The Financial Psychopath
What is a financial psychopath?
A psychopath is someone who acts on antisocial impulses without regard for its destructive consequences. They exploit people and lack empathy. They focus only on themselves. Psychopaths have a distinct “charming” nature which often catches professionals off-guard. What they perceive as real is discordant with what is happening hence, they act with impunity until they are caught in the act. However, they are willing to avoid major consequences of some actions so as not to ruin their charming persona.
Tools have been developed by companies to diagnose psychopaths in the work environment. One such is the Business-Scan 360 where Bibiak and Hare have identified three subsets of corporate psychopaths: (1) corporate manipulators who are cons and have more passive behaviors, (2) bullies who are more aggressive, and (3) puppet masters that are both manipulative and bullies. (Babiak, 2006) This tool has identified 3.5% of executives that fit the psychopathic profile. White-collar crimes entice psychopathic personalities due to their high rewards with historically minimal punishments if they are caught, except for one which we shall discuss.
The financial psychopath is a subgroup of corporate psychopaths wherein they focus on the financial resources which they can control. Money is entrusted to them because of their fiduciary duty to manage it. A key psychopathic feature is being unremorseful to negative financial outcomes from their dealings.
They are likely to be male because fewer women in the corporate world are in control of the company’s finances. Also, female psychopaths use their sexuality to manipulate people hence they are less likely to be caught because their actions are likely admonished. Violence is an unlikely course of action from a financial psychopath. But to be considered a financial psychopath, this harm that they do unto others exhibits pervasiveness in a life-long pattern of psychopathic behavior.
Two financial psychopaths
One high-profile case for financial fraud was Bernie Madoff who admitted to operating the largest Ponzi scheme in history in 2009. This behavior has been ongoing since 1992. Mr. Madoff was good at earning other peoples’ trust hence thousands of investors trusted him with their money. Only to have it vanished with most having nothing left after the dust has settled. And some of the victims are people he knew.
After contemplating on his crimes, in 2011, he wrote in an email, “I made the tragic mistake of trying to change the way money was managed and was successful at the start but lost my way after a while and refused to admit that I failed.” (Henriques, 2011) This points out that after all of the convictions, all the sufferings that thousands of victims went through, the suicide of his eldest son, and all the assets seized from him for recompense, he still thinks he was innocent. Can you conclude that he has no remorse for the scheme which he built in 1992?
Another high-profile case with a charming personality was Lee B. Farkas of Taylor Bean & Whitaker (TBW), a mortgage company in Ocala, Florida. He was convicted of securities fraud, bank fraud, wire fraud, and conspiracy to commit fraud. The closure of TBW had impacted Ocala’s economy greatly. Farkas was sentenced to 30 years in prison.
Farkas had a charismatic personality. One that will emulate the great Gatsby according to his former COO at TBW, Jason Moore. Court documents and local newspapers would reveal that Farkas exhibited deceitfulness by repeated lying or conning others for personal profit and pleasure. He used companies as fronts (as his “aliases”) to move money from TBW. Ocala news would report on how his private jet worth $28 million was paid from fraudulent loans of non-existing condominiums. Farkas also displayed unremorseful, disregard for others by forging mortgages from other people without their knowledge. Recorded statements in court revealed that Farkas said, ”We at Taylor Bean tend to spend money like drunken sailors”. When informed that TBW couldn’t pay $300 million in loans, he replied, “If you owe someone $100 you have a problem. If you owe someone $1 million, they have a problem.” (Lee, 2011)
Farkas is a puppeteer under the Babiak and Hare nomenclature. He was able to rehire his company president Raymond Bowman after resigning over fraudulent practices about a year before TBW would have met its fate. Farkas only needed to increase his annual salary to $440,000 with benefits that took care of his sickly mother. (Lee, 2011) This gave Farkas more control over him. Paul Allen, his CEO, and a former executive at Fannie Mae and Freddie Mac was enticed by Farkas to return as a consultant by offering privileges such as working offsite and the use of the company jet to visit his daughter in Florida. The court asked him why he’d come back after TBW’s shut down and he answered, “felt that Taylor Bean exhibited a lot of potential and could be sold to a third party.” (Lee, 2011) Farkas also promised him a $5 million bonus if this succeeds.
Farkas knew how to exert influences over his top management teams who were necessary to keep the legitimacy of TBW. Despite ruining the professional and personal lives of those who worked with Farkas under TBW, they stayed with him. He was like a cult leader. He also destroyed many others who fell victim to his fraud. The shutdown of TBW had a ripple effect. Because of so many fake loans on their books, it affected Colonial Bank vetted on these loans. Because TBW was a major employer in Ocala, a lot of people in this community lost their jobs. It had a great impact on the financial sector at the time the U.S. economy was also weak. Farkas was greedy, but there are other sinister traits explaining his actions.
References
Babiak, P. a. (2006). Snakes in Suits: When Psychopaths Go to Work. New York: ReganBooks.
Henriques, D. (2011, December 10). Business. Retrieved from The New York Times: https://www.nytimes.com/2011/12/11/business/bernie-madoffs-lasting-shadow-3-years-after-his-arrest.html
Lee, S. (2011, April 10). Ocala Star Banner. Retrieved from Ocala.com: https://www.ocala.com/article/LK/20110410/News/604198503/OS
Ehrrman, Thiery. Bernard Madoff Painted Portrate_ DDC5189. https://www.flickr.com/photos/home_of_chaos/3612816281/ (CC-BY 2.0)