leadership in a fraudulent world: lessons learned

Leadership in a Fraudulent World

May 12, 2016

Program Agenda

I. Introduction

II. Leadership Characteristics

III. Fraud Diamond

IV. Case Studies

Frank RudewiczPartner, Marcum LLP

Education:

University of Connecticut School of Law, JD

Central Connecticut State University, BS, Industrial Technology

Certifications:

Private Investigator

Certified Protection Professional

Certified Anti-Money Laundering Specialist

Admitted to CT and Federal Bar

Leadership

Be a Leader

What’s the most important

quality of a leader?

The ability to create followers

Be a Leader

How do leaders get followers to do what they want them to do?

The Power of Presence

If there is any leadership posture

that disturbs a potential follower,

it’s aloofness.

Presence as Personal Concern

“The tragedy of leadership today is that many who are in great need, many who seek an attentive ear, a word of support, a firm hand, a tender smile or even a stuttering confession of an inability to do more, often find their leaders distant men and women, who do not want to burn their fingers.”

Henri Nouwen

Leadership Paradox

Those who want to be in charge of everyone, often find themselves unable to be close to anyone

Leaders without Followers

Angry

Stressed out

Too busy

Preoccupied with the “hard” skills

Narcissistic

Managing up

Sheltered

Unpracticed

Leadership is not . . .

Being in charge, being the CEO or a Managing Director is not the same as leading

Reaching the top, being first, or being the best is not the same as leading

Having the highest income is not the same as leading

Setting a strategic direction, or developing a great plan is not the same as leading

Leadership Fundamentals

Leadership is the ability to mobilize a group of followers toward a desired and common objective

Leadership requires the ability to motivate followers

A person will not follow unless they’re convinced that the leader “gets” them, will work for their interests, and will lead them in a direction that is good for them and those they care about

Be a Leader

What actions create great

personal relationships?

Treat Relationships as

Bank Accounts

What actions make deposits?

What actions make withdrawals?

Use the Platinum Rule

What’s wrong with the Golden Rule?

Treat others the way

they want to be treated

Deal with Incompetence

“A” Players hate to work with “D” players

Hold team to standards

Treat those who leave with respect

Give Praise

Timing

Own it and make it personal: “I think . . .”

Drop the “but”: don’t join praise with criticism

Remember “Platinum Rule”

Self-fulfilling Prophecies

People strive to live up to your expectations

Praise given in advance is predictive of future behavior

Praise the small to get the big

Constructive Criticism

Timing is everything

What is the purpose of criticism?

Is criticism about you or them?

Leadership

Six common traits in effective Leaders:

1. Ability to Bring About Change

2. Competence/Subject Matter Expert

3. Confidence

4. Excellent Persuasion Abilities

5. Honesty

6. Optimism/Can Do Attitude

Leadership Traits

In a Fraudulent World

The Origins of Fraud

The Fraud Triangle

Opportunity

Pressure

Rationalization

The Fire Triangle

Fuel

Heat

Oxygen

The Fraud Triangle

Opportunity is generally provided through weaknesses in internal controls:

o No separation of duties

o Little supervision and review

o Lack of management approval

o Few system controls

Pressure can be imposed due to:

o Personal financial problems

o Personal vices such as gambling, drugs, extensive debt, etc.

o Unrealistic deadlines and performance goals

Rationalization – justification for fraudulent activities:

o “I really need this money and I’ll put it back when I get my paycheck…”

o “I’d rather have the company on my back than the IRS…”

o “I just can’t afford to lose my home, car, everything…”

o “I need to make my numbers for this quarter…”

The Fraud Diamond

David Wolfe and Dana Hermanson

Incorporates the human element – CAPABILITY

“Opportunity opens the doorway to fraud, and incentive (pressure) and rationalization can draw a person toward it; but the person must have the capability to recognize the open doorway as an opportunity and to take advantage of it by walking through, not just once, but time and time again.”

Pressure

Opportunity

Rationalization

Capability

Fraud Diamond, cont’d

Six traits in the personality of the fraudster associated with the capability element:

1. Positioning

2. Intelligence and Creativity

3. Ego

4. Coercion

5. Stress

6. Deceit

Comparative Traits

1. Positioning - Ability to Effect Change

2. Intelligence and Creativity - Competence

3. Ego- Confidence

4. Coercion- Excellent Persuasion Abilities

5. Stress- Optimism/Can Do Attitude

6. Deceit- Honesty

MADISON RUTHERFORD

Emergence of the Laboratory Scandal

-Annie Dookhan

CLARK ROCKEFELLER

CLARK ROCKEFELLER

• http://www.youtube.com/watch?feature=player_embedded&v=SYx

0lAfC2Wo

http://www.youtube.com/watch?feature=player_detailpage&v=_-cn5k2Nur8

Contact Information

Contact Information

Frank E. Rudewicz

Partner

Marcum LLP

53 State Street, 38th Floor

Boston, MA 02109

617-226-0487

Frank.Rudewicz@marcumllp.com

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