Penndemonium
PhD Student
Posts: 1896
Reg: 11-29-04
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10-24-18 01:29 PM - Post#263417
In response to SteveChop
All, I spoke at a seminar one time on investment fraud in the post-Madoff era. People were asking me how you can sleuth around or do your due diligence to catch the fraud before becoming a victim. They were imagining investigative and forensic research that busts the company open. I told them that will almost never happen. The reason is that if you are doing deep due diligence that looks like it will expose the fraud, people like Madoff will simply stop sending you information and you'll lose interest in working with them. You won't catch the fraudster red handed - fraudsters will find easier prey and move on. I further pointed out to them that all of the new regulations in the world won't stop this exact fraud from happening again. The reason is that new procedures still rely either on human judgment or else documentation procedures.
The US regulatory response to Madoff made small firms like my own spend millions to jump through hoops for regulatory oversight. Our firm is the same honest firm before and after the oversight. A fraudster would have no problems fooling the regulators - it would be just as easy as before. They would just need to fake more documents - which they were already willing to do anyway. No regulator would catch that - they would just have more faked documents in their file cabinets than before.
Furda was being very astute in his comments - that admissions cannot replace the athletic department in assessing talent. Meanwhile, if you add documentation procedures or double down on oversight, you will simply encumber the process for the average honestly recruited athlete, and overall hurt your program. A determined fraudster would still be able to fool the system. This is the sad legacy that Jerome has left us with.
The only way to really solve this problem is to have good people working with other good people and having them all aware of possible shenanigans. Everything else is window dressing and simply making life difficult for honest people.
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