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Let us think of those numbersâ€”$5 billion and 12,000 scientists. Those are huge. Certainly, we can argue that biomedical research is inherently risky and costly, and recognize that for every successful drug, hundreds or thousands fail. We can also recognize that patents and licenses expire and that the search to eliminate side effects is ongoing, even for effective drugs. We can recognize all of these factors and still look with wonder at the potential size of the occupational fraud problemâ€” perhaps $600 billion? Then we can begin to search for our 12,000 scientists and $5 billion research budget. I doubt we shall have much success.
Incidentally, the research budget for the entire pharmaceutical industry is estimated to be about $31 billion.10 A truly impressive numberâ€”probably less than one monthâ€™s worth of fraud in the workplace, but impressive nonetheless.
If we add together all the FBI and law enforcement personnel who spend all or part of their time putting together the Uniform Crime Report (which, ironically, does not even treat fraud as a priority crime), all the forensic professionals engaged in research, all those affiliated with professional organizations, all those with an academic interest in the field, I doubt we hit 10 percent of Pfizerâ€™s total. If there are 1,200 persons funded at $500 million doing fraud research, I will be amazed. There are many times those numbers of people and funds conducting fraud investigations, but research is another matter altogether. Certainly, the occupational fraud problem is scattered throughout thousands and thousands of organizations, great and small, in every industry we can think of. This dispersion and complexity creates a problem in beginning to apprehend the size of the problem, much less the cure, but $600 billion is still $600 billion. Where, please, is our research?
For example, why is white-collar crime in general, and occupational fraud in particular, apparently such an underreported event? We have seen the opinion of the Presidentâ€™s Commission on Law Enforcement and the Administration of Justice that in 1968 white-collar crime was believed to be viewed indifferently by the public and some even had sympathy for the perpetrators. More recently, our Canadian colleagues seem to have found that the number of persons who say they will report such acts is significantly higher than those who say they did make such reports. The National Public Survey on White Collar Crime by the National White Collar Crime Center found that significantly more persons say they will report such events, when they have been a victim, than actually do. The NWCCC goes on to state its belief that less than one in ten such episodes is ever reported to a law enforcement agency. Why is this?
In my private-sector forensic career I have seen few organizations that have a firm grasp on the size and components of their fraud problems. Usually they rely on incidental reports and, in turn, generate incremental responses. Jeffrey Seglin, writing of the tendency of some organizations to operate from a â€śclose
the barn door after the horses are outâ€ť mindset, takes particular note of the efforts being made by Harvard Business School Publishing to write a code of ethics after one of the editors of its publication, the Harvard Business Review, had a highly publicized affair with the subject of one of her stories. He quotes Michael Rion, a business ethics consultant as follows on this phenomenon: â€śThe biggest mistake people make... is trying to rewrite policies to solve last monthâ€™s problem.â€ť11
So, too, do many organizations, in my experience, rush to fix the last crisis in an effort to show appropriate concern, demonstrate resolve, send messages to employees and customers, and, most important of all, bring closure to the event. What tends to operate is a sort of organizational algebra that says, Problem A = Rule B. Once the rule is in place, the problem is deemed unfortunate, but appropriately dealt with, allowing the organization to move on. The significance here is not only the limited utility of such a posture, but also the fact that there is frequently no conscious or consistent effort to understand the dimensions of misbehavior in the organization. Rather, the tacit philosophy is a bit like the childrenâ€™s game where the furry creature pops out of one hole, is hit by a rubber mallet, and then pops up in another hole. In many organizations the game is the same, only the names are different. The organization hums along, doing whatever it does for a living, until the fraud or ethics problem pops up. The problem is hit with a new rule and goes away until it pops up again somewhere else. The process is then repeated.
Organizations may also attempt to apply best practice criteria to the formulation of an antifraud program, hoping this will suffice. Such efforts are verified by their designation as best in class, world class, or best practice. Such labels can operate as a sort of pacifier or body armor, depending on the dynamics of the situation. As a pacifier they allow the purchaser, the client, to relax, since their search for answers is effectively overâ€”they just purchased a world-class solution. There is none better. Or, if under attack from above, they can hold up the policy and point to its best practices description (and price tag) and deflect incoming fire by arguing that they bought the best and most expensive model available and are, therefore, not to blame for any problems or incidents. This is not unlike the traditional police practice of ratios of officers to citizens. This was the best practice of the time, and if the proper ratios were in place, the problem was believed to be adequately addressed. Besides, who could argue with a best practice?