Fraud is deception, but it is not always illegal, necessarily. Sometimes fraud is nice fraud, passed off, perhaps, as merely gaming the system, according to a business plan that might be called “take the money and run.” If you can pull it off, in addition to becoming filthy rich, you might even win popular acclaim, as perhaps, someone like Donald Trump.
Indeed, what if at the university, MBA’s learn explicitly to wheel and deal, like Trump? That is, to game the system, then to take the money and run? More on MBA education later, including unpacking the MBA curriculum component called game theory. For now, I argue we need more MBA’s who are less adept at gaming the system, and more committed to something that used to be called living over the store.
An illustration of living over the store could make this real. Near Seattle is a now-retired lumber mill on a picturesque bay. If the current Port Gamble owners will let you, find the manager’s house on the high bank, then walk out onto the porch at the back. From there, 24/7, the mill’s manager could observe most every detail, below.
When the original owners migrated from Maine—to start the mill in the 1850’s—Port Gamble was a distant outpost, a day’s boat ride from Seattle…itself, a distant outpost. Along with the owners, the workers had virtually no options once they gathered in that place, but to cultivate community, and cut, mill and ship lumber to San Francisco.
The short story, of course, is the mill was a smashing economic success, damage to native peoples, notwithstanding.
So, let’s update this illustration.
If Port Gamble was run today by MBA’s, perhaps they might import cheaper, foreign born workers. Also, they might mortgage the mill and use proceeds to buy other businesses, or to live sumptuously. Or if the mill might be publicly traded, they could use profits to buy back shares rather than to expand the business.
But of course any of these options, if executed, would be at cross purposes with living over the store.
One wonders, also, might any qualify as fraud? Well, to scope out an answer, let’s start—not with nice fraud—but egregious fraud, instead. Then, once anchored there, we can work backward toward “nice.”
In our last podcast we met alleged fraudster Steven Croman, a mega-landlord who recently surrendered in Manhattan. Among allegations are that he directed a coercive business that forced out rent-regulated tenants. Then Croman converted their apartments into highly lucrative, market-rate units, in order to flip their buildings, allegedly.
Not exactly a noble, living over the store-type narrative. Egregious fraud? I’d guess if the prosecutor’s case sticks, most would concur, this is egregious fraud. If it walks like a duck and talks like a duck…well you know.
But then, enough about apartment-flipping. How about alleged bank fraud? You know. The sort of Great Recession-type fraud depicted in the film, The Big Short? Why haven’t these guys gone to jail, anyway?
That’s coming up. Stay tuned.
From Boulder, Colorado, this is Jim Sawyer for Capitalism in Crisis.