A Brief Study in Fraud

Written in 2019

I have been avidly seeking stories of fraud. I am currently taking a riveting ethics course entitled, Resisting Corporate Corruption. The class is taught by a former Exxon executive who actually cares about helping b-school students develop a toolkit to prevent and resolve fraudulent activities. We have covered Enron and the origins of the financial crisis, which have both been melodramas of human greed and malevolence paired nicely with willful ignorance and those who should have known better.

Studying these cases has sparked a more intense interest in understanding how people with extreme promise, a plausible dream, and great ambition can go so terribly wrong. Luckily, much of the US is also interested in exactly the same subject matter I am, so I have several examples to draw from:

• Fyre, the Netflix documentary about the comically executed eponymous music festival conceptualized by Billy McFarland and Ja Rule

• The Dropout, the ABC Radio podcast about Elizabeth Holmes and her dysfunctional company, Theranos

• Dr. Death, the chilling Wondery pod-cast about Christopher Dunstch and the victims of his horrific surgeries

While the subject matter among these stories wildly differs, the main characters, who actively engaged in fraudulent activities, suffer from varying degrees of the same character flaws:

1. Blinding confidence

2. Inability to accept expert advice

3. Refusal to fail

Blinding Confidence

Confidence is key. Clients will not work with you and investors will not fund you if they do not believe in you. McFarland, Holmes, and Dunstch all had the ability to inspire deep confidence in their visions, whether or not they had the education and experience to achieve them. More surprisingly, many intelligent, discerning, and seasoned individuals chose to support these frauds because they were inspired by their winning confidence.

After-the-fact, the infallible confidence these three figures exhibited now seems delusional in nature. What bowls me over is that the halo effect of these frauds was so strong, that people who knew facts to the contrary, were still duped into following along. Confidence without credentials should inspire fear, as it is more likely an indication of how little a person knows rather than their raw ability to execute their vision.

Inability to Accept Expert Advice

The second fatal flaw McFarland, Holmes, and Dunstch all suffered from was the inability to listen to and accept expert advice. Several times throughout these stories, these frauds were warned against their actions. McFarland was repeatedly told by a seasoned event coordinator that his approach to housing attendees had to change, or people would be left without housing. McFarland did not listen, and his attendees were left without shelter. Holmes’ leadership style was equated to that of a dictatorship because she refused to listen to the realities of her company’s situation, and preferred to fire people rather than hear how she should change her approach. In several surgeries, Dunstch was explicitly told he was doing incorrect and harmful things to a patient, and rather than accept the critiques to save his patients, he would intimidate others to regain his authority.

It can be difficult to accept advice when we believe we are right, but these three people refused to listen to others with more experience and success. There is a balance between steering one’s own ship and enacting the input of advisers, but McFarland, Holmes, and Dunstch did not consider or integrate feedback into their approach. I see this as an effect of a desperate need to preserve their egos and maintain control. For whatever reason, it was more important for these people to be “right” than to find solutions, and to impose their authority than work as a team.

Refusal to Fail

The final (and most surprising) similarity I recognized across all three individuals, which I believe directly contributed to their ethical downfalls, was the refusal to fail. One of the more compelling personal anecdotes that arose from an interview in Dr. Death, was from one of Dunstch’s football teammates, who saw Dunstch work relentlessly hard to learn how to complete a field-drill correctly. This teammate went on to tell his children the story of Dunstch’s work ethic, upholding Dunstch as a paragon of the value: if you work hard enough and never give up, you will be successful. The teammate was shocked to learn of Dunstch’s downfall, and suffered the cognitive dissonance that must arise when a common value that should lead one to succeed, led his friend to jail.

In completely dedicating themselves to success, these people twisted their morals to accommodate for actions that would stave off failure just a little bit longer. They were so sure they would succeed with just a little more time or a little more money, that compromising their morals probably seemed worthwhile. However, by making personal success their primary objective, outcomes like patient safety and customer security were entirely ignored.

Though McFarland, Holmes, and Dunstch suffer from much more than over-confidence, the inability to take advice from others, and refuse to fail, I focus on these traits because I think they are common among ambitious people. These are cautionary tales of how certain characteristics, when taken to their extremes, result in catastrophic outcomes that could have been avoided.