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Trying to understand the psychology of fraud


A big topic in the sciences just now …

For those interested in the relationship between philosophy and psychology (and cartooning!), here’s an NPR story, complete with cartoons, “Psychology Of Fraud: Why Good People Do Bad Things,” featuring Chana Joffe-walt and Alix Spiegel:

Twenty-two years after Toby made that promise to his father, he found himself standing in front of the exact same judge who had sentenced his brother, being sentenced for the exact same crime: fraud. …

Excerpt Tenbrunsel’s argument that we are often blind to the ethical dimensions of a situation might explain part of Toby’s story, his first unethical act. But a bigger puzzle remains: How did Toby’s fraud spread? How did a lie on a mortgage application balloon into a $7 million fraud?

According to Toby, in the weeks after his initial lie, he discovered more losses at his company — huge losses. Toby had already mortgaged his house. He didn’t have any more money, but he needed to save his business.

The easiest way for him to cover the mounting losses, he reasoned, was to get more loans. So Toby decided to do something that is much harder to understand than lying on a mortgage application: He took out a series of entirely false loans — loans on houses that didn’t exist.

Creating false loans is not an easy process. You have to manufacture from thin air borrowers and homes and the paperwork to go with them.

Toby was CEO of his company, but this was outside of his skill set. He needed help — people on his staff who knew how loan documents should look and how to fake them.

And so, one by one, Toby says, he pulled employees into a room.

Nothing here that the traditional doctrine of sin wouldn’t tell us, but interesting story, for sure.

That said, the situation is more complex now than it used to be because many people believe it is okay to lie, even in science, for a cause you care about.


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