Fraud for Thought

August 27, 2009

Actual US figures, from the FBI

Actual US figures, from the FBI

The next time you read a puffed up columnist railing against public sector waste and praising the streamlined efficiency of the private sector, spare a thought for Andrew Wetherall.

Cuts in public services and layoffs in the public sector are invariably accompanied by the excuse that they are undertaken in the interest of “efficiency” – cutting red tape, or unncessary waste. The metaphor of bodily obesity is constantly mobilized to justify mass layoffs, using a discourse where the public sector plays the role of a bloated wastrel (needing the “fat” to be literally “cut” from its waist/waste) and unnamed privately run institutions are framed as sleaker, slimlined, well exercised and toned bodies.

Yet Wetherall’s case suggests that things are not as clear cut as this. Wetherall is a 49 year-old man from St Albans, who used to be a director with the accountancy/consultancy firm KPMG (a major government contractor, it’s worth bearing in mind). I say used to be, as Wetherall is currently being tried in Southwark Crown Court for false accounting and fraud, to which he has pled guilty. He won’t be returning to the boardroom just yet.

His sin was to milk company expenses on an almost heroic scale, to satisfy the Imelda Marcos-like tendencies of his wife, or so he says, for whom he made false expense claims amounting to over £545,000. Apparently, fearing divorce from Catherine, his second wife, Wetherall began to feed her with luxuries bilked from KPMG and, indirectly, the British taxpayer. £15,000 a month seems to be the going rate for a healthy marriage in the shires, an amount that the bloated, inefficient corporate body of KPMG was happy to supply.

As Wetherall allegedly kept his claims to below £5,000 a shot, and his total claims amounted to half a million, that means that he must have submitted close to one hundred claims before his colleagues became suspicious enough to ask questions. Clearly neither cost nor climate conscious, KPMG merrily signed off on multiple fictitious flights for Wetherall and his trophy wife. As he told police, “once he started stealing it became easier and easier as there were few controls or restrictions upon him, and he became cavalier in his approach.”

Cases like Wetherall’s are, of course, common in contemporary capitalism and there are far worse offenders who will be spared jailtime. At least Wetherall was trying to maintain his marriage, however sordid the relationship must have been. Yet bloated, inefficient beasts like RBS or Lloyds TSB carry out more heinous frauds on a daily, even hourly bases. If overdraught charges mean a thing to you, then you’ll know what I mean.

The private sector, far from being streamlined and svelte, is just as prone to bloat as its public equivalent.

GE Capital, financial offshoot of GE, one of the world’s largest corporations, is being fined $50 million for a series of gargantuan accountancy frauds. Hank Greenberg, the mogul who steered AIG to the brink of a behemoth of a bankruptcy, has paid $15 million to settle a similar case. In both instances, huge financial players simply reported fraudulent figures to make it look like they were healthier than they were.

Accountancy firms like KPMG, which are often tasked with assessing frauds, are actually some of the worst offenders, facilitating the crimes of others. PriceWaterhouse Coopers, for example, is being sued by victims of fraudster Bernard Madoff. PwC Canada was supposed to audit the “assets” of investment fund Fairfield Sentry, yet seems to have utterly forgotten to do so. As the Telegraph reports, “PwC Canada has been accused of negligence for failing to spot that Fairfield Sentry’s $7.2bn of assets simply did not exist.”

All of this is worth remembering next time someone argues with you about public sector waste and private sector efficiency.

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