Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.
Fraud: A Legal or Moral Term?
The definition above was taken from a legal dictionary. Most of the time we think of “fraud” only in the legal sense. If we read that definition carefully, however, we can see the concept actually carries the idea of deceit for personal benefit. The fraudulent act is one where misrepresentation occurs to induce another person or entity to act, resulting in whatever goal is sought by the fraud.
American society is filled with fraudulent representations up and down, right and left. People do not engage in these acts imaging–at least after a while, when they are accustomed to them by habit–they are doing anything wrong. Why? Everybody seems to be doing it everywhere you turn, but no one uses the term, “fraud,” but something else.
Let us look at some examples that include both the legal concept of fraud, as well as the moral concept; that is, legally misrepresenting something for profit.
Fraud In Everyday Life
You are involved in a fender-bender. You have a friend who owns an auto body shop. It also happens you have a desire to purchase a new electronic device. You go to your friend for an estimate. You know what principle the insurance company will use to select the comparative bids. You tell your friend, “Can you figure this so I have a little left over?” Your friend wants the work, and wants to help. Your car gets fixed. You get your cash and forget it.
You are a government contractor. You’ve been in the business for years. You know how to build in added profits on contracts that will be approved without a hitch. You know the hot buttons that will bring your business up on the federal or state radar screen for review or problems. You regularly build in incremental changes that boost your profits.
You are a physician. With many patients, you spend about 10 minutes, and with some, 5 minutes for a quick check-up. After each one, you check off boxes on your clipboard. Each box = “treatment”= a billed fee. You regularly check boxes that do not apply to the real treatment. You are giving the insurance companies and U.S. government the treatment. Your bedside manner makes your patients love you. They do not know what boxes you check. It’s just business. Miss a box? You pay your billing manager to catch it.
You are an hourly worker. You are going to be late to work. Your childcare bill will be coming due. You give your electronic ID card to a coworker to clock you in. You will work harder when you get there to catch up.
You are an attorney. You have files filled with scores of cases with nearly identical fact situations. When new clients come in with similar cases, your paralegal pulls files, and generates documents with the appropriate changes. You bill at the original rate required to generate those documents. No client has any basis to contest what you did.
You also have several crews of undocumented workers. You get them to finish the job, then complain to the only one who speaks English the work was not as promised. You cut their cash pay between 25-50%, which already is below 50% of what you would have to pay legal workers.
You are in the auto repair business. People come to you with a sqeak. You know it’s probably a dry grease fitting, but you tell the truth, “We’d better look at it. It’s really unsafe if it’s a ball joint.” The customer leaves the car. Your employee–who gets paid a percentage of each job–returns to tell you it needs a ball joint, inner and outer tie rod end, and a shock absorber. The bill went from $1.50 for some grease to $450. The customer returns, you tell her how good it was she came in, and how safe the car is now. She leaves relieved and satisfied.
“What the Market Will Bear”
While there are some in business, government, and private life, who self-consciously know they are engaging in fraud (even if by another name, e.g., “smart”), it seems most fraud occurs in a mindless fashion. If clients, customers, and companies pay, and there is no push-back, why not keep doing ? How does this occur?
Many of us can remember when we were young and taught to tell the truth. Then there was that day when we went on our first job as an hourly worker. Day by day, incident by incident, we learned “how the world works.” A few of us may have had the good fortune to have worked for a series of impeccably honest employers, and we did not learn the ins and outs of the little and big cheating that occurs.
“Charge what the market will bear” is the ordinary way people engage in small and large fraudulent services and billing. If the bill goes out and is paid, that’s positive reinforcement that the fraud has its own reward.
Our Financial Crises and Our Fraudulent Habit
Millions of Americans are pointing their fingers at others in government and business. Everyone places blame on everyone else for the condition we are in. Nevertheless, decades of the Fraud Habit underlie part of the problems we face today.
There are some Americans who are scrupulously honest. These simply will not do “what everybody’s doing.” We know this.
Nevertheless, the problem of practical fraud in services and billing is a major problem. No one talks about where they have crossed the moral line. No one wants to cut back on profits, or have an ethical conversion, if everyone else will continue standard practices. In fact, even if there were a mass movement to change things, there still would be many who would find that foolish, and another opportunity for more profits.
Make Your Decision at Your Own Risk
One of the saddest things to note is that becoming honest can cost you your job. If you are a small business owner, you can make an organization-wide decision, and accept reductions in profit. Yet if you are in a large corporation, expressly reservations about a service or product will mark you as a target for termination.
Jeffrey Wigand once worked for a national tobacco company as the head of research. When he decided to spill the beans about his company’s long-held knowledge that smoking is addictive and harmful, he suffered a multimillion dollar campaign of threats, character assassination, and fear for himself, his family, and any future to find another job. A movie based on his struggles and painful journey tells a portion of what he had to endure.
So now, honesty likely may have a professional penalty. The man or woman with ethical scruples must consider demotion, transfer, or termination, as the cost of doing the right thing. Americans, and their counterparts in other nations where fraudulent practices also flourish, must, or at least should, wrestle with a moral dilemma that ought not to exist.
Americans long have had, “In God We Trust,” imprinted on their paper currency. Millions believe the popular propaganda that Americans are a very religious people. It always feels good to believe that God approves of a nation and its practices. Yet, at least in the case of the Bible, there are many statements against fraudulent practices in business: Proverbs 20:23 and Deuteronomy 25:13-16 among them. The last text is worth citing.
13 Do not have two differing weights in your bag—one heavy, one light. 14 Do not have two differing measures in your house—one large, one small. 15 You must have accurate and honest weights and measures, so that you may live long in the land the LORD your God is giving you. 16 For the LORD your God detests anyone who does these things, anyone who deals dishonestly.
Whether or not anyone believes such ancient teachings, millions of Americans now are reaping the bitter fruits of fraudulent practices that are destroying the financial stability of the nation. Since so many religions teach forgiveness for lying, cheating, and stealing is available just for the asking, this fraud reinforces all others.