Million-Dollar Frauds.

• Author: Hermanson, Dana R.
• Position: Review

by Gary McKechnie and Nancy Howell

Published by The Institute of Internal Auditors, Altamonte Springs, Fla., 113 pages, $29.00

REVIEWED BY DANA R. HERMANSON

Million-Dollar Frauds presents a lively and engaging discussion of 11 famous financial frauds, including Barings, Lincoln Savings & Loan, Orange County, and Daiwa Bank. Drawing information primarily from the business and popular press, the authors do an excellent job of telling the story of each fraud. The focus is on the personalities involved, the apparent motivations for committing the frauds, the organizational weaknesses that allowed the frauds to occur, and the consequences of the frauds. Each case is covered in about 10 pages, just the right length to convey the message and keep any reader's full attention.

This work has several important strengths. First, the book is a great tool for building awareness of financial fraud. These 11 stories, combined with the fraud statistics presented in the introduction, make it clear that financial fraud is a significant problem that can strike a variety of organizations. Building awareness of the problem is the critical first step in ultimately solving the problem.

Second, the book presents several valuable insights gleaned from these frauds: "If something appears too good to be true, it probably is"; "Be skeptical in your business dealings"; and, "You should be able to understand what others in your organization are doing." Many fraud cases involve unreasonably high profits or returns, people who don't ask the tough questions, and experts who are unable or unwilling to explain their complex activities to others. Each of these factors is a clear indicator of risk. Living by the three insights above can help managers to reduce risk in their organizations.

Third, the authors have managed to write the book in layman's terms while still providing clear explanations of what the perpetrators did. The balance between entertainment and technical detail is struck quite well. The authors also provide interesting information on the personal traits of the perpetrators and allow us to see the "human side" of fraud cases.

Despite the book's numerous strengths, there are some limitations. First, it is important to recognize that the information in the book is derived primarily from the business press (The Wall Street Journal, Business Week, etc.) and the popular press (Newsweek, U.S. News and World Report, etc.). While these are credible news sources...