The Costs Of Corporate Crime

Steven Mintz

Steven Mintz, the Ethics Sage, has a post on a subject dear to my heart, “How much damage does corporate crime do to the United States?” Each year in my ethics class I ask my students to estimate the damage and comment on it. He has filled out that damage estimate with some new information. I am very appreciative and next Fall my students are going to be reading this post.

Professor Mintz’s post is entitled, Business Fraud. Most of the first paragraph is below but I want you to go to his site and read the whole thing. This subject is a critical factor in whether or not we should do more about business ethics or not. If his figures (or mine) are in anyway correct, our nation is being crippled.

In my last blog I wrote about the ever-increasing cost to society of criminal fraud that targets investors. Fraud in business organizations also seems to be on the rise despite all efforts to reduce it following well-publicized accounting frauds at Enron and WorldCom. According to research conducted by the Association of Certified Fraud Examiners (ACFE) in 2008, U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud. Also, the median dollar loss caused by fraud schemes was $175,000. More than one-quarter of the frauds involved losses of at least $1 million. …

The costs may be 994 billion dollars, 7 percent of annual revenues, lost to corporate fraud. That doesn’t include corporate crime like dumping pollutants, evading taxes, killing or maiming workers by evading safety regulations, etc.

Is that enough reason to put business ethics as a primary legal and economic concern in every governing body from the cities to the federal government?

James Pilant

Let’s Make The Armed Forces Eat Gulf Seafood!

This is from Washington’s Blog. The original title is Secretary of the Navy Hatches Brilliant Plan to Sell More Gulf Seafood and Transport Oil to the War Zone.

From the Times-Picayune –

Navy Secretary Ray Mabus, who doubles as President Barack Obama’s point man on Gulf Coast oil spill recovery, is pressing America’s armed services to consume as much Gulf seafood as possible.

Navy Capt. Beci Brenton said Monday that Mabus has talked with Secretary of Defense Robert Gates and the secretaries of the Air Force and Army, and his staff has talked to the Defense Commissary Agency, which operates a worldwide chain of stores for military personnel, making the point “that we should be buying Gulf Coast seafood.”

In a meeting Monday with Ewell Smith, executive director of the Louisiana Seafood Promotion and Marketing Board, Mabus reaffirmed his commitment to using the tools at his disposal to help the Gulf seafood industry recover from the damage the BP oil spill has done in reality and perception. The board is gearing up for a large-scale national marketing campaign, with $30 million in BP money and millions more in federal dollars, to reassure restaurants and markets across the country that Gulf seafood is safe.

Okay, they are having trouble selling seafood that may be (or is) contaminated with oil or chemical dispersant and the armed services are being pressured to buy some. Since the fellow in question is Secretary of the Navy, we should probably put the word, pressured, in quotation marks and note that the armed services (at least the navy) are going to buy gulf coast sea food.

Is this wise?

In about twenty years, when we can get some good data on the long term health effects, we will have a clear picture of whether or not this was a good idea.

In my mind, if there is choice between seafood from the gulf and somewhere else, that really isn’t a choice. I don’t like oil in my food. I’m just weird that way.

Thanks to the anonymous guys at Washington’s Blog for bringing this to my attention.

James Pilant