Steven Mintz, the Ethics Sage, has a post on a subject dear to my heart, “How much damage does corporate crime do to the United States?” Each year in my ethics class I ask my students to estimate the damage and comment on it. He has filled out that damage estimate with some new information. I am very appreciative and next Fall my students are going to be reading this post.

Professor Mintz’s post is entitled, Business Fraud. Most of the first paragraph is below but I want you to go to his site and read the whole thing. This subject is a critical factor in whether or not we should do more about business ethics or not. If his figures (or mine) are in anyway correct, our nation is being crippled.

In my last blog I wrote about the ever-increasing cost to society of criminal fraud that targets investors. Fraud in business organizations also seems to be on the rise despite all efforts to reduce it following well-publicized accounting frauds at Enron and WorldCom. According to research conducted by the Association of Certified Fraud Examiners (ACFE) in 2008, U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud. Also, the median dollar loss caused by fraud schemes was $175,000. More than one-quarter of the frauds involved losses of at least $1 million. …

The costs may be 994 billion dollars, 7 percent of annual revenues, lost to corporate fraud. That doesn’t include corporate crime like dumping pollutants, evading taxes, killing or maiming workers by evading safety regulations, etc.

Is that enough reason to put business ethics as a primary legal and economic concern in every governing body from the cities to the federal government?

James Pilant