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Fraud Museum is for educating about financial malfeasance throughout history
(San Antonio Express-News (KRT) Via Thomson Dialog NewsEdge) Aug. 26--AUSTIN -- Almost everyone knows about fraud at Enron Corp., but what about the Yazoo Land Fraud in 1794?
The newly created "Fraud Museum" wants to educate people about financial misdeeds throughout history, including that embarrassing period in Georgia's political past.
Fraud affects virtually everyone, said Joseph Wells, founder of the Association of Certified Fraud Examiners and founder of the museum.
"If you ask a roomful of people if they've ever been mugged, a few will respond," said Wells, also a former FBI agent. "But if you ask if they have ever been ripped off, every hand in the group goes up." The Fraud Museum reflects the growing national insistence by courts, Congress and the public on greater business accountability and a crackdown on fraud. Colleges also are increasing their ethics courses.
"The scandals have just created a buzz about business ethics," said Joe DesJardins, a philosophy professor at the College of St. Benedict and St. John's University in St. Joseph, Minn., who has taught business ethics for more than 25 years. "There is a pendulum, and something like Enron hits and we see a sudden uptick in student interest."
The museum, housed in a small two-story building on West Avenue near downtown, features more than 90 items including framed stock certificates, checks, photographs and letters.
It's a small collection -- nothing close to the scale of the Bob Bullock Texas State History Museum -- that hangs on the walls of the association's headquarters.
It highlights recent fraud, including a stock certificate from WorldCom, which imploded in an $11 billion accounting scandal that in 2002 led to one of the nation's biggest bankruptcies.
It also features a stock certificate from Adelphia Corp., whose founders pleaded guilty to fraud as shareholders lost more than $60 billion.
As for the Yazoo Land Fraud, it occurred after four companies bribed the Georgia Assembly into selling them 20 million acres of land for $500,000, or less than 3 cents an acre. Public protests led to the sale's recision a few years later. The Fraud Museum features a painting of legislators burning documents in front of the state Capitol.
Also featured is a picture of English financier Clarence Hatry, who contributed to the stock market crash of 1929, Wells said.
Hatry filed for bankruptcy, revealing he'd forged $67 million in municipal bonds to cover his debts. That panicked other investors, who sold off their American securities in droves.
"I think what is needed mainly, of course, is someone to teach people before they get into these god-awful frauds," said Bill Shaw, professor of law and ethics in business at the McCombs School of Business at the University of Texas at Austin.
The museum's focus is to educate people because it's difficult to defraud someone who knows better, said Wells, who also teaches fraud detection courses.
Already, more than 2,000 people have toured the fraud exhibit, most of them during the Association of Certified Fraud Examiners' 17th annual conference in Las Vegas last month.
Laura Hartman, professor of business ethics at DePaul University's College of Commerce, likes the idea of the museum as long as it doesn't glamorize fraud.
"We need to know enough to prevent fraud and damage to stakeholders and shareholders," Hartman said. "How do we prevent these major extraordinary frauds from happening? Maybe his museum will sufficiently educate so that we can prevent some of these dastardly events from occurring in the future." The museum opens at an opportune time.
Participation in the Society for Business Ethics is at its highest level ever with more than 1,000 members, and it has been growing at 5 percent to 10 percent a year, said ethics professor DesJardins, the organization's executive director.
Also, the accrediting association for business schools now requires that every accredited business school show evidence that students are learning about ethics.
"That is a very clear change since the Enron era," DesJardins said. "The result of that has been a significant increase in the number of people teaching the courses.'" The passage of Sarbanes-Oxley in 2002 also spurred greater interest in ethics, said Keith Darcy, executive director of the Ethics & Compliance Officer Association, based in Waltham, Mass.
The association, founded in 1992 with 19 members, has seen its membership double to 1,278 since 2002.
"We haven't seen the end of ethical issues being raised," Darcy said. "In an age of information, there are no secrets and no place to hide. All of our business practices are open to scrutiny because of the Internet." The main lesson that the Fraud Museum teaches is that there are no new fraud schemes, Wells said.
Some think it should be housed in Houston -- the home of Enron, the energy giant that suffered a stock collapse from massive accounting fraud. But Wells took the initiative to set it up in Austin.
"Fraud has doubtlessly been around since nearly the dawn of time, since humankind learned to lie," Wells said. "What we see over history is simply repetition of the same schemes dressed up for modern-day victims. While not every liar is a fraudster, all fraudsters are liars."
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Copyright (c) 2006, San Antonio Express-News
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