Insider fraud struck again yesterday, this time resulting in charges being filed by the U.S. Securities and Exchange Commission (SEC).
According to the SEC, a former executive in the Stamford, Connecticut offices of a New York-based broker-dealer deceived clients when selling them mortgage-backed securities (MBS). He allegedly told them that his firm paid more for the MBS than it actually did, or made up a fictional seller and arranged supposed trades, when in reality he was selling out of his company’s own inventory at higher prices to bank a better profit.
In the SEC filing, the former exec was said to have swindled his clients and brought in nearly $3 million in additional profits. While the duplicitous activity went unnoticed for a time, his star rose within the company and so did his bonuses.
When news like this breaks, how long do you think it takes before other clients start to question the trustworthiness of the entire company? If one person was ripping people off, who is to say there aren’t more? Fraud awareness training is meant to prevent these situations from giving companies black eyes in very public ways.
And once that bell is rung, good luck trying to unring it. Now, rather than focusing on doing their jobs, everyone at that firm has to work double time to assure clients that they aren’t just like the guy who could be eating three squares a day behind bars for the next few decades.
Think of it like a bad food experience. If you got really sick after eating say, shrimp, you may end up feeling queasy every time you see or smell shrimp again. The same works in the business world, and the last thing you want is for people to get queasy when they hear your company’s name because of the actions of a deceptive employee – someone you thought you could trust.