The Madoff story has more to do with corruption than it has to do with fraud, audit, reporting statements, standards and procedures. Fraud is just the icing on the cake and that story, in my opinion, has yet to be told in a clear, concise and effective way off-screen, on-screen and in print.
Corruption is more subtle, pervasive and effective as a tool of deceit and deception. Often it runs in generations and covers a great span of time. One thousand years is not too long as far as corruption is concerned. One, two, three or even five, six and seven generations is not uncommon. Is there a gene or celestial dimension? That question is often overlooked, not asked or considered because we are still at the roots of understanding it.
Corruption is never a bottoms up thing as many would believe. It flows from the top and stops in the middle. By the time it gets to the bottom it has transformed itself into something else, often becoming or masked as being standard operating procedures that complies with generally accepted rules, regulations, procedures and guidelines.
Those at the bottom who make mistakes intentionally, through mishap, naivety, set-up or with criminal intent and/or aspirations are often fired immediately on the spot upon discovery, unless protected from the top, then they are rewarded. To identify, expose and fire those at the top requires great force of movement stimulated, influenced or motivated by some encroaching movement of dynamic and effervescent social, cosmic, external or celestial influence or order to bring about the slightest spectacle of change.
In other words, corruption is embedded, it is very difficult to get rid of completely. For a time, certainly, but never forever! Hence, the watch must be eternal and guarded. No one is exempt. No one at all.
What is required is setting of goals and ideals to work towards and taking actions and steps to move in the right direction. Often that’s enough to mitigate the problem and keep everything in check.
There are times when everything will fall apart, but if the foundation is there and the principles secured, guiding lights will grow back again.
What we find is that corruption, vis-a-vis fraud leading to criminal behavior, operates slowly like still water and it penetrates deeply as well. Wherever there is great fraud, there is always great corruption. And in almost all cases, we find that the greatest and most effective fraud and corruption undertakings always start at the top, hardly ever at the bottom.
When new comers arrive on the scene, which are always freshly recruited into the operations out of some naive or inept underpinning, they must decide quickly, almost instantaneously, to take the position, get involved or leave it alone for in the end corruption shall win.
What’s most striking in dealing with the topic at all levels of institutional and corporate concern, is that it is usually systemic and generational as well. It is a major subject in the world which cuts through to the core, fabric and essence of who we are, shaking the very foundation of our being and survival instincts, yet still it is present everywhere.
Corruption is the one element or issue that we are still dealing with today whether you find it in a pyramid scheme, a street con job operation or a sophisticated debt issuance covered in well informed legalese that squarely goes against established principles of finance, often providing debt at wrecking ball usurious rates.
If they can do it, they will. It’s not about what you make, it’s about what you take!
You judge corruption by who benefits and how that benefit was secured, transferred, diverted or concealed, usually in complex, non-existent, ethereal, unrecorded or other sophisticated ways where the receiver can say and use as a defense that what I received was normal, it was in the normal course of doing business, it was priced at fair value, and when you examine these cases carefully, time and time again, you’ll find something glaringly wrong causing the receiver to go silent or look the other way: “Catch me if you can! They did it over there. Why can’t I do it here too? is often the defense and justification”
There’s always a kick-back, there’s always a family who benefits in a direct or indirect way, and the ways of structuring and initiating these pay-offs are infinite and too numerous to mention. Hence, assigning blame and pinning the tail on the donkey is often a frustrating and elusive task.
At the heart of it, corruption is a social custom, an environmental disease, a curse and sin at the same time.
It’s a norm for those who practice it. It’s a way of life. It’s the way of doing business. Some were born directly into it making it their original sin.” That’s the way the world works,” they’ll say in absolute conviction. That’s not how the world works, not everyone is corrupt, but in their own mind, everyone is.
Corruption is passed from one generation to another as “wisdom.” It infects and affects all whom it touches and come into contact with it within its sphere of influence.
Corruption is you, corruption is me! We have to start seeing it that way in order to recognize the problem.
Addressing corruption starts with the individual seeing it first in themselves, their family, community and then lastly in the broader nation and society as a whole in all areas of business, banking, churches, corporations, government and institutions as well.
Corruption is as old as time!
It is the first original sin! It never dies.
Corruption is never direct. It is always subtle, often beautiful, and sometimes evasive. It’s impact is felt and is great! It ruins the individual and destroys the family and corporation. It is everywhere!
The only way to deal with corruption when its presence is sensed, felt or identified, is to walk away from it. Often the problem is much bigger than you think. A bold decision is required. Can you make it? This is the true test of time.
For the CPA and accountant, it means “disengagement.”
If a public accountant has never “disengaged” from a client or project for any reason whatsoever, that accountant has not yet been fully tested.
It takes guts, it takes dignity, it takes pride!
The more he stands to lose, the greater the test. If nothing is lost or the loss marginal or inconsequential or even “normal”, he has not been tested at all.
You are only tested when you are forced to make an immediate decision that carries real and meaningful costs, dis-empowerment and sacrifice, sometimes with no apparent hope of compensation or recovery.
For the corporation, it’s when they risk dissolution. For the government, when they truly care about their people. For the accountant, it’s when investors are at risk or reputation lost.
Disengagement allows the individual to maintain one’s independence, confidence and integrity, but always at a price. It is a price that the CPA and accountant must be willing to pay at all times during their career and endeavors.
When you value the integrity of your mind, soul and spirit to reach for and achieve the highest moral good and standards possible, even if compromised, even if tested and failed, in the end victory will be yours and you will find that even if you are in the most corrupt and hostile environment, that because you strive to achieve those time honored ideals and virtues every day in your work life and personal interactions, you’ll find that evil cannot touch you and in the end you shall prevail.
It is those who try to defend it, justify it, argue in favor of it and kill for it, that are truly the perpetrators who should be blamed.
They seem to have a sixth sense of right and wrong, good and bad, that defies the imagination turning things around always to suit themselves, expressing inept and illogical points of view that support their own interests, soul desires and cardinal soul stirring direction.
These are pretty corrupt individuals who would rather die than cave in or change their ways, views or perspective on things.
For them it is life and death, because corruption will win in the end in most cases, victory for them is almost always assured. At least, that’s how they view things and think!
The problem with corruption is that it compromises the whole! It divides the cell.
Corruption diverts benefits and energy away from one goal or destination towards another, usually one for which that energy or benefit was not intended.
It is this diversion of benefits or losses that is the problem!
The pain and suffering that it can cause on others are untold and is perhaps one of the biggest problem facing mankind in securing its future and survival as a specie on this planet.
To the extent that benefits and energy derived through corruption can be applied towards an unintended use, consequence, obfuscation, consumption or application, corruption shall prevail and more often than not and shall win as well, but only for a time!
In the accounting and financial world, the impact on financial statements shall be startling and the effect on capital and financial markets devastating as well!
People ask why can’t I find redemption, why can’t I be redeemed. I’ve paid the price, I’ve done my time, yet society refuses to forgive me.
The reason is that those who have been hurt are still suffering, often in more ways than one.
Until the shattered, destroyed and smashed victims and their generation and relations have been healed, compensated and made whole over time, and the perpetrator go through some form of death and rebirth internal transformation process that is real, often unverifiable, the system is blocked and still broken and redemption is nowhere to be found.
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Edward A. Shields, CPA, MBA
Former World Bank Accounting Policy Advisor, International Finance Corporation Accounting Policy Advisor & Investment Officer & PwC audit staff, Columbia University, Brooklyn College & UCLA alum
Chief Executive Officer
450 Lexington Avenue, #1248
New York, NY 10163