¶ … Satyam -- The Enron of India," involves its former chairman Ramalinga Raju, who admitted to years of corporate fraud in 2009. At the heart of this fraud was the way in which Raju handled the accounting reports of the company. An initial attempt to cover up the company's debt culminated in the necessity to fabricate an increasing amount of revenue. This ultimately culminated in 94% of the company's assets and cash being fabricated. This type of corporate fraud is an unfortunately frequent occurrence in the world of business today. The problem involved in fraudulent activity is that it cannot continue perpetually. Even years of fraud will eventually, of necessity, be revealed when accountants or interested parties notice a discrepancy between what is reported and the cash flow that is in fact available. Furthermore, revealed corporate fraud tends to tarnish a company's reputation in the eyes of the public it serves as well as in the eyes of business partners. This is very difficult to recover from, and should act as a deterrent from this type of crime.

Yet, one of the problems is that companies and leaders who do commit this kind of fraud believe that they will be able to maintain the deception, despite the fact that many, like Enron and Worldcom, have been exposed and brought to their knees as a result. According to Kaplan (2010), however, it is notoriously difficult to detect well-concealed fraud; hence the perpetuation of the crime; there is little to deter fraudsters from engaging in these practices. Kaplan (2010) notes that, despite the public scandals of fraudulent companies being exposed, there has been an increase of fraud between 1998 and 2007 when compared to the previous ten years. This is also despite the 2002 implementation of the Sarbanes-Oxley Act, which focuses on discouraging fraud and encouraging whistle-blowing.

The problem of fraud therefore seems to be increasing, while the supposed deterrents remain ineffective for unethical companies and CEOs who seek to deceive the public and their partners. The problem is that these practices tend to create a negative sense of trust among companies, while it also endangers partnerships and the public that makes use of the services of the companies in question, particularly when investments and other monetary services are involved.

2. Discussion

One of the ways in which fraudulent companies escape detection is by means of changing auditors between the time of their final clean financial statement and their final fraudulent one. According to Kaplan (2010), about 60% of companies that engage in fraudulent practices change auditors during the period of wrongful reporting, while 40% do so just before the start of the fraud. This change in auditors makes it easier for deceptive practices to slip through the cracks.

According to Schoen (2006), the fact of aggressive prosecutions and tough laws have made an impact on fraudulent activity among corporations, but have not discouraged them to a degree that companies who want to commit fraud would think twice about doing so. Indeed, there has not been a significant reduction in fraudulent activity, as mentioned above. One major factor in this is also mentioned in the case study; that there is an imbalance between the incentive to cheat and the cost associated with it. In the case study, one might assume that Raju would have been able to continue his fraudulent practices for several years more if he had not owned up to the deception when he did.

Often, fraudulent practice is exposed by whistleblowers or by practitioners themselves whose conscience overrides their desire to maintain the deception. However, the monetary incentive of fraud remains sufficiently strong to override both conscience and the potential legal consequences of this practice.

Lefcourt (2011) confirms that there is a culture of fraud among businesses, regardless of industry, as demonstrated by the example of Maxim Healthcare Services, Inc., based in Columbia. This healthcare provider submitted false claims for services to the value of $61 million over 11 years. This fraud involved both managers and employees, who consistently modified time sheets to support the fraudulent practice. In addition, the charges included offices that were not properly licensed and a lack of quality in care provided.

The problems involved in these practices are obvious; the public receiving the services are at risk, not only of their health, but even of their lives if substandard care is provided. This is particularly important in the health care industry. In the financial industry, the importance of ethical practice lies in the fact of preserving the life savings and very livelihoods of clients. The greatest risk...

Those committing fraud are only at risk once they are found out. Indeed, it was only when one of these stakeholders, a patient, filed a lawsuit against the company under the False Claims Act (Lefcourt, 2011). The federal investigation this claim launched took five years to complete, a period during which thousands of additional clients were defrauded and harmed.
An important point that Lefcourt (2011) makes is that, too often, the "settlements" for fraudulent practices are so mild in monetary terms that companies not only survive them, but are free to continue these practices. In terms of this example, it therefore appears that only very large, public cases are truly prosecuted to their full extent. Companies who engage in fraud are generally able to afford the best of legal representation, which is part of the problem. Meanwhile, the public and investors who engage in interactions with the company in good faith, suffer as a result, with very little by way of legal repercussions to offer any hope of restitution or accountability among similar giants in the business world.

The Anonymous Employee (2011) Website provides further information on the nature of corporate fraud, and suggests that not only managers and collective corporate giants commit fraud, but that ordinary employees do t his as well. This poses a danger to the company in question, making losses imminent as a result of fraudulent practices. The authors suggest that the first important step is being able to identify corporate fraud when it occurs. This means that the nature of various types of fraud should be scrutinized and highlighted, so that both managers and employees can be aware of how to identify and report it. This is important across the board for companies that are trying to remain ethical in an increasingly unethical world.

Although it appears that it is impossible to overcome corporate fraud when giant companies choose to cover their tracks and deceive their public and partnership stakeholders, there are indeed measures that companies and individuals can take in an attempt to create a better corporate climate for all.

As stated by the authors of Anonymous Employee (2011), the first important step is recognition. This occurs when a company is concerned with the honesty and sound business practice of its employees. Recognizing the types of possible fraud and the way in which employees might commit such actions is important in order to be able to curb it.

Another important remedy is whistleblowing. Employees should be supported and protected when choosing to report on fraudulent activities that they identified in their environment. These practices should be encouraged in any employee relationship, whether it be with peers or superiors. This is where management within corporations and management of corporations in a collective sense meet. If better legislation and protective measures were in place for whistleblowers, corporate giants might be more concerned with engaging in ethical practices.

Currently, however, the challenge associated with whistleblowing is the fact that those who do choose to report on their peers and superiors tend to suffer the consequences, while those who were engaged in wrongdoing in the first place tend to practically get away with murder. In extreme cases, whistleblowers are even fired, as in the case of the U.S. Park Police Chief (McArdle, 2011). She was recently reinstated, after years of legislation to dispute her dismissal.

Currently, experiences like these tend to discourage whistleblowing, while at the same time the relatively lax settlement and prison laws for fraudulent companies are somewhat lax, making it more appealing to engage in fraud than to act in the ethical interest of stakeholders. For this reason, a remedy could be to modify the existing legislation. Sentences for fraudulent companies should be much harsher, while whistleblowing legislation should protect those who report fraudulent activities and make it easier to do so.

Legislation that is currently in place is clearly not sufficient to curb the culture of fraud that currently plagues the business world. Clearly, the temptation to pursue money at the cost of all else is simply too strong for some to resist in favor of mutually beneficial dealings with clients and stakeholders. Hence, it is important to create a platform from which companies and individuals can be encouraged to engage in ethical practices.

Conclusions and Recommendations

In conclusion, if the corporate world today is taken under scrutiny, it becomes all too clear that fraud is indeed "alive and well" in corporate America…