Lying for Money | Dan Davies

Summary of: Lying for Money: How Legendary Frauds Reveal the Workings of the World
By: Dan Davies


In ‘Lying for Money’, author Dan Davies offers an insightful look into the world of white-collar crime, revealing how these legendary frauds expose the hidden side of our global economic systems. The book examines the frameworks and mechanisms behind famous cases of deceit, uncovering the need for opportunistic exploitation of corporate and financial entities. Readers can expect captivating explorations into schemes such as the Ponzi scheme, the London Interbank Offered Rate (LIBOR) scandal, and the US savings and loan crisis of the 1980s. The book aims to reveal the nature of fraud in the modern economy, where the desire for wealth surpasses legitimate means of obtaining it, and how an understanding of such crimes can grant powerful insights into our global economy.

The Art of Fraud: How it Works, from Ponzi Schemes to Financial Institutions

Fraud has increased concomitantly with the advancement of the global economy. It is an elusive crime that can subvert the usual checks and balances of a legitimate business. To deceive corporations or financial institutions, perpetrators must have a deep understanding of the business. Criminals who commit fiscal crimes are often of the same social status as those who prosecute them, which emphasizes the deep-seated problem of fraudulent activities in society. Pyramid schemes and other scams prey on the financially vulnerable, attaching themselves to affinity and religious groups in poor communities. Additionally, financial analysts discovered a major financial crime that caused banks such as LIBOR to pay millions of dollars in fines. Similarly, publicly traded companies, such as the City of London Convalescent Fund, Pension Society and Savings Bank, are not immune to fraudulent activities, as seen with the infamous John Stanley Humphery. Accounting fraud is typically the foundation of stock market fraud. The stock market often exploits a company’s potential rather than its actual profits. Despite the potential for fraud in the stock market, surprisingly little actually occurs due to “due diligence” measures.

Long Firm Frauds and Medicare Scams

Commercial transactions are based on the principle that a seller will deliver goods and the buyer will pay for it. However, long firm frauds occur when a fraudulent party runs up commercial credit with the intention of defaulting on it. In the 1960s, American Express was a victim of long firm fraud when they lent money to Tino DeAngelis, who used vegetable oil as collateral. DeAngelis committed fraud by putting seawater in the oil vats instead of the promised oil. Similarly, in the late 1900s, fraudulent Medicare claims cost the system hundreds of billions of dollars due to weak internal mechanisms and lack of oversight. Perpetrators took advantage of this by billing the system for expensive, nonexistent services. To avoid these scams, proper checks and balances need to be in place to prevent fraudulent activities.

Counterfeiting Beyond Currency

Counterfeiting extends beyond paper bills to misrepresenting products, and can have fatal consequences, as demonstrated by the death of musician Prince caused by a counterfeit drug. Despite the efforts of pharmaceutical companies and regulators, the problem persists. Trust and certification are essential in the medical industry, amplifying the severity of counterfeit drugs. Frauds like these highlight the pervasiveness of counterfeiting and the need for increased vigilance.

The Rise and Fall of Charles Keating

In the 1980s, the US savings and loan (S&L) industry faced financial trouble due to limited mortgage options and insufficient scrutiny. Charles Keating took advantage of this situation by corrupting property appraisers and engaging in fraudulent activities. He grew his empire by manipulating market valuations and buying political influence but eventually faced downfall when his misrepresentations were uncovered. The scandal highlighted the need for better financial oversight.

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