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0;text-align:center}.mw-parser-output .ambox .mbox-empty-cell{border:none;padding:0;width:1px}.mw-parser-output .ambox .mbox-image-div{width:52px}@media(min-width:720px){.mw-parser-output .ambox{margin:0 10%}}@media print{body.ns-0 .mw-parser-output .ambox{display:none!important}}</style><table class="box-One_source plainlinks metadata ambox ambox-content ambox-one_source" role="presentation"><tbody><tr><td class="mbox-image"><div class="mbox-image-div"><span typeof="mw:File"><a href="/wiki/File:Question_book-new.svg" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/50px-Question_book-new.svg.png" decoding="async" width="50" height="39" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/75px-Question_book-new.svg.png 1.5x, //upload.wikimedia.org/wikipedia/en/thumb/9/99/Question_book-new.svg/100px-Question_book-new.svg.png 2x" data-file-width="512" data-file-height="399" /></a></span></div></td><td class="mbox-text"><div class="mbox-text-span">This article <b>relies largely or entirely on a <a href="/wiki/Wikipedia:Articles_with_a_single_source" title="Wikipedia:Articles with a single source">single source</a></b>.<span class="hide-when-compact"> Relevant discussion may be found on the <a href="/wiki/Talk:Control_fraud##" title="Talk:Control fraud">talk page</a>. Please help <a class="external text" href="https://en.wikipedia.org/w/index.php?title=Control_fraud&action=edit">improve this article</a> by <a href="/wiki/Help:Referencing_for_beginners" title="Help:Referencing for beginners">introducing citations to additional sources</a>.<br /><small><span class="plainlinks"><i>Find sources:</i> <a rel="nofollow" class="external text" href="https://www.google.com/search?as_eq=wikipedia&q=%22Control+fraud%22">"Control fraud"</a> – <a rel="nofollow" class="external text" href="https://www.google.com/search?tbm=nws&q=%22Control+fraud%22+-wikipedia&tbs=ar:1">news</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?&q=%22Control+fraud%22&tbs=bkt:s&tbm=bks">newspapers</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.google.com/search?tbs=bks:1&q=%22Control+fraud%22+-wikipedia">books</a> <b>·</b> <a rel="nofollow" class="external text" href="https://scholar.google.com/scholar?q=%22Control+fraud%22">scholar</a> <b>·</b> <a rel="nofollow" class="external text" href="https://www.jstor.org/action/doBasicSearch?Query=%22Control+fraud%22&acc=on&wc=on">JSTOR</a></span></small></span> <span class="date-container"><i>(<span class="date">December 2013</span>)</i></span></div></td></tr></tbody></table> <p><b>Control fraud</b> occurs when a trusted person in a high position of responsibility in a <a href="/wiki/Company" title="Company">company</a>, <a href="/wiki/Corporation" title="Corporation">corporation</a>, or <a href="/wiki/State_(polity)" title="State (polity)">state</a> subverts the organization and engages in extensive <a href="/wiki/Fraud" title="Fraud">fraud</a> for personal gain. The term "control fraud" was coined by <a href="/wiki/William_K._Black" title="William K. Black">William K. Black</a> to refer both to the acts of fraud and to the individuals who commit them. </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Concept">Concept</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Control_fraud&action=edit&section=1" title="Edit section: Concept"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>The concept of control fraud is based on the observation that the CEO of a company is uniquely placed to remove the checks and balances on fraud within a company, such as through the use of selective hiring and firing. These tactics can position the executive in a way that allows him or her to engage in accountancy fraud and embezzle money, hide shortfalls or otherwise defraud investors, shareholders, or the public at large. A control fraud will often obtain "investments that have no readily ascertainable market value",<sup id="cite_ref-black_book_1-0" class="reference"><a href="#cite_note-black_book-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> and then shop for appraisers that will assign unrealistically high values and auditing firms that will bless the fraudulent accounting statements.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> </p><p>Some control frauds are reactive in the sense that they turn to fraud only after concluding that the business will fail.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup> Opportunistic control frauds, by contrast, are attracted to a criminogenic environment where it is harder to detect fraud, e.g., as a result of <a href="/wiki/Deregulation" title="Deregulation">deregulation</a>.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading2"><h2 id="Examples">Examples</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Control_fraud&action=edit&section=2" title="Edit section: Examples"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>An example would be when an insolvent company publishes accounts showing massive profits. This will cause the stock to rise beyond its actual value, and those exercising the control fraud will cash in their stocks before the reality is known by others.<sup id="cite_ref-black_book_1-1" class="reference"><a href="#cite_note-black_book-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> Additionally, companies can lobby for changes to weaken the law or accompanying regulation. This can be particularly effective with large campaign contributors like <a href="/wiki/Charles_Keating" title="Charles Keating">Charles Keating</a>, who with other control frauds in the United States League of Savings Institutions, was able to get his own people placed on the board of the primary regulatory agency, the <a href="/wiki/Federal_Home_Loan_Bank_Board" title="Federal Home Loan Bank Board">Federal Home Loan Bank Board</a> (FHLBB). With the assistance of people like Speaker of the House <a href="/wiki/Jim_Wright" title="Jim Wright">Jim Wright</a> and the <a href="/wiki/Keating_Five" title="Keating Five">Keating Five</a>, he was able to convert <a href="/wiki/Lincoln_Savings_and_Loan_Association" title="Lincoln Savings and Loan Association">Lincoln Savings and Loan Association</a> into a <a href="/wiki/Ponzi_scheme" title="Ponzi scheme">Ponzi scheme</a>, making millions for himself, while suppressing the investigative and regulatory functions of the FHLBB. Eventually, the Ponzi collapsed, as all Ponzis must, but with a massive cost to the taxpayers and unsecured investors. </p><p>Control fraud can also occur in a political situation, for example by the leader of a country who can use their position to embezzle public funds and turn the country into a <a href="/wiki/Kleptocracy" title="Kleptocracy">kleptocracy</a>. For example, the post-Soviet republic of <a href="/wiki/Azerbaijan" title="Azerbaijan">Azerbaijan</a>.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> </p><p>Examples of control fraud include <a href="/wiki/Enron" title="Enron">Enron</a>, the <a href="/wiki/Savings_and_loan_crisis" title="Savings and loan crisis">savings and loan crisis</a>, <a href="/wiki/Sam_Bankman-Fried" title="Sam Bankman-Fried">Sam Bankman-Fried</a>, and <a href="/wiki/Ponzi_scheme" title="Ponzi scheme">Ponzi schemes</a> such as that of <a href="/wiki/Bernard_Madoff" class="mw-redirect" title="Bernard Madoff">Bernard Madoff</a>. </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Control_fraud&action=edit&section=3" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a href="/wiki/Graft_(politics)" title="Graft (politics)">Graft (politics)</a></li> <li><a href="/wiki/Moral_hazard" title="Moral hazard">Moral hazard</a></li> <li><a href="/wiki/Principal%E2%80%93agent_problem" title="Principal–agent problem">Principal–agent problem</a></li> <li><a href="/wiki/Regulatory_capture" title="Regulatory capture">Regulatory capture</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Control_fraud&action=edit&section=4" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <dl><dt>Notes</dt></dl> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist 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class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px 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.cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite id="CITEREFBlack2005" class="citation book cs1">Black, William K. (2005). <i>The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry</i>. University of Texas Press. p. 2. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0292754183" title="Special:BookSources/0292754183"><bdi>0292754183</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=The+Best+Way+to+Rob+a+Bank+is+to+Own+One%3A+How+Corporate+Executives+and+Politicians+Looted+the+S%26L+Industry&rft.pages=2&rft.pub=University+of+Texas+Press&rft.date=2005&rft.isbn=0292754183&rft.aulast=Black&rft.aufirst=William+K.&rfr_id=info%3Asid%2Fen.wikipedia.org%3AControl+fraud" class="Z3988"></span></span> </li> <li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text">Black(2005, pp. 51, 251, 253)</span> </li> <li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text">Black (2005, pp. 5, 7, 8, 60, 282)</span> </li> <li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text">Black (2005, pp. 5, 7, 8, 11, 37-38, 61)</span> </li> <li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite class="citation web cs1"><a rel="nofollow" class="external text" href="https://www.aei.org/foreign-and-defense-policy/asia/defining-kleptocracy-a-first-step-toward-victory/">"Defining kleptocracy: A first step toward victory"</a>. 21 November 2017.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=unknown&rft.btitle=Defining+kleptocracy%3A+A+first+step+toward+victory&rft.date=2017-11-21&rft_id=https%3A%2F%2Fwww.aei.org%2Fforeign-and-defense-policy%2Fasia%2Fdefining-kleptocracy-a-first-step-toward-victory%2F&rfr_id=info%3Asid%2Fen.wikipedia.org%3AControl+fraud" class="Z3988"></span></span> </li> </ol></div></div> <dl><dt>Bibliography</dt></dl> <p><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFBlack2005" class="citation book cs1"><a href="/wiki/William_K._Black" title="William K. Black">Black, William K.</a> (2005). <span class="id-lock-registration" title="Free registration required"><a rel="nofollow" class="external text" href="https://archive.org/details/bestwaytorobbank0000blac"><i>The Best Way to Rob a Bank Is to Own One</i></a></span>. University of Texas Press. <a href="/wiki/ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <a href="/wiki/Special:BookSources/0-292-72139-0" title="Special:BookSources/0-292-72139-0"><bdi>0-292-72139-0</bdi></a>.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=book&rft.btitle=The+Best+Way+to+Rob+a+Bank+Is+to+Own+One&rft.pub=University+of+Texas+Press&rft.date=2005&rft.isbn=0-292-72139-0&rft.aulast=Black&rft.aufirst=William+K.&rft_id=https%3A%2F%2Farchive.org%2Fdetails%2Fbestwaytorobbank0000blac&rfr_id=info%3Asid%2Fen.wikipedia.org%3AControl+fraud" class="Z3988"></span> </p> <div class="mw-heading mw-heading2"><h2 id="External_links">External links</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Control_fraud&action=edit&section=5" title="Edit section: External links"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <ul><li><a rel="nofollow" class="external text" href="http://www.schneier.com/blog/archives/2010/11/control_fraud.html">Schneier on Security: Control fraud</a> (He refers to a paper with a dead link; the paper is <i>When Fragile becomes Friable</i>.)</li> <li><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1238218222"><cite id="CITEREFBlack2005" class="citation conference cs1"><a href="/wiki/William_K._Black" title="William K. Black">Black, William K.</a> (19 December 2005). <a rel="nofollow" class="external text" href="http://www.peri.umass.edu/fileadmin/pdf/conference_papers/SAFER/Black_Fragile_Friable.pdf"><i>When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic Stagnation and Collapse</i></a> <span class="cs1-format">(PDF)</span>. <a rel="nofollow" class="external text" href="http://www.networkideas.org/ideas-activities/2005/12/workshop-entitled-financial-crime-and-fragility-under-financial-globalisation/">Financial Crime and Fragility under Financial Globalization</a>. Delhi, India.</cite><span title="ctx_ver=Z39.88-2004&rft_val_fmt=info%3Aofi%2Ffmt%3Akev%3Amtx%3Abook&rft.genre=conference&rft.btitle=When+Fragile+becomes+Friable%3A+Endemic+Control+Fraud+as+a+Cause+of+Economic+Stagnation+and+Collapse&rft.place=Delhi%2C+India&rft.date=2005-12-19&rft.aulast=Black&rft.aufirst=William+K.&rft_id=http%3A%2F%2Fwww.peri.umass.edu%2Ffileadmin%2Fpdf%2Fconference_papers%2FSAFER%2FBlack_Fragile_Friable.pdf&rfr_id=info%3Asid%2Fen.wikipedia.org%3AControl+fraud" class="Z3988"></span></li> <li><a rel="nofollow" class="external text" href="https://www.pbs.org/moyers/journal/04032009/profile.html">Bill Moyer's journal: William K. Black: CSI Bailout</a></li> <li><a rel="nofollow" class="external text" href="https://www.federalreserve.gov/pubs/ifdp/2009/985/ifdp985.pdf"><i>Executive Compensation and Earnings Management under Moral Hazard,</i> Bo Sun</a></li> <li><a rel="nofollow" class="external text" href="https://www.youtube.com/watch?v=ld5tERIBvsg">Bill Black testifies re: Lehman Brothers</a></li></ul>    </div><noscript><img src="https://login.wikimedia.org/wiki/Special:CentralAutoLogin/start?useformat=desktop&type=1x1&usesul3=0" alt="" width="1" height="1" style="border: none; position: absolute;"></noscript> <div class="printfooter" data-nosnippet="">Retrieved from "<a dir="ltr" href="https://en.wikipedia.org/w/index.php?title=Control_fraud&oldid=1121334457">https://en.wikipedia.org/w/index.php?title=Control_fraud&oldid=1121334457</a>"</div></div> <div id="catlinks" class="catlinks" data-mw="interface"><div id="mw-normal-catlinks" class="mw-normal-catlinks"><a href="/wiki/Help:Category" title="Help:Category">Categories</a>: <ul><li><a href="/wiki/Category:Fraud" title="Category:Fraud">Fraud</a></li><li><a href="/wiki/Category:Criminology" title="Category:Criminology">Criminology</a></li><li><a href="/wiki/Category:Corporate_crime" title="Category:Corporate crime">Corporate crime</a></li><li><a href="/wiki/Category:White-collar_criminals" title="Category:White-collar criminals">White-collar criminals</a></li></ul></div><div id="mw-hidden-catlinks" class="mw-hidden-catlinks mw-hidden-cats-hidden">Hidden categories: <ul><li><a href="/wiki/Category:Articles_needing_additional_references_from_December_2013" title="Category:Articles needing additional references from December 2013">Articles needing additional references from December 2013</a></li><li><a href="/wiki/Category:All_articles_needing_additional_references" title="Category:All articles needing additional references">All articles needing additional references</a></li></ul></div></div> </div> </main> </div> <div class="mw-footer-container"> <footer id="footer" class="mw-footer" > <ul id="footer-info"> <li id="footer-info-lastmod"> This page was last edited on 11 November 2022, at 18:54<span class="anonymous-show"> (UTC)</span>.</li> <li id="footer-info-copyright">Text is available under the <a href="/wiki/Wikipedia:Text_of_the_Creative_Commons_Attribution-ShareAlike_4.0_International_License" title="Wikipedia:Text of the Creative Commons Attribution-ShareAlike 4.0 International License">Creative Commons Attribution-ShareAlike 4.0 License</a>; additional terms may apply. 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