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White Collar Crime

Ancient Fraudsters Wrote the Playbook Modern White-Collar Criminals Still Follow

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Picture a man frantically sawing through the bottom of his own ship in the middle of the Mediterranean Sea. Passengers rush below deck to find him red-handed, hole half-cut, wood shavings floating in the rising water. A chase ensues. The would-be fraudster, cornered and desperate, hurls himself into the ocean rather than face justice.

This isn’t a Netflix true crime series; it’s a 2,300-year-old insurance fraud that went spectacularly wrong.

In the latest episode of Oh My Fraud, host Caleb Newquist takes listeners on a journey through time to explore some of history’s earliest recorded financial frauds. Fresh from his European travels (with a particular fondness for Budapest’s goulash and Vienna’s coffeehouse culture), Caleb digs into ancient schemes that prove creative accounting isn’t a modern invention.

When Rome Literally Auctioned Off the Throne

The Year of Five Emperors in 193 reads like a corporate governance nightmare. It started with Emperor Commodus getting assassinated on New Year’s Eve 192 and creating what Caleb calls “quite an exciting start to the year 193.”

His successor, Pertinax, took the throne with big plans to reform Rome’s finances, which Commodus had left in ruins. Think of him as the turnaround CEO brought in after a spending spree. His first move was cutting the donativum, the cash gifts emperors traditionally paid to the Praetorian Guard when taking power.

Bad idea. The Praetorian Guard, Rome’s elite military unit responsible for protecting the emperor, didn’t appreciate their bonus getting slashed. When Pertinax’s follow-up offers still fell short, around 300 guards stormed the palace. After what Caleb imagines as “a very brief conversation,” they assassinated him. His entire reign: 87 days.

What happened next defies belief. The Praetorian Guard auctioned off the throne to the highest bidder. Marcus Didius Julianus won and became emperor, essentially purchasing the Roman Empire like buying a company at auction. But word quickly spread about how he got the throne. Three influential generals rebelled and claimed it for themselves. Within 66 days, Julianus was assassinated, ending one of the shortest reigns in Roman history.

The parallels to modern corporate fraud are hard to miss. We’ve seen executives obtain positions through financial manipulation and insider dealing. The donativum system itself mirrors modern bonus structures that create dangerous dependencies. When those bonuses get cut, whether in ancient Rome or on Wall Street, the backlash can destroy companies and careers.

The World’s First Insurance Fraud Goes Sideways

If the Roman story shows political corruption at its worst, ancient Greece produced the world’s first recorded insurance scam in 360 BCE. Meet Hegestratos, a sea merchant with a plan that was elegant in its simplicity and spectacular in its failure.

To understand the scheme, you need to understand bottomry loans. Back then, sea travel was genuinely terrifying. Ships sank all the time. Bottomry allowed merchants to borrow money using their ship and cargo as collateral. If the vessel reached its destination, the merchant sold the cargo, repaid the loan with interest, and kept the profit. If the ship sank, the lender ate the loss. It was proto-insurance built on trust that merchants wouldn’t deliberately sink their own vessels.

Hegestratos saw opportunity where others saw protection. He and his coconspirator Zenothemis took out a bottomry loan for a grain shipment from Syracuse to Athens. But instead of using the money properly, they immediately sent it to Massalia (modern-day Marseille). They planned to sail for a few days, scuttle the ship, claim tragic loss at sea, and keep both the loan money and the grain.

Two or three days into the voyage, Hegestratos decided it was showtime. He snuck below deck and began cutting a hole in the ship’s hull. Meanwhile, Zenothemis stayed topside, supposedly creating a diversion.

But as Caleb hilariously reimagines it, Zenothemis was terrible at his job. Picture him “fake coughing every time there’s a loud noise from down below” while other passengers, who already didn’t like him, grew suspicious. The cutting was loud. The diversion was pathetic. Soon, passengers rushed below to find Hegestratos literally caught red-handed.

What followed was pure slapstick. Caleb envisions it as “one of those Keystone Cops chase scenes with Yakety Sax playing behind it.” Hegestratos flees through the ship, passengers in hot pursuit, ending with the fraudster hurling himself into the Mediterranean. As the ancient orator Demosthenes recorded, “Thus miserable as he was, he met a miserable end as he deserved, suffering the fate which he proposed to bring about for others.”

You’d think watching your partner drown would inspire some soul-searching. Not Zenothemis. With remarkable audacity, he tried to continue the fraud. He actually asked the crew to sink the ship anyway, arguing that “all hope was lost.”

When that failed and they limped to shore at Cephallenia, there was a dispute. Protus, the “supercargo” responsible for the grain reaching Athens, wanted to continue there. Zenothemis insisted they go to Massalia, claiming connections to the deceased fraudster and the original lenders. The local magistrates sided with Protus. They ordered the ship to Athens, where Zenothemis filed lawsuits claiming ownership of the grain.

The Mystery Ending That Still Bugs Historians

The frustrating part of this story is we don’t know how it ended. The original documents were “mutilated,” leaving only 32 paragraphs that “yielded no satisfactory sense” about the final verdict.

This uncertainty has sparked debate for centuries. John M. Zane’s 1925 Michigan Law Review analysis offers a twist: maybe Zenothemis wasn’t a coconspirator but another victim. Zane points out that Zenothemis had no access to the redirected money, no legitimate claim to sell the cargo, and nothing to gain from the ship sinking. Maybe he desired to return to Massalia because he genuinely wanted to collect insurance to repay his lender friends.

Zane even suggests that if it went to trial, the rich lenders probably lost because Athenian juries were populist and unsympathetic to wealthy plaintiffs, a dynamic that sounds familiar to anyone following modern white-collar crime prosecutions.

Whether Zenothemis was a fraudster or a fool, the case establishes a principle fundamental to financial law: fraudulent contracts are void. This ancient precedent echoes through centuries of case law and continues protecting victims today.

Ancient Schemes, Modern Lessons

As Caleb notes, there are no new frauds, just new fraudsters. The schemes evolved from bottomry loans to blockchain, from cutting holes in ships to cutting corners in compliance, but the patterns remain:

  • Exploiting trust. Bottomry loans worked because people trusted merchants wouldn’t sink their own ships, just as modern systems assume executives won’t tank their own companies
  • The coconspirator problem. Hegestratos learned fatally that complex fraud needs help, yet every additional conspirator multiplies detection risk
  • Documentation dilemmas. Even in 360 BCE, fraudsters needed false paperwork and had to manage competing claims
  • Greed override. Both cases show how easy money overrides rational risk assessment

Caleb’s observation about creating diversions particularly resonates: “You cannot have any weak links in your conspiracy. Don’t think you can just let some hack create a half-assed diversion for you.” His reimagining of Zenothemis’s pathetic distraction attempts—fake coughing to cover ship-cutting sounds—reminds us that fraud often fails not in conception but in execution.

For CPAs and fraud examiners, these aren’t just historical curiosities; they’re training exercises in pattern recognition. The executive inflating revenues for bonuses follows Julianus’s playbook. The insurance fraudster staging accidents mirrors Hegestratos’s scheme. Understanding these patterns helps professionals spot red flags before they become scandals.

The Timeless Blueprint of Financial Deception

From emperors buying their positions to merchants attempting insurance fraud, these ancient cases reveal that financial deception is as old as commerce itself. The schemes involved ships instead of spreadsheets, cargo instead of cryptocurrency, but the underlying patterns of exploiting trust, creating false documentation, and letting greed override judgment haven’t changed.

For today’s accounting professionals, these historical frauds serve as cautionary tales and educational tools. That executive oddly eager to bypass controls? They’re following Julianus’s playbook. That unusual insurance claim with convenient timing? It echoes Hegestratos’s bottomry loan scheme. The vendor insisting on redirecting payments? They’re pulling a move as old as Massalia.

What makes these ancient frauds valuable is their stripped-down simplicity. Without modern financial instruments and digital smokescreens, we see the raw mechanics of deception. The Praetorian Guard’s throne auction isn’t fundamentally different from a board being bought off; it’s just more honest about the transaction.

Listen to the full episode of Oh My Fraud to hear Caleb bring these ancient frauds to life with his signature blend of historical detail and irreverent humor. Because sometimes the best way to understand today’s financial crimes is to study the fraudsters who wrote the original playbook over two millennia ago.

Stock Options Weren’t Lucky Timing—They Were Backdated Fraud

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In 2005, a Norwegian professor at the University of Iowa discovered something that would shake corporate America: CEOs weren’t getting lucky with their stock option timing; they were cheating. By looking backward and cherry-picking dates when their company’s stock hit rock bottom, executives at more than 130 major corporations were guaranteeing themselves millions in profits.

That professor, Erik Lie, shared his story with Caleb Newquist in a recent episode of the Oh My Fraud podcast.

The Accidental Fraud Fighter

Erik never set out to expose corporate fraud. Growing up in Norway, spending time skiing in the mountains and playing by the water, he was just a kid who was good at math. His path to becoming one of TIME magazine’s 100 Most Influential People in 2007 started with simple curiosity.

Erik’s work at the University of Iowa’s Tippie College of Business didn’t involve trying to catch cheaters. He was studying how stock options affected executive behavior. But what he found in the data was too strange to ignore.

Stock options give executives the right to buy company stock at a fixed price in the future, usually set at the market price on the grant date. Thanks to a 1993 tax law, they’d become hugely popular as “performance-based” compensation that companies could still deduct from their taxes. By the early 2000s, tech companies were handing them out like candy.

When Lucky Timing Becomes Mathematically Impossible

Erik was looking at what happened to stock prices around option grant dates, following up on earlier work by NYU professor David Yermack. But where Yermack found a modest pattern in early 1990s data, Erik discovered something explosive in more recent numbers.

“You see the stock price during the month beforehand, on average, go down by about 4%. And then right on the grant date, it turns and it goes up 4% afterward,” Erik explained. “This is crazy to find something like this.”

The pattern wasn’t just in individual stocks; it showed up in the entire market. As Erik put it, “The whole market is moving in that same direction. And you ask yourself, how could these guys predict the market? And how come they’re not working for a hedge fund in that case, instead of for a company out there in the Midwest?”

Some companies hit stock price lows for their option grants five years in a row. The odds of this happening by chance were astronomical. While defense lawyers would later claim their clients just “got lucky,” the concentration of perfect timing across hundreds of companies told a different story.

Breaking Academic Boundaries

When Erik read a Wall Street Journal article about the SEC investigating companies for “spring loading”—granting options before releasing good news—he did something unusual for an academic: he reached out to regulators.

“I contacted SEC, and this is not normal for me either,” Erik recalled. “Usually I stay in my bubble. But something compelled me to contact SEC and say, ‘Hey, I think you’re on the wrong path here.'”

His theory was simple. Companies didn’t have to disclose option grants until months later in their proxy statements. This meant executives could look backward and pick the most favorable dates. “They can essentially stand in March of a year and say, ‘Hey, we’ve got some grants last year, didn’t we? Let’s just pick a date to make that official date. And look at that—June 7th had a very low price.'”

Unlike Harry Markopolos, who was desperately trying to get the SEC to investigate Bernie Madoff during the same period, Erik found a receptive audience. One SEC staff member called him, asked for data, and appeared to take his findings seriously.

The Story Goes Public

To strengthen his case, Erik teamed up with colleague Randall Heron to study what happened after Sarbanes-Oxley required option grants to be reported within two days. Their findings were damning: companies that complied with the new rule showed no suspicious timing patterns. The magical ability to pick perfect grant dates vanished the moment executives had to report in real-time.

But academic papers rarely make waves. “People will not read these academic journals for the most part,” Erik admitted. “No one cares about these things.”

Enter Mark Maremont, a senior Wall Street Journal reporter who immediately grasped the story’s explosive potential. His team spent months analyzing data and contacting companies. The resulting March 2006 article, “The Perfect Payday,” featured colorful graphics showing company after company somehow granting options at exact stock price bottoms.

“One executive fled the country very quickly,” Erik noted about the aftermath. “I think it’s pretty clear that something is going on.”

The Journal won a Pulitzer Prize for its coverage. More than 130 companies faced investigations. Seventy executives lost their jobs.

Why Proving Fraud Is Harder Than Finding It

Despite overwhelming statistical evidence, criminal prosecutions produced mixed results. The challenge was, while Erik’s data showed undeniable patterns across hundreds of companies, prosecutors had to prove criminal intent for specific individuals.

“With enough data, you can see these patterns, but if you narrow it down to one data point, you can’t see what’s happening in that context,” Erik explained.

Smart executives had even built in deniability. “Some of them would intentionally not pick the lowest because it would seem so obvious,” Erik revealed. By choosing the second or third-lowest price, they created enough ambiguity to defeat prosecution while still enriching themselves.

The harm was real. Shareholders were deceived about compensation costs. Companies illegally claimed tax deductions. And as Erik pointed out: “If this is all harmless, then why not just do it out in the open?”

Lessons for Today’s Fraud Fighters

Erik’s story demonstrates what Caleb calls the “privatization of enforcement,” where academics, journalists, and others help catch fraud that overwhelmed government agencies might miss. But unlike traditional whistleblowers who face retaliation, Erik experienced little pushback.

“I wasn’t scared at all. I just thought it was a whole lot of fun,” he said, attributing his lack of fear partly to Norwegian culture where “any celebrity can go around in the street or take the bus.”

His new book, “Catching Cheats: Everyday Forensics to Unmask Business Fraud,” shares these and other stories about using data to spot deception. For accounting professionals dealing with an era of sophisticated financial manipulation, his work offers an important lesson: patterns in aggregate data can reveal frauds invisible at the individual level.

The backdating scandal largely ended once transparency was required. When executives could no longer manipulate timing in secret, the practice stopped. As Caleb observes in the episode, “These are rich and powerful people, executives at public companies. And we should want those people to be accountable for their actions.”

Sometimes catching cheats doesn’t require being a traditional whistleblower risking everything. Sometimes it just takes curiosity, rigorous analysis, and the courage to tell regulators when they’re looking in the wrong direction. In a world drowning in data, the ability to spot patterns others miss might be our best tool for keeping the powerful honest.

Listen to the full episode to hear Erik’s complete story, from his Norwegian childhood to becoming one of TIME’s most influential people, and learn how academic curiosity exposed one of the most widespread corporate frauds of our time.

From the Courtroom to the Classroom: How a Former Prosecutor Views White-Collar Crime

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When Bernie Madoff received his 150-year prison sentence for a massive Ponzi scheme, it seemed like justice had been served. Yet after the 2008 financial crisis, which devastated millions of Americans, virtually no high-level Wall Street executives faced criminal charges. Why not?

In this episode of the “Oh My Fraud” podcast, Miriam Baer—a former prosecutor with the prestigious Southern District of New York, corporate compliance professional, and former Vice Dean at Brooklyn Law School and currently Dean and President of California Western School of Law—shares insights from her unique career journey that help explain this paradox.

From Princeton to the Prosecutor’s Office

Baer’s journey through the world of white-collar crime began far from where she expected. After attending Princeton (where, yes, she knew Ted Cruz) and Harvard Law School, she initially had no intention of becoming a prosecutor.

Her path changed after working at a law firm on securities fraud cases, which gave her a crash course in understanding how companies manipulate their books. From there, she joined the prestigious U.S. Attorney’s Office for the Southern District of New York under then-U.S. Attorney Mary Jo White.

At the prosecutor’s office, Baer handled everything from mail and wire fraud to bank fraud and money laundering, learning the intricacies of federal criminal prosecution. This experience gave her first-hand knowledge of how prosecutors decide which cases to pursue—knowledge that helps explain why some financial criminals face justice while others seem to escape it.

Why Some Cases Get Prosecuted While Others Don’t

When massive financial scandals don’t result in criminal charges, public frustration often follows. “Why aren’t these people in jail?” becomes a common refrain. But Baer identifies a more nuanced reality than simple theories about wealthy people being above the law.

“There’s a tendency to look at the scope of the harm,” Baer explains. “Someone says, ‘Well, he caused all that horrible harm. Why aren’t you prosecuting him?’ The answer is, well, I’m bound by the statute.”

Baer identifies two distinct thresholds prosecutors consider:

  1. The “threshold of liability” – Whether a crime technically occurred under statute
  2. The “threshold of viability” – Whether prosecutors believe they can win the case

This second threshold is crucial but often overlooked in public discussions. Based on past wins, prosecutors develop mental “prototypes” of successful cases that shape how they evaluate new evidence.

“When someone says, ‘Is this a fraud case? Is it a viable fraud case?’ [prosecutors] think in their minds about what most recently was viable,” Baer notes.

During the 2008 financial crisis, prosecutors’ mental prototype of fraud was based on early 2000s accounting scandals that featured whistleblowers, clear paper trails, and cooperating witnesses—elements largely absent in the financial crisis cases.

“My whole theory is that especially what happened with the financial crisis is, yeah, there were folks who had passed the threshold of liability, but the prosecutors weren’t sure they were over the threshold of viability,” Baer explains.

This framework helps explain why more recent cases like Elizabeth Holmes and Sam Bankman-Fried resulted in prosecution. Both featured the crucial elements prosecutors recognize from successful cases: cooperating witnesses and defendants who “constantly talk all the time” and eventually contradict themselves.

The Problems with White-Collar Criminal Statutes

Beyond prosecutorial decision-making, Baer identifies fundamental flaws in the design of white-collar criminal statutes. Her book, “Myths and Misunderstandings in White Collar Crime,” explores these issues in depth.

“The statutes themselves are confusing us,” Baer explains. She identifies three primary problems:

1. “Flat” statutes that lack gradation

Unlike homicide laws that distinguish between first-degree murder, second-degree murder, and manslaughter, fraud statutes don’t meaningfully differentiate between degrees of severity.

“If I look up fraud, it’s just all falling under the fraud umbrella of mail fraud or wire fraud. And it really doesn’t matter that you were charged with mail fraud and I was charged with wire fraud from a moral valence,” Baer notes. “It just means you use the mails and I use the wires.”

2. “Bundled” statutes that combine vastly different crimes

Baer points to the Hobbs Act as a prime example—a single statute that criminalizes both robbery affecting interstate commerce and bribery by public officials.

“That’s very different from robbery…it’s all under the same statute,” she explains.

3. Statutes that fail to generate useful information

Perhaps most importantly, these flaws create a system that doesn’t effectively track patterns or provide clear information about white-collar crime.

“The system itself should produce information because we are the ones in charge,” Baer argues. “We can’t do that job if the system doesn’t give us information or information that we could get at.”

These structural issues create an “insider/outsider” divide in criminal justice. Those working within the system understand its peculiarities, while the public is left confused and suspicious.

“It leads to this level of people feeling estranged from the system and feeling like this system is rigged,” Baer says.

Case Studies: Timing, Complexity, and Expertise Gaps

Several practical challenges further complicate white-collar crime prosecution. One is simple timing—evidence of sophisticated fraud often emerges years after the fact, sometimes through academic research long after the statute of limitations has expired.

Baer references a paper published in 2015 that uncovered significant misrepresentations in mortgage-backed securities markets from the 2008 crisis. “Little late,” she observes wryly.

Another challenge involves proving intent at the highest corporate levels, where decisions flow through layers of management.

“The public hungers for the very top person to fall,” Baer explains. “They don’t want to hear that you got Mister mid-level dude.” Yet proving that a CEO directed fraudulent activities is often nearly impossible without direct evidence.

A third challenge stems from expertise gaps. As Baer candidly acknowledges: “I think people don’t realize the degree to which lawyers in particular are generalists… after three years of law school, I absolutely did not have forensic accounting skills.”

This knowledge gap means prosecutors must learn sophisticated financial concepts while simultaneously building cases against defendants represented by specialists in these areas.

To illustrate how criminal law sometimes misses the mark, Baer points to the “Varsity Blues” college admissions scandal. While the fraudulent behavior was clear, she questions whether criminal prosecution addressed the deeper issues.

“Whatever way you should deal with this type of behavior, which of course is terrible…it wasn’t clear to me that criminal law was doing anything to really fix it,” Baer reflects.

Implications for Accounting Professionals

For accounting professionals, Baer’s insights offer a valuable perspective. Understanding the gap between technical violations and “viable” criminal cases is crucial for effective compliance work.

“Being a world-class jerk is not the same thing as violating the mail fraud statute,” Baer points out, highlighting the gap between unethical behavior and criminal conduct.

The expertise gap between legal and financial professionals creates both challenges and opportunities. Accounting professionals who can effectively translate complex transactions for non-specialists provide immense value in both preventing and addressing potential misconduct.

Baer’s solutions include creating gradations within fraud statutes, unbundling combined statutes, and designing systems that generate better information about financial misconduct patterns. These changes would not only improve enforcement but potentially rebuild public trust.

Moving Beyond Simple Narratives

The paradox of white-collar crime enforcement shapes how our financial system operates and who faces consequences when it fails. As Baer’s analysis reveals, the seemingly contradictory patterns of prosecution stem not primarily from corruption, but from structural challenges built into our legal framework.

“If you want to have a better understanding of where the problems are and how you fix them, you need better information,” Baer emphasizes.

Baer’s book “Myths and Misunderstandings in White Collar Crime” explores these themes in greater depth. For those interested in hearing more of her insights, the whole conversation on the Oh My Fraud podcast offers a fascinating look into the world of financial crime prosecution from someone who’s seen it from multiple perspectives.

From Mob Graves to Corporate Fraud: A Prosecutor’s Journey Through America’s Most Notorious Cases

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When former federal prosecutor Sam Buell received an unexpected phone call asking if he wanted to join the Enron Task Force, he had zero background in accounting or corporate finance. “I just got the Enron case. Do you want to come work with me?” asked his former supervisor Leslie Caldwell. Just like that, Buell found himself thrust into what would become one of the most significant corporate fraud cases in American history.

In a fascinating episode of “Oh My Fraud” podcast, Caleb Newquist and Greg Kyte interview Buell about his remarkable journey from prosecuting mob bosses to untangling Enron’s complex accounting schemes. Now the Bernard M. Fishman Distinguished Professor of Law at Duke University, Buell offers rare insider perspective on how major fraud cases are built and why corporate criminals are so difficult to prosecute.

From Organized Crime to Corporate Fraud

Before tackling Enron’s financial mysteries, Buell cut his teeth on cases straight out of a crime drama. After graduating from NYU Law School, he clerked for a federal judge in Brooklyn’s Eastern District of New York during the early 1990s.

“That courthouse was the most interesting place I had ever been in my life,” Buell explains. “At that time, in the early 90s, there was more crime than anybody knew what to do with. The murder rate in New York City was around 2,000 murders a year at its peak.”

The district was a hotbed of criminal organizations – not just the Italian Mafia, but diverse groups organized around various ethnic communities. These enterprises ran everything from drug trafficking to extortion, illegal gambling, and even human smuggling operations.

“These guys aren’t doing fraud,” Buell notes. “What they’re doing is real… it’s black markets. The question is simply what’s getting detected and caught and what isn’t. It’s a pure cat and mouse game.”

After moving to Boston, Buell joined the infamous Whitey Bulger investigation. Though Bulger himself was a fugitive, his lieutenant, Kevin Weeks eventually cooperated with authorities.

“Weeks took us to some locations where we recovered a total of five bodies,” Buell recounts. “The bodies were exactly where he said they were going to be. After 20 years, vegetation changes, everything changes. But I don’t think you forget that.”

Working on these cases taught Buell to “follow the money” – a skill that would prove invaluable when he later tackled corporate crime.

The Call That Changed Everything

In late 2001, while still working on the Bulger case, Buell received the call that would redirect his career. Leslie Caldwell, his former supervisor from New York who was now heading the Enron Task Force, invited him to join the investigation of America’s most spectacular corporate collapse.

Despite having a young child and a new house, Buell’s wife encouraged him to take the opportunity. “This is the one shot to do something,” she told him.

The learning curve was steep. “I needed a high-speed education,” Buell admits. “I didn’t even know what LIBOR was. People would say ‘LIBOR plus basis points,’ and I’d be like, ‘what is LIBOR?'”

Fortunately, prosecutors worked closely with SEC experts who could explain the complex accounting issues. “You’re talking to a lot of people who are experts, including lots of the witnesses who were CPAs. You’re like, ‘explain it to me like I’m your mother.'”

Despite the technical complexity, Buell found the fundamental challenge familiar: follow the money and identify the deception. “The people you’re dealing with speak a different language, but that doesn’t mean they’re smarter than you or capable of understanding things you’re not capable of understanding.”

The Slippery Slope of Corporate Fraud

Unlike TV crime dramas where villains set out to commit fraud from day one, Buell explains that most corporate fraud cases follow a pattern of gradual escalation.

“Once you tell the first lie, once you mess with the first number, it’s like… you read about what happened in Worldcom,” he says. What eventually became a billion-dollar accounting scandal often begins with small manipulations that executives might consider minor stretches of the rules.

Buell calls this “the creep effect” – a series of increasingly problematic decisions driven by pressure to maintain appearances and stock prices.

“These companies are being lauded as great success stories. And no CEO wants to say, ‘actually, we’re not succeeding,'” Buell explains. This reluctance creates enormous pressure, especially when executive compensation is tied directly to stock performance.

At Enron, “the tail was wagging the dog,” as Buell puts it. “Everything was designed not to have the stock price be a reflection of fundamental value, but a reflection of excitement about all the things they were going to do.”

Personal financial entanglements made this pressure even more intense. Many executives had borrowed against their company stock to finance lavish lifestyles.

“Ken Lay at Enron was being told to buy things like yachts and horses and cars and real estate—not very liquid stuff,” Buell explains. “So when the stock price starts coming down, there’s margin calls coming from the personal bankers, and they can’t be satisfied with selling other assets because you’ve put all your money into illiquid things.”

This creates a powerful motivation to keep the stock price up at all costs.

The Arthur Andersen Controversy

One of the most controversial aspects of the Enron case was the prosecution of Arthur Andersen, Enron’s accounting firm, for obstruction of justice. When Andersen employees shredded Enron-related documents as the SEC investigation began, prosecutors saw a clear case of obstruction.

“To have a big five accounting firm that was already in trouble with the SEC…suddenly have the relationship partner and somebody in the in-house counsel’s office telling all the junior people in Houston to shred everything other than the official working papers…because the SEC is looking at Enron – this was shocking,” Buell explains.

The Justice Department offered Andersen a settlement, but the firm refused to admit wrongdoing, fearing this would destroy them in civil litigation. When prosecutors proceeded with an indictment, Andersen launched a massive PR campaign with “full page ads in the Wall Street Journal about how the Justice Department is trying to put 10,000 people out of work.”

Though a jury convicted Andersen, the Supreme Court later overturned the conviction on a technical point regarding jury instructions. By then, however, Andersen had already collapsed.

The case had lasting repercussions for corporate prosecutions. “It explains a lot about why the settlement market in corporate criminal prosecutions has boomed over the last 20 years,” Buell notes. Defense attorneys now routinely argue, “You don’t want to have another Arthur Andersen,” to secure deferred prosecution agreements for corporate clients.

“Boeing got a deferred prosecution agreement and hundreds of people died,” Buell points out. “General Motors got a deferred prosecution agreement. The argument was being made, ‘Hey, you can’t slam GM. You know, you want to win Michigan.'”

Proving Criminal Intent in Corporate Settings

The central challenge in prosecuting corporate fraud isn’t just finding misleading statements – it’s establishing criminal intent in environments where some level of deception is normalized.

“When we say someone has the intent to defraud, what we really mean is that they have the intent to engage in a kind of deceit that is wrongful in the context. And they know it,” explains Buell.

He illustrates this through a comparison: “Think about the difference between poker and golf. In poker, it’s part of the game that everyone is trying to deceive each other… In golf, you’re supposed to apply the rules very strictly to yourself.”

This distinction extends to financial markets, where different sectors have different norms about acceptable negotiation versus fraudulent misrepresentation.

Applying this framework to Enron reveals why the case was so complex. “It wasn’t like there was no there there,” Buell explains. Unlike a pure Ponzi scheme, Enron had legitimate business operations. “The criminal case was a collection of pieces of the business and incidents over time where they stepped over the lines and told lies. That doesn’t mean that the whole company was a fraud.”

Buell describes Enron as “a Rube Goldberg device…cantilevered off of itself constantly.” This complexity made it challenging not only to identify fraud but also to explain it to juries.

Why Corporate Fraud Persists

Despite landmark prosecutions and regulatory reforms like Sarbanes-Oxley, corporate fraud continues to plague our financial system. When asked what continues to surprise him, Buell answers simply: “That the scandals never stop.”

He points to ineffective regulation as a key factor. “Every single one of these cases almost…you can see directly the story of taking advantage of ineffective regulators.” From Boeing’s relationship with the FAA to Volkswagen’s emissions cheating, companies exploit weak oversight.

Sarbanes-Oxley, passed after Enron, had limited impact on criminal enforcement. More troublingly, it “never took up the question of what kind of products are being traded, by whom, and what is the danger of that…the shadow banking problem.”

Buell sees Enron as “a canary in the coal mine” that foreshadowed the 2008 financial crisis. “Enron, even though it was an energy company, was basically trying to run itself like an investment bank, trading products that were not regulated by the banking system in ways that ended up being much riskier than people realized.”

Most disappointing is how little we seem to learn from these cases. “Every time one of these things blows up, there’s all this talk about lessons learned. But the lessons don’t actually seem to get learned.”

For a fascinating first-hand account of how major corporate fraud cases are built from the prosecutor’s perspective, listen to the full conversation with Sam Buell on the Oh My Fraud podcast. His experiences provide essential context for understanding why corporate fraud remains so persistent despite our best efforts to prevent it. 

You can also earn free CPE for listening with Earmark.

Hidden in Plain Sight: How Yale Missed a $40 Million Procurement Fraud

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For years, Yale University School of Medicine administrator Jamie Petrone lived a lifestyle far beyond what her job title suggested. She drove a Mercedes-Benz G550, a Range Rover Autobiography edition, and other luxury cars. She owned three houses in Connecticut and another in Georgia. Her social media accounts showed off her wealth for everyone to see. Yet it took nearly a decade before anyone at the prestigious Ivy League school asked how she could afford it.

The shocking truth: Jamie was orchestrating a massive fraud from inside Yale. She secretly ordered thousands of tablet computers—mostly Microsoft Surface Pros—and shipped them to an out-of-state business. That business paid her personally through her own company’s bank account. By the time an anonymous tip finally exposed the scheme in 2021, Yale had lost more than $40 million.

As told in an episode of Oh My Fraud, this case represents one of the most significant procurement fraud schemes ever perpetrated against an academic institution.

A Trusted Employee Exploits the System

Jamie joined the Yale School of Medicine’s Department of Emergency Medicine in 2008 and rose to become Director of Finance and Administration by 2019. With years of experience, she knew Yale’s procurement procedures inside and out, giving her the perfect roadmap to commit fraud.

In 2020, Jamie’s supervisors questioned why her department’s budget showed a big spike in computer purchases. She claimed the department was updating equipment and collaborating on a new project with Yale New Haven Health. No one pressed her further.

The $10,000 Threshold Trick

One simple rule made Jamie’s fraud possible: She could approve any purchase under $10,000 without extra oversight. Rather than submitting big orders for 50 or 100 tablets at once, she broke them into smaller requests—each one kept below the $10,000 limit. With no second approval required, her orders sailed through accounting.

According to the FBI, Jamie placed thousands of these small orders. In one case, she directed a coworker to purchase 100 Surface Pro tablets in 13 separate purchase orders. Twelve orders were for 8 tablets each, totaling about $9,100 each, and one order was for 4 tablets at $4,551. By splitting them up, she avoided the automated controls meant to detect high-value purchases.

Jamie then claimed the tablets were for department research or other official projects. Instead, she shipped them straight to a third-party reseller in New York, which sent payments to her company, Maziv Entertainment LLC. This arrangement racked up millions of dollars of profit, all at Yale’s expense.

Suspicious Spending Hiding in Plain Sight

While Jamie carefully hid the paper trail, she did not hide the results. She drove multiple luxury vehicles, including a Range Rover Autobiography and a Mercedes G550. She amassed four homes and flaunted her lifestyle on Instagram. Even without a full investigation, her lavish, conspicuous spending should have raised questions.

According to the Association of Certified Fraud Examiners (ACFE), “living beyond one’s means” is the top behavioral red flag among fraudsters. Despite this common red flag, nobody at Yale confronted the glaring mismatch between her university administrator salary and her multimillion-dollar expenditures—until an anonymous whistleblower reported seeing her load stacks of computers into her Range Rover in 2021.

The Anonymous Tip and FBI Investigation

In August 2021, Yale received a tip about large quantities of computer equipment leaving its campus. After confirming that Jamie was ordering suspiciously high volumes of tablets, the university notified the FBI. Investigators got a search warrant and began tracking packages Jamie sent from a FedEx location in Orange, Connecticut, to a reseller in New York.

Within days, they intercepted several boxes containing 94 Surface Pro tablets. Records showed she had recently placed a $144,000 order for more hardware—far beyond any legitimate department need. Realizing the investigation was closing in, Jamie turned herself in on September 3, 2021.

Guilty Plea and Aftermath

Jamie eventually admitted to the scheme, telling investigators she had done it for years—perhaps as many as ten. In March 2022, she pleaded guilty to one count of wire fraud and one count of filing a false tax return. She had not filed tax returns at all from 2017 through 2020, and earlier returns falsely claimed stolen equipment as business expenses.

In October 2022, Jamie was sentenced to nine years in prison. She forfeited six luxury vehicles, four houses, and more than $560,000 held in her company’s account. Yale’s official loss totaled $40,504,200. The U.S. Treasury was also shorted over $6 million in unpaid taxes.

Lessons for Every Organization

This fraud shows how easily a single employee can exploit weak procurement controls—even at an elite institution with a $41 billion endowment. Here are some key lessons:

  1. No One Is Above Suspicion: Long-term employees often have the trust and insider knowledge needed to commit major fraud. Familiarize yourself with employees’ roles and watch for unexplained changes in lifestyle.
  1. Monitor Repetitive Sub-Threshold Purchases: Splitting one large order into many small ones is a common trick. Regularly examine patterns of similar purchases under approval limits.
  1. Heed Behavioral Red Flags: Living beyond means, unusual personal expenditures, or unexplained wealth should prompt further review.
  1. Take Every Tip Seriously: The ACFE’s research shows that most frauds are uncovered by tips. Encourage a culture that supports whistleblowers and investigates promptly.
  1. Don’t Overlook Tax Implications: Illicit income is still taxable. Filing false returns or failing to file can lead to extra penalties and charges.

Hear the Whole Story and Earn CPE

For more details on this case—along with expert insights on fraud and ethics—listen to the full “Oh My Fraud” podcast episode. You can also earn free CPE credit by enrolling in the course on Earmark. 

The story of how such a large-scale fraud remained hidden for so long offers valuable lessons about the power of small gaps in oversight—and the big price organizations pay when those gaps go unaddressed.