- The Mafia hires good accountants: Honest cheaters enable the mob.
- This day in history: 2007, 2012, 2017, 2021
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The Mafia hires good accountants (permalink)
High-profile leaks like the Pandora Papers and financial collapses like Carillion have shone a spotlight on the role that "the professions" play in enabling international finance crimes, which include both money-laundering and the underlying (ghastly, violent) crimes that produce the money to be laundered.
For example, the Sackler family knowingly and deliberately created the opioid epidemic that has killed more than 800,000 Americans so far, and then used the best, most respectable, highest price bankruptcy lawyers in the country to secure a deal that let them keep billions and deny justice to their victims.
High-priced, ultra-respectable firms of economists generate millions in billing every year ginning up plausible-seeming, opaquely complex "analyses" that monopolistic firms use to bamboozle regulators into allowing them to undertake anticompetitive mergers that destroy the real economy, communities and jobs:
And then there are the auditors – four giant firms have gobbled up all their rivals and merged with one another, while "diversifying" into offering "consulting" services that leave them hopelessly conflicted and signing off on fraudulent books that lead to catastrophic collapses and billions in tax fraud:
The corruption of the audit industry is especially deadly, since auditors are meant to be the umpires of the world, providing oracular "ground truth" to claims about how companies conduct themselves and what they're making and spending:
The great finance capitals of the world, like London, are the epicenters of the enablers of global finance crime, where the great and the good have waxed fat on the massive fees they charge to post-Soviet kleptocrats who have colonized both the city and the nation's politics:
But for all the attention paid to consultancies, lawyers, economists and other elite enablers, the accounting profession itself is rarely named when scandals erupt. Which is a mystery, since the keeping and auditing of financial ledgers is so key to corrupt practices.
A late-2021 paper called "Does the Mafia Hire Good Accountants?" by a group of academic accountants in the US, Italy and Germany, offers a tantilyzing explanation for the conspicuous absence of accountancy from the list of professions involved in global crime:
The paper uses a fascinating and robust methodology to examine the honesty of mafia accountants: they comb the national police's database of mafia-related persons for accountants, then examine the audit records, tax records and legal history of those accountants' non-mafia clients.
They conclude that if a business uses a mafia accountant, it has better, more honest finances than a business with a non-mafia accountant (!). Specifically: "private firms serviced by accountants with [organized crime] ties have higher quality audited financial statements, as evidenced by lower levels of abnormal working capital accruals, fewer small earnings, fewer tax restatements, and lower levels of discretionary revenues. Further, these firms receive more modified audit opinions, and pay higher fees."
The authors suggest that when the mafia chooses an accountant, they have to choose between two mutually exclusive strategies:
I. Hire a stupid accountant that you can trick into signing off on dirty books; or
II. Hire a smart accountant who can turn your dishonest business into one that is honest on paper, even if that erodes your profits.
The authors make a compelling case that the mafia choose the second strategy. What's more, they show that even accountants with known mob connections have no trouble finding non-criminal clients ("it is disheartening the Mafia can hire seemingly good accountants who appear to suffer no adverse reputation effects from their Mafia ties").
Perhaps that's because the mafia is so crucial to both the Italian and global business world: the authors quote a 2017 ISTAT study that says that 12% of Italian GDP is mafia activity and a 2011 UNODC study that attributes 3.6% of global GDP to Italian mafia groups.
But it would be a mistake to think that just because the mafia has clean books that it runs good businesses. Businesses that are run or colonized by mobsters aren't good firms – they pay poorly, produce low-quality goods and services, and engage in a variety of crimes and regulatory violations.
This is a fascinating and clever analysis, though it's short on recommendations. The most concrete policy proposal the authors advance is for police to maintain a public registry of accountants under investigation for mafia ties, and to bar those accountants from practicing until they are cleared.
This day in history (permalink)
#15yrsago Schoolkids “passing notes” by commenting on random blog-posts https://web.archive.org/web/20070203045817/http://informationweek.com/blog/main/archives/2007/01/dear_steph_and.html
#15yrsago 9/11 Commission Report hobbled by DRM https://web.archive.org/web/20070204013047/https://techliberation.com/archives/041976.php
#10yrsago Too Big to Know: David Weinberger explains how knowledge works in the Internet age https://memex.craphound.com/2012/02/01/too-big-to-know-david-weinberger-explains-how-knowledge-works-in-the-internet-age/
#10yrsago WSJ publishes actual climate scientists’ letter on climate science https://www.wsj.com/articles/SB10001424052970204740904577193270727472662
#10yrsago US trade rep and hotel caught lying about confidentiality of secret ACTA meeting in Hollywood https://www.techdirt.com/articles/20120131/23161417605/hollywood-gets-to-party-with-tpp-negotiators-public-interest-groups-get-thrown-out-hotel.shtml
#5yrsago Sean Spicer defends handcuffing a 5-year-old American boy for hours at an airport immigration checkpoint https://www.independent.co.uk/news/world/americas/white-house-five-year-old-boy-detained-dulles-international-airport-hours-sean-spicer-pose-security-threat-donald-trump-muslim-ban-a7554521.html
#5yrsago Trump’s war on science, a chronology (Week 1) https://scienceblogs.com/confessions/2017/01/30/the-donald-trump-war-on-science-week-1-how-bad-could-it-be
#5yrsago Suspecting arson, cops subpoena homeowner’s pacemaker logs, then charge him with multiple felonies https://www.csoonline.com/article/3162740/cops-use-pacemaker-data-as-evidence-to-charge-homeowner-with-arson-insurance-fraud.html
#5yrsago Federal judge orders emergency injunction and restraining order ending Trump’s #muslimban https://arstechnica.com/tech-policy/2017/02/judge-orders-halt-to-trumps-immigration-executive-order/
#1yrago Unidirectional entryism https://pluralistic.net/2021/02/01/dinos-and-rinos/#entryism
#1yrago The good news about vaccination bad news https://pluralistic.net/2021/02/01/dinos-and-rinos/#mixed-news
Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/).
- Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Yesterday's progress: 517 words (57595 words total).
Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. Yesterday's progress: 569 words (3949 words total).
A Little Brother short story about remote invigilation. PLANNING
A Little Brother short story about DIY insulin PLANNING
Spill, a Little Brother short story about pipeline protests. SECOND DRAFT COMPLETE
A post-GND utopian novel, "The Lost Cause." FINISHED
A cyberpunk noir thriller novel, "Red Team Blues." FINISHED
Currently reading: Analogia by George Dyson.
Latest podcast: A Bug in Early Creative Commons Licenses Has Enabled a New Breed of Superpredator (https://craphound.com/news/2022/01/30/a-bug-in-early-creative-commons-licenses-has-enabled-a-new-breed-of-superpredator/)
- Boskone 59 (Feb 18-20)
Dangerous Visions and New Worlds: Radical Science Fiction, 1950 to 1985 (City Lights), Feb 27
Emerging Technologies For the Enterprise, Apr 19-20
- The End of Uber (The War on Cars)
Moral Panic (Drug Science Podcast)
- "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The Washington Post called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
"How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)
"Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
"Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p1562/_Poesy_the_Monster_Slayer.html.
- Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022
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