Lying For Money
The idea that “there isn’t much that is truly difficult” to understand about complex fraud is at once a bracing and disarming introduction to Dan Davies’s new book. A juror, he acknowledges, mired in a lengthy white-collar trial, would beg to differ.
Lying For Money: How Legendary Frauds Reveal The Workings of Our World
Dan Davies, 2018
Criminal trials usually conclude by determining the defendant’s responsibility or not for illegal actions. Or sometimes a defendant will concede the actions are his own, but argue they weren’t criminal, inviting a debate about his motivations and honesty. That’s a big problem in fraud trials where “so many liars are involved. And when a case has a lot of liars, it takes time and evidence to establish that they are lying.’’
At its simplest Davies has written a 300-page book about liars. It can be read either as a potted history of half-famous rogues or a genealogy of financial malfeasance. The first is a book about fake gold, banknotes, pigeons and princesses — though all except the last were sort-of real. The second is a tidy categorisation of fraud into the “long firm”, “counterfeiting”, “control fraud” and “market crimes” such as insider trading. Davies, a former City analyst, also understands accounting and compiles a lucid summary of how executives fake sales, assets and collateral for loans.
The potted-history approach mostly works. It is delightful to learn that Queen Victoria was unwittingly named director of a fraudulent life insurance company in 1843. Members of the House of Lords “were sometimes willing to rent their names out to company promoters” which never happens nowadays. The Athenian orator Demosthenes earned his salt as a hot-shot marine-fraud lawyer who castigated two merchants for scuppering a dummy ship to con the underwriters of a valuable cargo being transported by the real one (shipping-insurance fraud is still a thing). But, depending on taste, a detour via the Eyrbyggja saga of ancient Iceland may subtract more than it adds.
Davies’s light and sardonic tone — which will be familiar to his twitter followers — carries the heavy material well. But one of the strongest sections, about the ongoing PPI scandal in the ‘Control Fraud’ chapter, is serious and thought-provoking. PPI, a £40 billion wheeze on the British public overshadowed by the financial crisis, was the opposite of Big Man fraud. Thousands of bank-branch managers became small-town fraudsters in the “criminogenic” environment of late 90s/early 00s U.K. retail banking. No one has gone to prison because there’s little evidence senior bankers ordered it and, rightly, no appetite to prosecute the foot soldiers.
Davies reaches the reasonable-sounding view that only a turgid and moribund economy will entirely starve financially-literate crooks of oxygen, so the optimal amount of fraud is more than zero. It’s a conclusion that no business person, regulator or politician could ever endorse because the same can’t be said for any other type of serious crime. Fortunately, as a business journalist trying to understand odd corporate behaviour every day, I feel we’re still far away from feeling the pinch of that trade-off.
