Financial scandal is a pervasive and growing problem, costing businesses billions each year. Perpetrators exploit loopholes in regulations and vulnerabilities within the financial system, defrauding investors, eroding corporate morale and damaging national reputations. This project quantifies the history of financial crime in the UK, revealing how systematic economic and institutional arrangements can both limit or fuel such activities. The research retells the history of the British economy from mercantilism to financial capitalism, illustrating how fraud and corruption have varied according to prevailing economic ideology, policy and structure.
Despite the passage of the Sarbanes-Oxley Act of 2002, which was a direct response to the Enron, Tyco International and WorldCom accounting scandals, financial statement improprieties remain all too common. For example, infamous bank trader Bernard Madoff ran a multi-billion dollar Ponzi scheme that resulted in the collapse of his investment firm and the loss of tens of thousands of jobs and over $65 billion of investor funds. In other cases, senior executives will use the accounting system to misreport earnings or inflate assets. For instance, Dennis Kozlowski and Mark Swartz of Tyco International were found guilty of inflating revenues, understating line costs and using the company’s legal department to circumvent internal audits when filing disclosure documents with the SEC.
The recent Wells Fargo scandal was a case in point. An independent committee’s report presented to the company’s board indicates that management manipulated financial records for years, culminating in the company’s bankruptcy filing in January 2023. The scandal revolved around the company opening 1.53 million checking and savings accounts and 565,000 credit card accounts without customers’ knowledge or consent, generating millions of dollars in unauthorized fees for Wells Fargo.