do think that we're living in a time where people are willing to try more. I also think that social media has played a role in what I think people feel as though

is due to them. So never in life, in my young adult life, did I have access to see how celebrities were living, where they were eating, where they were traveling, what they were doing, what they were wearing. And that does

something to me, I think, if I were to do this, where I think I should have those things too. How can I have them now? Hmm. Maybe I'll try to use my corporate credit card to purchase an expensive handbag because I want it to. I think when we have leadership that may present as a little bit less ethical than it may have the pay. Yeah, I'm thinking of Donald Trump saying, you know, getting around my taxes doesn't make me fraudulent. And it makes me smart. And people think. But think about how that impacts society.

When you see the most powerful office in the land saying that, how does that impact what I should be doing? You know, so I think all of that has an impact on the way we are living and what we're willing to try. Let's go back to the three types of perpetrators that you've identified. Earlier we talked about the intentional perpetrator, someone who commits fraud very much on purpose. Let's talk about the second category, the accidental perpetrator. What is their motivation? How do you describe them? Yeah. Some people are following the boss's orders, don't feel as though they can push back, and they find themselves ensued in a fraud.

That is a category that I define as an accidental perpetrator. Because I'll use myself as an example. If my department chair came to me and said, Kelly, I need you to just sign off on this document. I'll explain it to you later. Don't worry. More than likely, I'm going to do it because I trust her. I trust the system.

I trust the process. And I may feel as though I can't even push back because she's my department chair. She's my superior. So I'm going to honor my role, my duty, and the hierarchy that I work in. And if she asked me to do something, I'm going to do it. Now, that could lead me to being engaged in fraud, and I'm still a perpetrator, but my rationalization of why I did it was not for personal gain. I was just following the boss's orders. You give an example of a man named Andy Johnson, who was the vice president of finance at an energy company.

And this brings us back to your specialty, accounting. He got into a tricky accounting situation that ended up blowing. up in his face, even though he didn't think he'd done anything wrong. Can you share that story? Yes. So Andrew Johnson, he was in a situation where he was an accountant inside an organization and he was charged with really just making the numbers work. He worked for a company called NYCOR Energy. Nycourt Energy was a very sales-driven organization. The more customers we find, the more money we make and we don't necessarily care how we find them, we just need to make the money. And all they told Andy is just make the numbers work. And so they would bill customers a certain

amount for the energy that they would use. And then they would have to estimate how much they think that bill would be when it became due in the next cycle. And so it's this accounting process where it's not an exact science. So Andy found himself in a situation where they overestimated what they thought their customers needed to pay. And because of the fluctuation of natural gases, that estimate went down. And they needed to go back and say, actually, our revenues are lower than we thought that they were going to be. Now, his CEO, CFO did not want to hear that. And Andy was charged with, okay, how are you going to fix this situation?

Because we can't lower our revenue. So basically, Andy estimated his company would make a lot more money than it actually did, which meant that as a certified public accountant, he should have gone back and revised the numbers in his spreadsheet to reflect how much money they really took it. Yes. So Andy knew as a CPA, he knew that he had to follow, generally accepted accounting principles.

And generally accepted accounting principles says that you must adjust that in the period that you know that you're going to take a reduction. Andy tried his best to explain that, but nobody wanted to hear that. And so instead of taking all the loss in the moment and the period that he knew of it, he spread it out over a period of time. You're not allowed to do that according to generally accepted accounting principles. You just can't. So he made it look like there had been less of a big hit on the books.

And just sort of to cushion the blow, he spread out the loss over several months. Exactly. Okay. Exactly. Now, Andy did not think it was right because he was a CPA. He didn't think it was illegal. Andy felt really uncomfortable in the environment that he was working in. He decided he was going to leave NICOR.

And he found another job. He left that world, thought it was okay. And then three months, about three, four months into the new job, he gets a knock on his door from the FBI at home. And even when the FBI came, he thought, let me provide them with some information on what I saw and how the operations worked within Nykort. Never did he think he was a target, but he was. He was definitely a target. Wait, so he ended up going to jail? Oh, yeah.

He sure did. So there's no way that he could say, listen, this is what my bosses wanted me to do. Even if they didn't say it explicitly, I was just following directions. Listen, I can promise you that Andy said that. At some point in all of the interviews with the SEC, the interviews with FBI, I'm sure he said that. I was just following their orders. But then someone can say, you're a CPA. You understand the rules.

You have a fiduciary responsibility to do what's right to protect investors, potential investors. And you know this. Actually, you know it better than they do. So that can't be your defense. The worst part is, though, that he actually was like, ugh, this place stinks. I'm going to go find another job. And he, like, left. Exactly.

And so it's interesting because it matches this whole. idea of an accidental perpetrator. I never said to you that Andy wanted to buy a new car or live this lavish lifestyle. None of those things applied to him. How many of us have been in a situation when someone that we report to ask us to do something that we just don't really feel comfortable with, but we don't push back. This accidental perpetrator category are people pleasers. People that are team players. And that's a lot of us. There are people who you talk about in the book who commit fraud on purpose, but not so that they can buy fancy cars or big houses. They do it because they think they're doing the right

thing for other people, right? Can you tell us about that category? Yeah. So that category is called the righteous perpetrator category. And so there is a category for people who think they're doing good even if they're doing wrong. As I was organizing my thoughts and doing research, there was a person that reached out to me, and her name is Kayla Ravello. Kayla was a successful attorney. She graduated from Columbia University Law School, worked on Wall Street, and was a corporate lawyer for some very significant firms.

And so Kayla was very successful, but her husband wasn't. And so she one day said to her husband, you know, we are in the process of hiring vendors. And if you were a vendor on record, you could probably do some of the litigation support work for the firm. Now, the firm didn't have any anti-nepotism policy. And Kayla's not going to let anything go wrong. It's a referral. We refer people to other people, other business all the time. So it doesn't sound illegal.

Would you agree with me? Yes, I had absolutely agree. Okay. So Kayla's husband started an LLC and his family worked in the LLC. And so they were providing litigation support services. And there was a request for proposal. And Kayla's husband's firm was selected. Nothing wrong there.

Now, Kayla did not tell her partner. that who they actually selected was not only her husband, but her husband's family. She did not disclose that information, okay? She knew maybe not the best thing to do, but illegal she never thought. So things were working fine. He was doing the work. He was submitting invoices. Kayla had ultimate oversight of the invoices for approving them.

Everything was working fine. Well, there was a change in Kayla's department where they decided that they needed to submit invoices for work that had not been done such that they could use up some of the budget and not have to go back to their accounting department to say, we didn't use all the money we requested this year. So Kayla says, I'm going to submit some of these invoices for this litigation support. and we were going to pay them in advance with anticipation that the work will be done. The invoices were submitted by our husband's company, but the work stopped. He did not complete the work. So now people are asking Kayla, what's going on with this vendor? Why haven't we gotten the work?

And Kayla feels as though she can handle it. It's her husband. So I'm going to ask you, if you were Kayla, what would you do? you would think I can talk to my husband. Yes? Yeah, I'd be like, what's going on? Get it done. Get it done.

So Kayla tried and tried and tried to talk to her husband. And this went on for about six months. So Kayla's on a business trip, gets off the plane, and she's missed all these calls. Her husband had been arrested. He sold some type of drug to an undercover cop. When law enforcement started looking at it. into her husband, what was revealed is he had another family. Oh, dear.

He had another wife, another kid, and maybe that's why I went getting the work done. Yeah. So now Kayla is in a tough space. She's devastated. Her husband has been arrested. This work that has not happened. These invoices have been paid. Her partners don't know.

Can you feel the stress? And so now, as they are digging into her husband's life, they're digging into her life. So to make a really long story short, they're both arrested. She lost her law license, of course, lost everything. And Kayla reached out to me during the pandemic and said, you know, I've been following you on Twitter. Would you be open to having me come to class and share my story with you? And I'm like, absolutely. Yeah.

And when I tell you Mniew, you know, I'm going to be able to. that there were students that were crying as they were listening to what happened to her because they could empathize and they could hear that she was a perpetrator but did not receive any direct personal gain was really truly trying to help her husband now helping her husband does that indirectly help her sure but it was more of an emotional help because she didn't need the money she was a well paid attorney. So that was one of my reasons for creating this category because everyone is not a Bernard Madoff who is just doing things for personal gain. There are some people that are either

filing the boss's orders or there are other people that are using their organizations because they have the power and the privilege within an organization to help someone outside. And that was Kayla. That's who she was. And so I was very moved by her story. We've been talking about financial fraud, accounting scams. But there are other kinds of fraud too, right? Like medical fraud. Can you tell us about a case that you researched that happened 20 years ago, but I looked and it still comes up in the news. It's the case of a pharmacist named Robert Courtney.

Yes. You know, Robert Courtney sort of gives you chills for so many reasons. So Robert Courtney was a. Kansas City, Missouri-based compound pharmacist. Now, I say compound pharmacist because this is not the pharmacist that is in the Walgreens or the CVS's of the world. They are not the one standing behind there in their white coats. This is like the behind-the-scenes pharmacist. The person that makes the medication, makes the drugs. So that's what a compound pharmacist does. And one of the things he did was mix chemotherapy drugs for cancer patients. Exactly. So think,

about if you are a stage two or three breast cancer patient and you go to your oncologist, they hang that IV bag and you think it's filled with the medication that you need to shrink that tumor. Robert Courtney is the compound pharmacist on the other side that you never even think of. But what was happening was the patients weren't experiencing the traditional chemotherapy side effects that most patients experience. Weight loss, hair loss, nausea, are the typical side effects that a person experiences when they're going through chemo. Well, what the nurses started to notice was that the patients weren't experiencing that. So the nurses decided that they were going to take a bag of the intravenience

drugs and have them tested. They sent them off to the FDA. And what the test revealed is there was about only 1% of the approved medication, the proper dosage, yes, in those solutions. And so Robert Courtney was altering chemotherapy drugs. And when I say altering, I want to say diluting. When we come back, the impact medical fraud has on patients and why it's become harder than ever to be a whistleblower. More with forensic accountant and professor Kelly Richmond Pope. I'm Manus Zameroody and you're listening to The Ted Radio Hour from NPR. Stick around.

It's the TED Radio Hour from NPR. I'm Manushe Zomerode. On the show today, white-collar crime and fraud. My guest this hour is Ted Speaker, forensic accountant and professor Kelly Richmond Pope. Kelly was just explaining the 2003 case of pharmacist Robert Courtney, who was diluting medications, including treatments for AIDS and cancer. Kelly says his financial records were important clues to his motivation. He had two issues. He had a 600,000 bill from the IRS that needed to be paid,

and he wanted to make a donation to his church. He was highly religious. and he wanted to make a donation to his church. And so by spreading the drugs out among more people, it allowed him to increase his gross margin. And so this allowed him to expand that number. It's like going to a bar and getting watered down vodka, but far more deadly. Exactly. I mean, that is horrific.

Do we know how many doses he tampered with? Well, there were 98,000 prescriptions. and it affected 4,200 patients. It's sickening. When you think about the fraud perspective, it's almost like the perfect crime. Because think what happens. If you are 73 years old and you're a stage four cancer patient

and you pass away, no one's going to question it. Because they're just going to think your tumors grew and grew and grew and grew, and you just passed on. So no one's going to question. If it wasn't for those, nurses and doctors who really said something's just not right here. We need to look into this just because something just feels wrong.

I know what this looks like and I've never seen anything like this. Something's wrong. But you know, who would ever think that a pharmacist would do something like this? Why would a pharmacist tamper with drugs? And I interviewed a victim who talked about her mother who was one of the patients affected by this dilution of drugs. And she said that, you know, my mother was in excruciating pain towards the end of her life. And to find out that what it was was she didn't receive any medication, she said she could not even breathe for days when she heard this because she felt like her mother probably could have survived.

Gosh. There are victims that say my father, my mother had stage two cancer and was supposed to live. The prognosis was positive. And then the cancer just grew and grew and grew and grew and grew. We didn't know why. And they died. And so he was sentenced to 30 years in federal prison. And so he still sits in federal prison today.

In so many of the cases that we've talked about, if it weren't for one person who knows, noticed something off, nothing would have happened. You know, you've got the county clerk. You've got nurses who are wondering what's happening to their patients. You've got someone who takes a stand who speaks up, the whistleblower, and you say that we need more of them. Yes. And, you know, the nurse going up to the oncologist saying something is wrong. took a lot of courage. You have a right to say something and keep going if you just feel

that it's wrong. And so I am a strong believer of whistleblowers and I find whistleblowers a source of inspiration. They make me question if I have the bravery to do what they do. and I hope I do, but, you know, it makes you question because sometimes staying silent is easier. And when you think about when you're coming forward with this type of information, it's not to really benefit you. It's to benefit society, to benefit others, those that you don't even know. And so that takes a level of bravery, compassion, integrity, you fill in the blank of which word it means to you, but it takes something in them that I hope I have in me. When you think about some of the more classic or historical fraud cases, it always is around

a whistleblower. Think Watergate, discovered by a whistleblower. Think Enron, discovered by a whistleblower. And who can forget about Bernard Madoff, discovered by a whistleblower? It takes a tremendous amount of courage to come forward in the name of the truth. But we'll When we think about the term whistleblower, we often think of some very descriptive words. Rat, traitor, tattletail, weasel, and those are the nice words, the ones I can say from the stage. How many of us have ever seen something thought that we should report it but decided not to? When this question was asked to a group of employees, 46% of them responded by saying that they had seen something and decided not to report it. Many people choose not to become whistleblowers due to the fear of retaliation, from demotions to death threats to job loss, perpetual job loss.

Choosing to become a whistleblower is an uphill battle. Their loyalty comes into question, their motives, their trustworthiness. Yeah. You talk about the threat of retaliation from the person or the organization. that they're blowing the whistle on. And I had never heard this story. The one that comes to mind is that of the tellers at Wells Fargo. What happened there?

Wells Fargo had a culture of just unethical behavior. And so it was part of the culture. And it came from the top. What they were telling people and instructing people to do was to open accounts in the names of customers so that Wells Fargo. could recoup the fees. So that is additional checking accounts, credit cards, you name it. They were doing it. And so they were banking on the fact that we wouldn't, we as consumers, as customers, wouldn't figure it out. And they were probably right about that. I mean, how frequently

are you really looking at your statement? Are you really downloading your statement, downloading that PDF from your bank, and going line by line by line, by line. or how frequently has it been where you've received in the mail, you've been pre-approved for a credit card. Now, what customers were experiencing at Wells Fargo is they were receiving an actual credit card that says, here is your credit card. You know, have at it, go use it. And they never opened that. And so the bank was using a process called pinning, where they would set a pin to four zeros,

so that the bank employees, the tellers, could control the account. And so this allowed the bank to receive fees on these open credit cards. And that allowed them to secure a lot of fees. And it was employees, several of them at different branches who noticed, including Lynn Oriama, who you've written about. Exactly. So Lynn was one of the Wells Fargo whistleblowers and employees. She transferred from the New Jersey Wells Fargo office

to her Virginia Wells Fargo office. And first day she hits the door, customers started to complain to her that they were receiving credit cards that they had not applied for. And so she then starts looking into the situation and she notices that there are around 1,500 checking accounts

that are tied to the bank's address. And she got concerned. There should never be customers that have an address to our bank. They should have their home address. So she ran this report and tried to report internally about what she found. And when she reported internally, crickets. In fact, what ended up happening is the district manager then comes and pays Lynn a visit and they're saying, you know, I didn't hire you to come here and make all this trouble. And Liz, like, whoa, you know, I'm here doing my job. Like, I'm, I'm here doing my job. Like, I

I'm showing you that there is something wrong here. These customers are wronged, and we've got to fix it. So what ended up happening is Lynn then came under attack, the bullying, the harassment. You know, that's a typical kind of treatment of a whistleblower. Now, what I wanted to do with the whistleblower categories is really similar to what I wanted to do with the perpetrator categories. And that was to allow people to understand that all whistleblower categories, is really similar to what I wanted to do with the perpetrator categories. understand that all whistleblowers are not disgruntled employees looking for something wrong in their organization. That's not everybody. Some people like Lynn are just doing their job.

Someone brings something to them. They have to respond. They have to act on it. And then they uncover this massive scheme. The employees that tried to whistleblow were actually fired. And it really made me think about the message that I was sharing with my students. And it made me think, what if my students have been Wells Fargo employees? On the one hand, if they whistleblue, they would have gotten fired. But on the other hand, if they didn't report the fraud that they knew, the way current regulation is written, employees are held responsible if they knew something and didn't report it. So criminal prosecution is a real option. What's a person opposed to do with those type of odds? all people know the valuable contributions that whistleblowers make.

42% of frauds are discovered by a whistleblower in comparison to other methods like management review and external audit. It's important for us to cultivate hope. Whistleblowers are hopeful. Their hopefulness really is what drives them to come forward. We also have to cultivate commitment. Whistleblowers are committed and it's that passion to that organization. that makes them want to come forward. Whistleblowers are humble. Again, they're not seeking fame, but they are seeking fairness.

And we need to continue to cultivate bravery. Whistleblowers are brave. Often, they underestimate it the impact whistleblowing had on their family, but what they continue to comment on is how hard it is to withhold the truth. I'm curious, you know, a lot of people blame fraud,

simply on greed. What do you think? Is it more than that? It makes me, you know, all the times that you've mentioned quarterly earnings reports or stock prices or a culture that seems to make fraud so prevalent. I think it's less about greed than I do think it's about circumstance because people get placed in tough circumstances a lot. We only want to hear good news. So we only want to hear good news. So we only want to to hear positive earnings reports. We only want to hear that the product is phenomenal. We don't want to hear the bad news. And so we are conditioned to push out good. I think we need to explore the cultures that we are creating in these organizations because they are pressure cookers.

And we tend to see these collapses of these pressure cooker environments years later and how internal controls become lax. We really need to discuss stress in a way that we're not talking about it and decision making in a way that we're not talking about it because there's a mindset of people pleasing that is allowing a population of us to just create the narrative that you want and it may not be the one that is realistic. I want to read to you something. that came in the mail to me the other day, which is from a lab, a clinical lab that tells me that on April 6, 2023, they identified a ransomware incident on our computer network.

And that files that contained my name, my social security number, my date of service, and clinical test information are now out in the world. This is not the first time I've gotten this kind of letter over the last several years. And they offer a monitoring service that I can sign up for for free. And I'm just wondering, like, is this just part of our daily life? Does this surprise you at all? Or do you hear about stuff like this all the time? You know, I'm sorry, first of all. Thank you.

And yes, it happens. I get those letters too. and I'll tell you somebody that has educated me so much on what to do when things like this happen is a gentleman named Brett Johnson. And Brett is a reformed cyber offender. And so he's another person that comes to my graduate class and talks to my students. And what he shows us when he comes to class is he says, you do know that all of your personal information is already on the dark way.

And it's probably for sale for 99 cents to $2.99. So he proceeds to show me, hey, Kelly, there's your name. If I paid 99 cents, I could have your social security number, your driver's license number, all of your property records, everything. And so I always say to Brett, what do you do when this is a situation? He's like, well, the best thing you can do is, you know, put a freeze on your credit reports. You know, so no one can access those because no one can. open credit under your Social Security number or name. So that's the best thing you can do.

But yeah, it's pretty scary how easy it is. Not only for cyber criminals to hack into systems, but for your information to be shared or compromised, it's really scary. I'm curious as to what you want people to take away from the examples that you've given us. Because on the one hand, I could imagine it would make people paranoid. But maybe you're just saying, you know, don't be scared of learning how to do accounting and reading books and financial statements. You have to do that. So my takeaway, it depends on the audience. So if I'm talking about perpetrators, the takeaway there is any one of us could be one. Don't think that you could never find yourself in a situation like that and make sure you have the proper internal controls that protect you and protect your or.

organization because it could happen and you don't even realize it. If I'm talking about victims, I say there are situations that are outside of our control and we need to understand what they are and get comfortable with those. If you're a whistleblower, speak up and we need to create an environment to support them because we so desperately need them. I mean, because where there's people, there's fraud, unfortunately, right? As my grandmother said, there is no, there's no fast money. And if it's too fast, it's probably not good. Kelly, Richmond Pope, thank you so, so much for all your time, all your crazy stories and your good advice. Thank you so much for having me, Manus. Thanks so much. Kelly is an accounting professor at DePaul University. Her book is called Fool Me Once Scams, Scams, Story.

and secrets from the trillion-dollar fraud industry. You can see her full talk at ted.com. Thank you so much for listening to our show this week. It was produced by Rachel Faulkner White and edited by Sana's Meskampur and me. Our production staff at NPR also includes Matthew Cloutier, Fiona Girin, Andrea Gutierrez, James Elohusi, Harsha, Harsha, Nahaada, Katie Montalione, and Lane Kaplan Levinson. Beth Donovan is our executive producer. Our audio engineer was Patrick Murray. Our theme music was written by Romteen Arablewee.

Our partners at TED are Chris Anderson, Michelle Quint, Alejandra Salazar, and Daniela Ballerazzo. I'm Manus Zameroidi, and you've been listening to The TED Radio Hour from NPR.