By Dov Michaeli

What does fraud have to do a blog that deals with health and science? Quite a bit, as you’ll see. We are going try and understand what got these people going, and what makes them go on.

The latest fraud that inhabits the news headline is the demise of mF Global, a Wall Street bank. Without getting into the gory details, the fraudulent aspect of the episode is that clients money, supposedly kept segregated from the company’s finances, except that when the company collapsed because of outrageous risk-taking, so did the customers money vanish.

So far, run-of-the-mill Wall Street. What is interesting about it is that the CEO, Jon Corzine, had been Managing Partner at Goldman Sachs, U.S. senator, and governor of New Jersey. Now, this in itself doesn’t mean that the he couldn’t be a crook, except that he really wasn’t until he did.
Anybody who knew him was shocked: the guy was a straight arrow, moral, public-spirited, etc. etc.

Jon Corzine. A good guy who got caught in hubris

Not to dump on the one-percenters, here is another shocking episode, this one closer to home. Diederik Stapel, a professor of social psychology at Tilburg University in the Netherlands recently admitted that most or all his publications were conjured up out of whole cloth. We are not talking
here about some obscure professor and his moss-gathering publications. His publications were widely quoted by journalists and pundits. He plumbed the psyche of conservatives and liberals alike. An example: a recent paper that was widely quoted, including in TDWI, purported to show that Dutch people who are liberal and tolerant in normal circumstances become conservative and racist when disorder reigns. The buzz this paper created was audible: the paper was touted by liberal and conservative talking heads to prove their diametrically opposed points. And in tolerant Holland there was much consternation and hand-wringing, even talk of failure of the educational system (one of the best in the world).

Was this guy born a crook?

How Does it Happen?

In a word: slowly. Both Corzine and Stapel are not psychopaths; both were not born crooks. Both stumbled somewhere along their career.  But how?

What comes to mind is the classic Milgram’s experiment. Stanley Milgram published in 1963 a study in which volunteers were instructed to administer electric shocks to subjects who failed to answer certain questions correctly. Actually, the subjects were actors, and there was no electricity. Be it as it may, the volunteers, Yale student with higher that average IQ, administered incrementally higher and higher shocks despite cries of anguish that eventually died out, suggesting loss of concieciousness or even death. The common message of the experiment: atrocities like the holocaust can happen anywhere. Obedience to authority is part of our psyche. But how did such bright students, who in the 60’s questioned authority as an article of faith, agree to administer potentially lethal shock? I think the answer lies in the protocol of the experiment: the initial shock was “only” 15 volts, enough to cause a tingling sensation. But as Jennifer Crocker, a social psychologist at Ohio State University, points out in an article in Nature (10 November, 2011) an important threshold was crossed: from an initial abhorrence of inflicting harm on fellow human being they did just that, justifying it with the fact that it’s only minor discomfort is caused, in the name of science. Classic resolution of cognitive dissonance. From there the next increment of 15 volts was not very difficult. And then the next, and next…What we call a slippery slope.

What happened to Corzine? He was probably under pressure watching his financial empire crumble in front of him. He didn’t order to break the law and use his customers’ funds. At least that was his testimony before Congress. All he had to say to an underling is “find me the money, I don’t care how”. And there you have the budding fraudster: the underling, eager to please, or maybe trying to keep his job, crosses the line with the rationale that when the dust settles he’d put the money back where it belongs. This is  ationale of most Ponzi scheme artists. They start small, promising to themselves that this is only temporary, that once the market turns in their favor they’d return the money. Once they get away with it, they try it again, and again, and that’s how Bernie Madoffs a created.

What about Stapel, the scientist who didn’t even do it for money? He did it for glory. His first paper was probably legitimate, except the minor omission of a minor data point. It wasn’t picked up by the reviewers. Minor, but a huge qualitative jump. From now on the road is wide open to more and more egregious scientific fraud.

Yes, we have to punish fraud with the most severe penalties. But that’s not enough. We somehow need to instill values that would make the first step unthinkable. Is it too late? Did the culture of “anything  goes” contaminate us so thoroughly as to become inured to moral and ethical considerations of simple decency?

Dov Michaeli, MD, PhD
Dov Michaeli, MD, PhD loves to write about the brain and human behavior as well as translate complicated basic science concepts into entertainment for the rest of us. He was a professor at the University of California San Francisco before leaving to enter the world of biotech. He served as the Chief Medical Officer of biotech companies, including Aphton Corporation. He also founded and served as the CEO of Madah Medica, an early stage biotech company developing products to improve post-surgical pain control. He is now retired and enjoys working out, following the stock market, travelling the world, and, of course, writing for TDWI.

2 COMMENTS

  1. Unfortunately, we have a tendency to make the penalties almost inconsequential (unless it’s a case like Madoff). I wrote about Google’s “fall from grace” earlier this year ( http://ipatient.posterous.com/google-say-it-aint-so ). In that case the GOOG settled with the DOJ for $500M (so that Larry Page could avoid criminal prosecution). Merck just settled recently for their complicity in the VIOXX scandal – for $950M. In fact – healthcare has more than it’s fair share of fraudsters and miscreants.

    In 2008 Mr. Klaidman wrote Coronary – a book that detailed the Government investigation into Tenet Healthcare. On the release of the book he said:

    “My interest was in systemic flaws in American medicine, not criminal fraud. But the more I thought about it the more obvious it seemed to me that vulnerability to fraud was a major systemic flaw in American medicine.”

    I would argue that vulnerability to fraud is a major systemic flaw that goes beyond just medicine/healthcare. Time and time again – the penalty simply isn’t a sufficient deterrent. The calculus is too easy.

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