Thursday, 2 February 2012

Organised fraud: The rules of the game

An analysis of  organised fraud

As you read the news it becomes clear that it is both possible and extremely easy for a group of people of any size to decide to operate a plan which is likely to create the impression to the outside it is a genuine cause, but in fact by using techniques known to magicians and hypnotists, and designed to remove as much money from its innocent victims as possible while all along they believe it is going somewhere else. The individual and small time frauds are well known and do not need any extra details for everyone to understand how they operate. But when large organisations are created or used solely or additionally for the purpose of outright theft, then a mechanism is operating which has hardly changed for centuries and still, for most of the time, works as well as it always has.

The basic model is based on the mafia, with a relatively formalised structure and protection mechanisms in place to avoid legal challenges, and threats and penalties in place for those who consider breaking ranks. All in all the ideal conditions create a 360 degree all round protection from failure, sealing the operators from outsiders and rogues within, creating a consistent illusion to the public and gain their protection from inside or outside challenges through the same use of  carrots and sticks as the mafia (in the form of favours or threats) and using the illusion of legitimacy to fool the authorities. After all, an apparently legitimate business should look as good to the authorities as it does to the public, or you need a huge amount of money and effort to cut them in on it as well which is usually an additional method of sealing the cracks. But there are also many allegations claiming some emanate from the top downwards, hence leaving the power on the same level as the fraud, making investigation or challenge virtually impossible as it is the authorities themselves who are operating it. By this I mean the alleged or proven fraud is set up by the government itself, so physically impossible to challenge as it has become the law, even when the actual activities do not reflect the official ones.

There is a process of learning involved while observing these processes, in my case enhanced by studying law and criminology, where after learning the basic clues find it easy to spot any and every scam just as if they were using a special code. The trouble with this ability is it means you get to catch on long before there is much evidence, and then spend months, years or a lifetime watching it come out while few people believe you. But it’s a very clear and virtually infallible ability as once you have the formula you can work backwards and see how each element fits in to whatever you are investigating which are not present in legitimate business. Even the police need far more evidence than persuasive before taking a case to prosecution, as fraud is recognised as the most complex area of evidence altogether, and as such is often argued to remove the cases from jury trial as it is so easy to confuse them and really may need a professional panel familiar with all the mechanisms I describe here. This works in favour of the fraudsters as it takes so long to build an effective case they can be gone before it’s begun and our money with them. In fact there is only one type of fraud which must be exposed with time naturally and that is where people lose their money altogether. This is on the edge of my organised fraud scenario as unlike a complex system mixing apparently genuine business with clandestine theft, these people simply offer a product and fail to deliver. It may take a day or a year to find out, as they may offer either ‘interest payments’ taken from other peoples’ ‘investments’ to keep the scam going longer, or a delayed payment so people wait till the ‘maturation’ of whatever commodity they think they have ploughed their life savings into, whether wine, land or whatever, only to find it doesn’t exist. These are in stark contrast to the mafia style frauds, and could be compared as amateur, for the reason that the fraud is never in doubt and many do get caught and punished. There the ease of the instant result combined with so much greed to blind them to the ultimate expectation of failure are too much to resist. Whether some believe it is better to live like a king for a year or two only to pay for it in prison I do not know, but would put them outside my organised fraud system as unlike a large scale conspiracy which can cover its tracks indefinitely and provide a bare minimum of actual products or activities, these guys just offer the public something and do not deliver it. Some outright theft, like pyramid and ponzi schemes, will deliver in the short term but can only last as long as more people pay in to provide the imaginary profits on the early investments. So besides to illustrate the general picture of how all frauds operate these are outside the main scope as they are not watertight.

Examples of known organisations:

The best way to see how this operates is through history. As humans appear to reinvent themselves every generation, believing they are immune to the errors of previous ones, the nature of organised fraud has never changed besides the details since the beginning, as they found a working formula which relies on the same flaws in human nature, both of the victims and perpetrators. The seven deadly sins allow humanity to use pride, lust, greed, sloth and probably the others somehow to find it easier to earn a living with as little work as possible or work but with returns many times higher than a real job. The pride and greed bring in customers who think they are too clever to be scammed and more interested in cheap goods or easy returns than where they are coming from. The combination of clever crooks and stupid victims allows a scheme to be set up almost at will basically whenever any evil genius thinks of it. It’s extremely easy to bring others on board to act as directors, as birds of a feather tend to stick together and many already work in organisations where it is well known who is up to what and would be up for some more. My aim here is to present a standard and recognisable structure anyone can see when informed, and if the elements can be seen at any angle then you can be fairly sure others will be seen looking elsewhere. The ultimate purpose is that the more familiar everyone becomes with the signs something may well be wrong, the sooner whistles can be blown and not wait till the money’s gone before anyone notices it’s not what it seems.

The earliest well known mass fraud were church indulgences. These were the simplest way to keep funds rolling in based purely on the alleged power of God. My first rule of fraud, no profession has fewer crooks than society in general, applies here, and anyone who does not believe me I can list pages of cases where every single profession is represented as having an equally evil section. Intelligence and integrity do not come together as a package, intelligence is neutral and if someone who has a great deal of it prefers to earn their money by cheating than struggling their way up the career path then the career itself is entirely irrelevant.  So of course who could people trust more than God himself, and his representatives on earth, the church. The same ones who threatened to kill Galileo for claiming the earth went round the sun. They exploited this to its full extent (they clearly did not believe as much as their followers as if they had they would all be condemning themselves to an eternity of hell) and people spent centuries queuing up to receive the Lord’s blessing in return for hard cash. Like every scheme since it was no different to being mugged at knifepoint in the street, as as long as you cooperated the result was identical, you left without the money and with nothing in return. You can do the same with a threat or a promise, but both crooks want and get the same thing.

Governments were the next area to operate such tricks, having taken over from the church and lost vast amounts of money from the US Civil War, Alexander Hamilton, the First secretary of the treasury, issued war bonds for the people to support their country to pay back the losses. These were sold at a face value, went down to almost nothing, and then sold to speculators who were connected with Harrison who then redeemed them at their face value. This was technically the first government bailout through issue of government bonds, which are only worth a nominal amount as not based on any concrete asset. This policy is still in use at its greatest level today in 2012 as an international means of delaying debt repayments in the form of bailouts and quantitative easing, going against week one economics classes by generating new money in the form of bonds, which increases the total supply without any additional capital production. It is no different from its original form, only serves to dilute the currency and force up commodity prices in reaction, as the smart money leaves cash and is moved to solid assets, and delays any financial problems while making the general population poorer in the short term as their wages are worth less as a consequence.

The next embellishment was to offer genuine looking investments in random and impossible to check commodities, but going to exactly the same place. This was the most famous and largest scam of all in history, the South Sea Bubble. Again, the government was on hard times, and set up a bogus South Sea company in South America to try and sort out their deficit.Their original mission was more in genuine investments, but under the guise of a company who were in fact purely a government vehicle designed for a different purpose entirely. After a decade or so the speculation in the shares they issued pushed the price up to the bubble, a massive (for the 18th century) £1000. This was like the 2000s dotcom bubble in that people invested in little understood commodities, shot the price up by mass buying rather than product performance, and when they actually found the true worth the bubble inevitably burst as was solely driven by a combination of ignorance and wild enthusiasm. Back then it was virtually impossible for home investors to have a clue what they were investing in thousands of miles away, so believed the government hype, as the South Sea company was just a government vehicle set up to trade its debt away independent of the Bank of England. Once the next stage arrived, the redemption, where people start to cash in their shares, the value fell to £150 and everyone lost the remainder as it was never worth more to begin with. Who was sacked and implicated for its actions? The Chancellor of the Exchequer, the Postmaster General and three ministers. So much for trusted politicians, especially ministers. So what has changed since? You must check that up yourselves.

 This was a standard mock auction format, still used today in structured loans, where a product is offered either hidden in a bundle of others, or impossible to see or prove as situated elsewhere, and people buy purely on trust. Structured loans are entirely fraudulent, but illustrate perfectly how illegality and fraud do not always overlap, as if legalised people are free to use such loopholes, which is how the 2007 credit crunch was brought about. Banks sold loans to householders they knew were unable to pay back, earned a commission and then sold the loans on. This was called predatory lending, as the profit was in the transaction and not the commodity itself which was of dubious value. The structure was a method of rating loans as top rate AAA, but like ‘British meat’ the labelling was worthless, as British meat means killed in Britain, so unscrupulous but legal farmers ship live animals hundreds of miles to be killed here so they can earn more for what the poor customers believe are better quality plus incur unnecessary suffering on the animals. The loan packages were and still are rated by the top standard within, while can contain an unknown percentage of pure junk, ie non-status mortgages. The result of this crashed the world economy and is still nowhere near a recovery, and to illustrate the level of fraud involved, not one government has changed any of the regulations, although Britain promise to split clearing and investment banking in about 2019, the largest known gesture (and probably the only one) so far anywhere on the planet.

So as now, the public learn nothing. They trust a government until they get into trouble and get kicked out, and when another government offer something else they think it can’t be a scam, it’s the government and they’re not offering war bonds now but real investments. In comes the magician’s wand. Of course you have to change the window dressing each time if the same audience come more than once to see the show, but the money always ends up disappearing behind it. And the innate trust people expect of public servants has and will always allow them to take full advantage and be almost impossible to prosecute if working as a whole, as only individuals working alone tend to get picked off, just as in the outside criminal world.

Coming to modern times, we have two perfect examples of organised schemes, one which was the other type of simply robbing innocent people who were too greedy to check, but represented organised fraud the same way as it still used all the same methods to keep going for decades despite doing absolutely nothing besides moving the same money around indefinitely while taking a slice off the top, while the other lead the way for the modern 21st century model. Once a legitimate energy company, Enron became greedy and when they needed a cash injection decided to attract new investment based on future projected profits on their existing assets. That alone is a legitimate accounting method, but the difference here was Enron didn’t have any. Instead they worked out a way of false accounting which put current profits into the future based on a fake financial instrument they called an energy credit. There’s no point trying to explain how they claimed it worked, suffice to say it convinced people to invest multi-millions, as it never existed. But this represented an ideal scam in that it became so complex most outsiders could have no way of working it out, along with the authorities. If you hide your tracks in so many accounts, equations, sums and false claims you need a trained expert to see their way through it armed with complete disclosure warrants. And this can only happen when the police believe there’s a case, which is nearly always the last thing to happen if at all. Often they are called in sooner or later to check, but the system is so well made they find everything appears to check out, and following a clean investigation a company is normally better off than one never checked as it is has been seen to pass the police test of legitimacy.

Enron did manage to keep their increasingly complex system going, fooling most of the people most of the time until the final day, while staff still believed there was nothing wrong as only a small group in a huge firm actually knew the truth, the wrong information got into the wrong hands and they went down big time. The scam was so good and so thorough many staff thought it must me a mistake.
But the successful part was how they, like Bernie Madoff who I will describe next, managed to keep going for so long before it happened. There is a standard pattern for these operations. Firstly they deliver to early investors for long enough to create confidence in them. Then they use every trick in the book to silence inside questions, as before it becomes apparent to outsiders it is inevitable some insiders have to spot something if honest, as you can’t hide a magic trick from the stagehands for very long. They will claim that as part of the company if one is convicted they all will be, which on the face of it is possible as it can be hard to prove individuals could spend 40 plus hours a week in a company and not know the score. Then the usual mafia pair, sticks and carrots will be offered, and finally the often correct offer of freedom to complain to the authorities if you want, they won’t believe you anyway. Such pressure has been shown to work on the majority of decent innocent people, as the stress from possible consequences nearly always makes it easier to turn a blind eye and keep paying the bills or you may end up falsely accused of slander and lose your job. Also by its nature the police need a heap of better than usual evidence before they even take claims of fraud seriously, more so against organisations as you would imagine. So the chance of one or two people sheepishly offering suspicions to the police against what could be a multinational or billion pound company offers so little chance of being taken seriously as to be almost possible to ignore altogether.

So whistleblowing is always the exception, so in most cases it’s the outsiders who raise the suspicions. But by far the likeliest means to undo a crooked company is not by any of these ways but by the commonest of all, human error. Maintaining a lie is actually harder work than any other task as it’s based on nothing. You have invented a story, and the more people who share it must learn the script almost word perfect, and tell the same one every time unless it will soon become clear two versions can’t both be right. If there are false accounts the actual papers the owners need to keep track of where their own money really is can sometimes find their way into the accountant’s hands, and unless working for the mafia are not inclined to ignore such transgressions but send them straight to the police as is their legal duty. In fact this is more or less what undid Bernie Madoff, as after the standard internal dissent being silenced, two failed investigations finding nothing wrong, and managing to maintain a pure ponzi scheme for over a decade as it continued to attract new investors as he had worked out the perfect balance between paying original investors and taking a cut for himself so the money did not yet run out, by chance a book of his personal figures escaped the fortress and it was all over in a flash. But one thing all convicted frauds almost have completely in common is regardless of punishments the victims rarely get a penny back. The perpetrators can end in prison but the money is hardly ever recovered, and even more rarely returned.


It can be seen that while a pure pyramid or ponzi scheme with no product, only moving the same money around and taking a cut off the top, has to fail sooner or later as once people start losing when the money has to run out (requiring an exponential increase to maintain the payments to original investors to feign legitimacy) the fraud is painfully obvious, so is only run by a combination of greedy and stupid crooks. They tend to be one man bands with large numbers of variously guilty staff under them to do the selling and admin work, and is as much about the power and adrenaline than the money as nearly all (like Kevin Foster, the serial fraudster who sucked in many famous victims before all his companies were exposed after a long career in pyramid schemes) end up serving long stretches in prison. But if you want to use it as your long term living, or a short sharp scam which can close without a clue as to its nature, you need a proper conspiracy with a product. So instead of the chain letter method where a pyramid scheme involves a person simply paying to join and when you reach the top of the pyramid you receive the money, a product is introduced to appear genuine, and while everyone is busy exchanging usually cheap or worthless goods the bosses are offering the world and giving cheap tat. This is akin to the mafia model of running a front business, where what it appears to be doing is legitimate, and may actually reach a fully fledged janus company, with two faces, a fully functioning dry cleaners or restaurant on the street while protection rackets and money laundering are run from the back making the real money tens of times above the legitimate and not liable for taxes. But most just use the apparent guise of a genuine business as a shell to carry out the theft, and have no real worth or value to any of the business, but with an ostensible exchange of goods and services.

Enron was such an animal. Although the energy credits were a common example of a desperate act in hard times, while turning over real energy assets it was discovered the credits were more lucrative and reliable than the unstable energy market, and became more a part of their regular business than a temporary stopgap. Had they remained short term they may easily have got away with it, got back on their feet and carried on as normal. But the sort of mind who would think them up in the first place can never be a straight businessman. Once the taste of blood has been experienced they tend to want nothing else. If greed and pride do not take over the brains then it can be cleverly woven into normal business activities and never noticed by anyone besides the odd employee, whose fate we have already mentioned. The structure of these organisations is crucial, and while not every element is used in all most are and provide an all round protection besides the small hole which will always be untruth.

So we have a list of perfect mafia style elements which can allow large scale fraud and have not changed since the beginning:

1)      Offer a product people can believe in.
2)      Give an impression you can be trusted, preferably by the use of authority figures such as professionals or politicians who people think are above such things.
3)      Keep dissent to a minimum. Offer benefits to staff who begin to notice, and if they do not work offer threats. Most people need their jobs more than their integrity.
4)      Keep your opponents happy. If you have a local police force who may want to know what the lorries are delivering late at night, let them in on the action. If that doesn’t work go to their bosses. Then if they don’t play ball threaten them. In the largest organisations there is enough money and manpower to deliver both.
5)      Work with the media. Employ a good PR firm, get celebrity endorsements and give to charity publically. Keep the front looking good as behind the façade there is nothing.
6)      Exploit the law of conspiracy. Like the Three Musketeers it is all for one and one for all. If the employee complains then quite rightly it will take a lot of work to prove they are not part of it themselves. It is actually extremely difficult to work for anyone engaged in fraud not to see it so at best they had turned a blind eye until then and are assumed guilty until proved innocent as far as charging is concerned. The conviction itself will be up to the court. Therefore if someone complains at work first then they will tend to take it no further when reminded of this situation. It is simply not worth the risk.

Between them these methods are common to all conspiracies, as they must plug all possible leaks and fear and greed will keep the relatively innocent workers on the periphery from squealing, and inertia and possibly corruption will deter the police from taking the odd complaint seriously as without the best evidence it is going to take all their resources to properly investigate and often not worth their while.

I have actually devised a rough test for deference to authority. I have made a list of potential wrongdoing, and ask the readers to draw a line where the real frauds take over from wild accusations. The choice of acts and individuals is only a representative one and interchangeable with any others:

If I said for example, Barack Obama spent 80% of his green subsidies on party donors, Tony Blair agreed with Rupert Murdoch to exempt test matches from going on terrestrial TV in exchange for The Sun supporting Labour before the election, FIFA officials took bribes from countries to vote for them to host the football world cup, Rajendra Pachauri, head of the UN panel on climate change, was told a paper claiming a Himalayan glacier would melt by 2050 was wrong and still included it in his report knowing it to be false, a company found a cure for viruses but held it back so the industry could continue selling symptom treatments, a major US company sold arms to both sides, took the money and turned round and walked away while they killed each other, which is just a typical example of many,  Chris Huhne, a government minister, is about to be tried for asking his wife to take his speeding points, three MPs have been jailed for false accounting, etc etc. But how could such a nice man and president of the USA do anything wrong? Not like that nasty Richard Nixon who may have done nothing wrong as he resigned and did not actually stand trial for Watergate while 43 others did. But everyone thinks he was guilty despite having had no personal trial, while Barack Obama did not break the law as such with that particular move but clearly represents a more general attitude he must have to governing. How could George Soros who spends millions on charity and the environment crash the pound by speculation (quite legally)?

In fact two of these examples have been tried and convicted, the FIFA official and the UK MPs, while others are either under investigation or openly used the loopholes in the law to make arrangements which while not being illegal define their own moral boundaries as fairly wide. Now on the surface people look at Barack Obama’s doe eyes and nice smile and could simply not believe he’d be up to no good. Maybe he is, maybe he isn’t, but the perception would allow him to fully exploit such trust should he wish to. Unlike Nixon basically, although he appeared to come out only minus a job and little else, he was officially pardoned of any wrongdoing over Watergate although 43 other people involved were convicted, but officially he was off the hook. But perception somehow makes people assume those at the top working for the good of them and their country are above deception, which is both against the general human statistics and the history. This is diversion. They sail close to the wind, generate more and more intrigue, but unless they are stupid enough to cross that line, as the crooked MPs most certainly did, mainly as they were working on their own, but proved if a few are caught the usual picture means many more were not. So where do you draw the line? If Nixon’s the president and accept he was guilty (although he wasn’t) why is that different from Obama’s potential to be guilty? Why is Chris Huhne possibly being smeared to cause him problems while other MPs were naughty boys and should be stripped of all their pension and titles (which they were not).
Obama gave billions in subsidies to the already failed Solyndra solar power company, plus other Democrat party donors including another, Brightsource, Abound Solar, Solazyme, who gained a huge contract for biofuel for the military, TJ Gaulthier, a director, worked on Obama’s team and is apparently paid $15 a gallon for what is clearly many times more than the going rate, all with close connections to the Democratic party team and backers. Many decades earlier Basil Zaharoff's Vickers Company sold weapons to all the parties involved in the Chaco War. Further political examples include Abraham Lincoln's first Secretary of War, Simon Cameron, who was forced to resign in early 1862 after charges of corruption relating to war contracts. In 1947, Kentucky congressman Andrew J. May, Chairman of the powerful Committee on Military Affairs, was convicted for taking bribes in exchange for war contracts.

This confused perception and assumption of being too good to cheat, which converts to guilt and full acceptance afterward a trial and conviction but not for future replacements has the effect of stopping people treating new politicians the same as old ones, as if the relief of getting rid of the bad rubbish guarantees the new arrivals are different. Extending from individuals to groups, the ‘our government is the best’ illusion is one of the strongest and best exploited ones. If I say to people ‘look what the Italian/Iranian/Pakistani government are doing’ no one  here would really question it. It’s what they’d expect from less scrupulous foreign countries. But say the same about our own and they are seen as above that. Even when you expose known convictions they simply use denial and treat them as exceptions by individuals and reject any idea that if a few are genuinely caught it can’t mean there are more than likely many more who were not and still at it.

As long as ‘our boys’ can never cheat, only the foreigners, then they are generally protected from public scrutiny as no one expects their own to do so except in a few places like Italy where it is historically and culturally expected. The worst operation of politicians is where they are able to combine in force to put through any dubious scheme they wish and then who is supposed to stop them? If countries join forces like the EU and UN and cook up a scheme to do the same thing on a massive scale then they don’t even have a national police force to enforce the law. Therefore the EU can have over ten years of unsigned accounts and there is no higher authority to enforce it, the proof being every year another fail is added and no action has ever been taken as there is no one given the authority to do so, or if there may be they are clearly involved as with all such situations much of the incriminating material simply disappears. Therefore the sheer potential and opportunity for the combined forces of international cooperation to band together and steal money is almost infinite. The IPCC mentioned earlier in relation to its head, Rajendra Pachauri, has a growing list of ‘errors’, known anecdotal  unscientific data, discredited data, sheer wrong data etc which has reached its reports used worldwide to increase taxes, despite being told on every single one not to use them. Who can police the police? They set an example down the line, and if they can do it then why not those who work for them on and on? So in December 2011 the second tranche of emails was released from the University of East Anglia climate research unit, showing whole conversations casting doubts on computer models and adjusted graphs, deleted figures or simply fabricated from scratch. The first set had investigations, the main one headed by Lord Oxburgh, who was coincidentally part of the wider team itself and named frequently in the current set. The British law finds by default any opportunity for bias on the part of the investigator to be a void decision, yet this finding stood and although many times more explicit this time round not a single word has been said by the British government about the second set of emails. If the UEA were acting on government orders (remember my examples of convicted government fraudsters, it does happen) then how can they investigate themselves? If they looked at the details and found the ones ordering them to make sure the story looked convincing and there were no loopholes in the data once corrected were from government ministers what would be the point in arresting themselves? That is the ultimate level of power, they have reached the top level of being fireproof.

Psychological methods:

Belief and perception of outsiders drive frauds along as much as greed and pride on the perpetrators and victims. The appeal to authority is by far the greatest, as much major fraud tends to be carried out by high profile companies or government members themselves. If a company employs professionals, although the reality is that good and bad people are represented throughout life evenly, many professions are perceived to be above corruption, so if a doctor says they cannot cure your illness but can treat the symptoms you’d trust them, especially when they all did it, like for stomach ulcers. Councils in Britain were told to keep their money in Icelandic banks long after it was clear they were in trouble, as how could a whole country be crooked? And guess who was the first country to default on their banks since Argentina? This innate trust even worked across governments, with the British authorities having so much faith in their mirrors abroad that no one that counted believed they could be taking the money in a small scale ponzi scheme. Iceland had been offering interest rates way above the rest, with no legal protection for foreign investors. Had a private person put any savings, let alone their life savings in, any experienced investor or advisor would know if interest rates are higher than everyone else it’s safer not to risk it. If the money isn’t there to have such rates elsewhere then unless they have oil fields or a new gold mine then you can assume it isn’t there either. They then ploughed the money into ridiculous hostile takeovers of many of Britain’s largest and oldest retail businesses, at high levels of leverage (ie borrowing many times above their assets), only for the inevitable to happen and they lost it all.


1)      Trust in authority
2)      Denial
3)      Diversion
4)      Collusion
5)      Ridicule

The immediate result was the only one there ever is, an almost total loss. A few years later some of the bankers are now on trial at home for fraud, but as always this is an internal criminal trial and the money is long gone and convictions cannot help the victims get their money back. But the pride, kudos and trust by the councils who defied advice to remove the money while they could have has cost us all dearly. And not a penny of that money is actually lost, someone has it, whether the original thieves or who they spent it on, but it isn’t with the owners who only gave it on deposit and not to spend on themselves.

The next element is denial. Once someone has ploughed thousands into a scheme, the last thing they want to hear is it may be gone. So they think up every possible reason it is ok, delaying proceedings for valuable months or years as the collective denial of suspicious investors is used to allay the suspicions for their own peace of mind. For they know as well as I do that if their hunch is right, that money is gone, and even if the scheme is eventually blown apart it won’t get it back. So rather than join together each individual tends to start worrying, not find quite enough to prove anything, and turn round at try and put it out of their minds. So you can have hundreds of like minded people all working individually in isolation and dismissing concerns which collectively could stop the scam in its tracks. But knowing even if they did most people tend to only care about their own fate and if they rightly realise stopping a scam is unlikely to recover their money they’d prefer to live in hope and try and forget it.

Diversion has already been covered in the official function and purpose compared to the actual and the PR is added on top, just as an essential element of magic is to get the audience to look the other way while hiding and switching objects, but in fraud the purpose is not to entertain but pick your pocket. Look at the tricks employed to gain money from the fear of global warming. The RSPB openly admitted on the BBC Radio 4 they have to mention the climate in many grant applications as they know it’s almost guaranteed to work, as did most environmental and other charities. If you claim a good cause for your funds, genuine or not, people will feel sorry and be happy to either donate or be taxed for the poor polar bears. The fact all green taxes go to the same pot of revenue as all others, as do carbon credits and offsets tells you all you need to know. Even making what was illegal legal is still fraud if dishonest, it just means you’re one step ahead and changed the law to stop any legal responsibility. The energy credits invented by Enron to withdraw cash from innocent investors have now been changed to carbon credits, which unlike their predecessors are both legal and compulsory. That’s your ultimate level of fraud, when it is both legalised and compulsory to pay. How much conspiracy and collusion does that take to operate? It began with a meeting at the White House between President Clinton and Vice President Al Gore and the then legal head of Enron Ken Lay as to how to arrange the new carbon trading system, doing what was then deemed legal but became the greatest known fraud in the 20th century. So although energy/carbon credits having been proved fraudulent by a court, Bill Clinton and Al Gore authorised them as a front for saving the planet, was taken up worldwide, and  is now part of many people’s daily life and much higher tax bills.

Collusion was touched upon under the pressure put on honest employees to keep in line once they discover the truth, and as in law once they do become equally guilty as rather than turn them in become knowingly involved. That increases the pressure manifold as you can’t then take the top down without the risk of bringing yourself along with them, so in the end why bother. This works at all levels, making sure nearly all potential loose cannons stay in line and do not break ranks. Fear is the greatest motivation of the otherwise innocent secondary parties, and once part of the problem are too scared of the consequences of losing their jobs and reputation for exposing criminal practices in the company who provides their living. If people have children and mortgages then morals and ethics on the whole have to take a second place. That is the primitive family protection instinct kicking in, overriding all other higher motivations and too strong for most to overcome.

Ridicule is a very effective method particularly used through the media with the help of PR companies. Any doubts in well known trusted groups and individuals are subjected to a concerted finger pointing exercise as if the victim is becoming the perpetrator by daring to question the morals of upstanding bastions of society with what they claim is no evidence. Of course, unless there is enough evidence plus it means the police have to break the habits of a lifetime and investigate, or the press (the swingers of the business world, as they swing to either side as long as it sells papers, with no loyalty to either) speak out, who would risk a massive libel suit for printing anything implying fraud. So the collusion tends to keep the problem silent, another mafia trick of omerta, although they tend to use death as the motivation rather than the vaguer threats of never working in the field again. Both work very well though. For every leader there are tens or hundreds of loyal passive followers who go to work every day and overlook ‘someone else’ committing a crime while they look the other way and pretend they’ve done nothing themselves (denial again). A human, reliable and winning formula.

The mafia work as a fairly standard model for any organisation, both crooked businesses and governments alike. You have a clear organised hierarchy, a support system, outside protection, a communication campaign, a legitimate product to give the impression of honesty, threats, punishments and massive bribes. The decent employees are ruled by fear while the top level mix with the elite of politics and entertainment, to gain outside trust, and make sure everyone who can be a problem to them is looked after. The mafia go one step further and kill the police and judges who convict the odd one who does get set up for prosecution as a rare example, and often their families as well. Death is the ultimate deterrent and if the mafia impose the death penalty on the authorities then who is the authority in Italy now? As the official 2012 figure shows the mafia is now Italy’s largest company, at 7% of GDP, then clearly this is both possible and real, and just because it began in Italy does not mean it was ever restricted to it. No countries can and do now work in isolation besides a few rogues, so it would be both impossible for Italy to continue their open mafia activity alone (especially as the 7% figure was measured and accepted officially), as being part of the EU it is also their duty to remove organised crime in all member states. So if it is not then why not? One would now on reading this guess it was because they must be working together. What other explanation could there be?

So to stay scientific and generalise from the wide to the narrow, if Italy and probably the EU are partly run by the mafia, and you live in the EU, who is running your country?

This has tied together the majority of methods large groups share since the beginning of history, to work as a well organised unit using a tried and tested model, and the character flaws of the public to exploit to allow them to do so. If it could happen then it can happen now, if governments have done it they will do it and are doing it, and no profession can or is immune. My aim is to bring the magician’s tricks into public awareness, so next time you see a company or other group seeming to offer something that doesn’t seem quite right, fit them into the formulas. Can you see their products? Are their accounts published and appear genuine? If your suspicions were correct how would they be carrying it out? Does the return offered sound too good to be true? Do you know where all the money is being invested? Are the bosses not answering straight questions or giving answers which don’t sound right? And most of all trust no one. Never again assume a politician or president is above what every other individual is not. They are human, weak and prone to the same faults as everyone else on earth, plus they have the power and support to do it many times more than ordinary people can. If they have the potential you can both guarantee some will use it, and will cover many more people and money than the people you would expect to be crooked.

© David Howard November 2011

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