Wednesday, August 27, 2003

Aug 27 2003

I find this fascinating: a sixteen-year-old named Barry Minkow constructed a completely fraudulent company, and eventually took it public. When it all came crashing down, a company worth almost a quarter of a billion dollars was found to have assets totalling $62,000. Here’s a well-written overview (and here’s a more complete but less well-written one)…except it’s not the fully story.

There’s an article in Monday’s Wall Street Journal about Barry, who is now helping the SEC detect corporate fraud. He offers valuable insights into how fraud is perpetrated.

Everyone I met in prison had one thing in common — they never planned on being there. And not one of those companies went into business to defraud. Not one. Neither did I. What people don’t realise is that fraud is always a means to an end, never an end in itself. There is always a rationalisation: I’m going to do this now, and it’s tough, but next week we’re gonna get some big carpet-cleaning jobs, whatever, and we’re gonna make it back, pay everyone back, nobody’s gonna be hurt — and that will be the cure.

— Barry Minkow

He’s apparently found God, too. I’m always suspicious of that sort of conversion, but he’s low-key and pretty straightforward about it, and he’s made some significant life changes, so it seems legitimate.

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