They say a truly honest man is one you can play craps with over the phone.  Today’s headlines make us wonder where the honest people in business have gone.

We are all familiar with the basic facts surrounding the Martha Stewart case.  If you are like me, you found her recent conviction on all charges both startling and baffling.  How could someone so revered and trusted in the public eye suddenly be convicted of crimes of deception.  Why would she risk so much for a relatively small gain.

More importantly, what lessons can we take from this to our daily life as a credit professional?  Who can you trust? How can the CMA help?

There are many lessons here and they are more relevant today than anytime in the past.

People’s actions are often motivated by one or a combination of the “Three E’s”:  Error, Ego and Economics. 

To “Error” is human.  People in business make mistakes.  Decision making is about choosing among alternatives and taking risks.  In today’s fast paced environment choices have to be made rapidly, sometimes with minimal time for research and thought. 

An honest mistake is one thing.  However an ill informed mistake could cost you your credibility and even your job.  It is more important than ever to be honest about what you do and don’t know.  If needed, seek out reliable resources that can rapidly keep you informed.  The CMA Trade Credit Groups and Anscers are available to help you.  On-line Requests for Information, “RFI’s”, give you immediate access to your industry peers to clear accounts.  The Encyclopedia can help you keep informed.  The Community Bulletin Board offers you an opportunity to post questions and receive immediate advice and comparative approaches from other credit professionals.

The second “E” is “Ego”.  This can blind us from the facts and consequences of our actions.  “Ego” oriented decisions are relevant to credit professionals from two perspectives. 

Don’t let your ego get in the way of a tough decision.  It is a changing world out there.  Realize the facts may change surrounding a position you have taken on an issue in the past. The circumstances may have changed for a debtor company you have supported.  Step up to the facts at hand and do the right thing.

Also, watch out for principals of customer companies who let their “Ego” get in the way.  The executives now being tried and convicted for their misdeeds are poster children for this one.

I once sold to a medium sized distribution company with an owner who felt he had the magic touch.  After some successes he started buying smaller competitors with borrowed money.  He felt he could do no wrong.  Well, the obvious happened.  He made some bad choices, couldn’t meet his obligations and filed Chapter 7.  His decisions were blinded by his “Ego”.

The third motivator is “Economics”.  The desire for personal gain along with a blinding ego is a great formula for deceptive business practices and fraud.  WC Fields once said, “A rich man is nothing but a poor man with money.”  Don’t let someone in expensive clothes, an elaborate office, or a seemingly prestigious company deceive you.

Unfortunately, the recent conviction of Martha Stewart and other top executives is an example of a growing problem in business today.  Business fraud is something all of us will face at some time in our career.   It could manifest itself as check fraud, a misstatement of a company’s financial status, a break out operation, a catastrophic embezzlement by a trusted employee or in many other forms.  We have to be constantly on the look out and aware of when a fraud is a possibility.

The “Triangle of Fraud” helps explain how a fraud friendly environment can exist. 

On one side of the triangle is “Pressure”.  This can be economic pressure, an individual or company has desperate financial problems.  Perhaps an individual or a family member has severe health problems, a substance abuse issue or gambling debts.  This leads to the pressure needed to motivate, even apparently honest people, towards fraud.

The second side of the triangle is “Rationalization”.  “My company is small I am defrauding a large company.  Anything I get from them will be immaterial.”  Or, “I will just do this once and never again”, or, “just once more and never again.”

For fraud to be successful, “Pressure” and”Rationalization” must rest on a base of “Opportunity”.  There is “Opportunity” for fraud and deception when a company has lax controls, no checks and balances, or bases credit and collection policies on a belief the “unbelievable” will never happen.

This is another inherent value to the CMA.  The CMA is your professional association.  It is an organization that is in the game for YOU.  It provides access to timely information to keep you informed.  Comparison among your peers on “best practices”, the Lien Filing Services, the Collection Division and the Adjustment Bureau can all help you keep informed and swiftly react to the growing fraud issue. 

CMA Business Credit Services is managed for and by credit professionals to provide a credible resource.  This will not eliminate those situations when the “unbelievable” happens, but it will provide you the best tools available to minimize the impact on you and your company.