Why They Do It: Inside the Mind of the White-Collar Criminal

by Eugene Soltes

Overview

What drives wealthy and powerful people to white-collar crime? Why They Do It is a breakthrough look at the dark side of the business world.

From the financial fraudsters of Enron, to the embezzlers at Tyco, to the insider traders at McKinsey, to the Ponzi schemer Bernie Madoff, the failings of corporate titans are regular fixtures in the news. In Why They Do It, Harvard Business School professor Eugene Soltes draws from extensive personal interaction and correspondence with nearly fifty former executives as well as the latest research in psychology, criminology, and economics to investigate how once-celebrated executives become white-collar criminals.

White-collar criminals are not merely driven by excessive greed or hubris, nor do they usually carefully calculate costs and benefits before breaking the law. Instead, Soltes shows that most of the executives who committed crimes made decisions the way we all do-on the basis of their intuitions and gut feelings. The trouble is that these gut feelings are often poorly suited for the modern business world where leaders are increasingly distanced from the consequences of their decisions and the individuals they impact.

The extraordinary costs of corporate misconduct are clear to its victims. Yet, never before have we been able to peer so deeply into the minds of the many prominent perpetrators of white-collar crime. With the increasing globalization of business threatening us with even more devastating corporate misconduct, the lessons Soltes draws in Why They Do It are needed more urgently than ever.

Product Details

ISBN-13:	9781541774179
Publisher:	PublicAffairs
Publication date:	03/05/2019
Edition description:	Reprint
Pages:	464
Sales rank:	410,159
Product dimensions:	5.40(w) x 8.10(h) x 1.40(d)

About the Author

Eugene Soltes is the Jakurski Family Associate Professor of Business Administration at Harvard Business School. His research on corporate malfeasance has been cited by the Wall Street Journal, Financial Times, USA Today, and Bloomberg News. Professor Soltes teaches in Harvard Business School's executive education programs and is the recipient of the Charles M. Williams Award for Outstanding Teaching. He received his PhD and MBA from the University of Chicago Booth School of Business and his AM in statistics and AB in economics from Harvard University.

Table of Contents

Introduction to the Paperback Edition: Why We Do It vii

Prologue Managing in the Gray 1

Part I The Struggle to Criminalize

1 "Not…bucket-shop operators, dead-beats, and fly-by-night swindlers": Pillars of the Community 13

2 "Guys…don't drop out of windows for no reason": Creating the White-Collar Criminal 33

Part II Nature or Nurture? Reasoning or Intuition?

3 "Inherently inferior organisms": Bad People Making Bad Decisions 47

4 "I thought it was all going to pass": A Press Release with Consequences 65

5 "If you don't take it then you will regret it forever": The Triumph of Reason 81

6 "I never once thought of the costs versus rewards": Intuitive Decisions 99

7 "I never felt that I was doing anything wrong": Overlooking Harm 115

8 "If there was something wrong with this transaction, wouldn't people have told me?": The Difficulty of Being Good 131

Part III The Business of Malfeasance

9 "You can't make the argument that the public was harmed by anything I did": Misleading Disclosure 165

10 "Unfortunately, the world is not black and white": Financial Reporting Fraud 175

11 "You go from just being on top of the world": Insider Trading 201

12 "I thought we were freakin' geniuses": Deceptive Financial Structures 227

13 "You couldn't stop because YOU would wreck everything": The Ponzi Scheme 257

14 "When I look back, it wasn't as if I couldn't have said no": Bernie Madoff 287

Conclusion Toward Greater Humility 309

Acknowledgments 331

Illustration Credits 337

Notes 339

Bibliography 397

Index 435

Editorial Reviews

"[Soltes] has done a great service with Why They Do It. Not only does he draw on psychological research to dissect the way white-collar criminals think-or fail to think-before they act. But he also interviews several of the most famous white-collar criminals of our time, among them, the corrupt lawyer Marc Dreier and the financial swindlers Allen Stanford and Bernie Madoff. He presents what he has found in a spirit of understanding rather than condemnation."—Wall Street Journal

"[Soltes] takes a unique approach, looking for the connections between what motivated these men - and yes, they are all men - and asking not what they did but why they did it....Soltes creates some fascinating portraits."—Washington Post

"Groundbreaking...[an] impressive debut...A forcefully developed and documented contribution to our further understanding of high-level criminality in lightly regulated free markets."—Kirkus Reviews

From the Publisher

★ 10/01/2016
Soltes (Jakurski Family Associate Professor of Business Administration, Harvard Business Sch.) has written a groundbreaking book on executive misconduct. It draws on the author's interviews with multiple convicted white-collar felons, including Bernie Madoff and Dennis Kozlowski. The author shows how these managers rationalize their actions, rely on instinct, and fall victim to temptation and corporate culture. The book is divided into three parts. Part 1 argues that these criminals don't make cool cost-benefit decisions, contrary to popular belief. Part 2 uses numerous case studies and describes the changing scholarly explanations for white-collar crime. The third section is the work's culmination, with an in-depth interview and analysis of Bernie Madoff, who appears to be a psychopath—Madoff views his victims as suckers who benefited from his scheme before in unraveled. The volume concludes that the organizations that spawn these criminals must be punished to change their leaders' values. VERDICT Engaging, precisely researched, and well argued, this is a spectacular achievement in business ethics, corporate culture, and true crime. Highly recommended for all audiences.—Harry Charles, St. Louis

Library Journal

2016-08-10
A groundbreaking study of the psychology and motivations of white-collar criminals.Using interviews, correspondence, and phone calls over seven years with, among many others, Bernie Madoff, Enron’s chief financial officer Andrew Fastow, and Tyco’s Dennis Kozlowski, Soltes (Business Administration/Harvard Business School) provides special insight into insider trading, violations of financial reporting requirements, and pyramid schemes. In his impressive debut, the author has gathered in one place the thoughts and reflections of this group of criminals, many of whom have become well-known thanks to extensive media exposure. Soltes begins with a theoretical discussion of the roots of human behavior in an intriguing attempt to discern how propensities for ethical misconduct and criminal behavior occur. The subsequent discussions with the perpetrators concern their crimes, motives, and rationalizations. The author refutes the contention that white-collar criminality is distinct from criminality at large as essentially a race- or class-driven argument. He emphasizes instead how the business environment and the incentives for management to succeed foster white-collar crime. Management decisions, he insists, involve moral choices since they involve “the potential to help or harm another person.” Soltes prefers to “consider the possibility that illegal business decisions—moral decisions in their own right—are actually made much like any other kind of decision.” The interviewees’ rationalizations and “euphemistic labeling” are quite illustrative. Fastow, Enron’s financial wizard, said, “I was doing exactly what I was incentivized to do. We wouldn’t have gone through all this trouble if we just wanted to cheat. We were finding ways to get around the rules but going through a complex process to find the loopholes to allow us to do it.” Madoff preferred to view the fraudulent scheme for which he was convicted as “something closer to oversight than to recklessness.” The author also discusses the regulations related to white-collar crime and corrects some popular misconceptions—about insider trading, for example. A forcefully developed and documented contribution to our further understanding of high-level criminality in lightly regulated free markets.

Kirkus Reviews