Question

Please watch this video called Anatomy of Fraud.

After watching the episode, try to determine what systematic elements allowed the crime to happen.

https://www.youtube.com/watch?v=whMVt7LhTxk&feature=youtu.be

Answer 1

Watching the episode, there area few elements that clearly stand out as the causes allowing the fraud to happen. They have been listed below:

Lack of awareness among the investors: It is clear that investors had no expertise to judge the offering by themselves. They also seem inexperienced in the area of securities/ finances and were not skilled enough to make an informed decision. This probably is what led the perpetrator to target such clientele in the first place.

The Human Connection: Fundamentally, it wasn’t really the promise of exaggerated return or the product that got the investors interested. It was the trust they placed in the Hickman family. The trust that was earned through their involvement with local community for years. This helped them set the scheme rolling initially and then due to early success for the investors, it spread like wild fire.

Profits: No such fraud at such a scale can be committed without showing some concrete results to the victims. That is exactly how a Ponzi scheme works. The Hickmans clearly had it worked out in the sense that for a few years at the beginning they religiously made the interest payments to the investors thereby enhancing the trust and increasing their clientele.