November 2005 Topics
Never Give a Sucker an Even Break,
Ripping, Wildcat Subdivision, Salutary Effect,
Buyer’s Remorse, Non-buyer’s Remorse,
Seller’s Remorse, and Channel Stuffing
 

Only half of music recordings obtained by fans
in 2004 were from authorized CD sales.
 

Fraud In Other Words™
Professional Jargon and Uncensored Street Slang
by Larry C. Adams, CFE, CPA, CIA, CISA

 

Never Give a Sucker an Even Break
This credo for con men means don’t hesitate to take advantage of a fool. The American actor and comedian W. C. Fields (1880–1946) popularized the phrase. Fields ad-libbed the sucker rule when he played an oily, failed confidence man in “Poppy,” a 1923 Broadway musical and 1936 film. His full witty remark was “Never give a sucker an even break or smarten up a chump.” W. C. Fields often played the role of a hustler, carnival barker, or card sharp, and told yarns to distract his potential victims. He wrote the movie “You Can’t Cheat an Honest Man” (1939) and played “Larsen E.” Whipsnade, a deep-in-debt owner of a seedy circus, one step ahead of the sheriff. Whipsnade insisted, “You can’t cheat an honest man. He has to have larceny in his heart in the first place.” Another quote attributed to Fields is “A thing worth having is a thing worth cheating for.” W. C. Fields also wrote and starred in the movie “Never Give a Sucker an Even Break” (1941). Three more people might have created the phrase, “Never give a sucker an even break.” Edward Franklin Albee (1857–1930) owned a successful circuit of vaudeville theaters and knew W. C. Fields. Michael Cassius McDonald, known as “King Mike,” ran Chicago’s first crime syndicate with an army of confidence men and compliant politicians in the 1870s. King Mike opened “The Store,” the largest downtown gambling house with rigged casino games. Wilson Mizner (1876–1933) was a flamboyant promoter of real estate developments in Palm Beach and Boca Raton, Florida, in the 1920s before he went bankrupt.
William and Mary Morris, “Dictionary of Word and Phrase Origins,” HarperCollins Publishers, New York, 1988, page 406.
Image: http://www.progardenbiz.com/public_html/images/
articles/20031120184114470_1.jpeg

 

 Ripping
The process of illegally copying audio, video or data files to a computer hard disk from a DVD (digital versatile disc) or CD (compact disc). A disc that is licensed, encrypted, or copy-protected is intentionally difficult to access or alter by normal methods. Ripping strips out, or evades, the added security features. Ripping means to rip-off or use dishonestly. To conserve storage space, the “rips” or decrypted file copies of music and movies often are converted to a compressed format, such as MP3 or MPEG-2. Ripping enables fans to create customized playlists and play audio or video selections on portable digital players. Only half of the music recordings obtained by fans in 2004 were from authorized CD sales and 4 percent were from paid download services, according to NPD Group market research. Digital data is intellectual property protected by treaties of the World Intellectual Property Organization (WIPO) signed in 1996, the U.S. Digital Millennium Copyright Act of 1998 (DMCA), or national copyright laws. So far, no licensing security feature embedded in the original files has been able to prevent illegal copies from being made and redistributed. Ripped or pirated copies of Windows XP software sell for US$3.60 in Beijing. Hackers on the Internet sell “keygen software,” that evades copy-control technology and generates valid license numbers needed to install popular software products. Some digital licensing security features make it difficult for ripped files to be played on certain types of equipment.
Steven Branigan, “High-Tech Crimes Revealed: Cyberwar Stories from the Digital Front,” Addison-Wesley, Boston, Massachusetts, 2005, pages 213 – 215, 306 - 308.
Image: http://www.jojometal.com/archives/images/dvd-arrr-thumb.jpg

 

Wildcat Subdivision
A subdivision of land created by circumventing a state’s land division requirements and local zoning laws. The area is developed through a series of successive lot splits, using legal loopholes to avoid regulations, infrastructure costs, and consumer disclosure requirements. For example, the first buyer of a rural, one square mile lot (640 acres) is permitted to split his land into 5 parcels to sell. The second buyers, or shell companies, soon split their lots into 5 parcels, making 25 lots for sale. The third buyers break the lots into 5 parcels, making 125 lots for sale. Then the fourth buyers divide their lots into 2 parcels. Consequently, the first buyer’s lot has been quickly converted into 250 lots for sale. A wildcat subdivision offers little consumer protection. The burden is on the buyers to check the land’s resources. An unsuspecting buyer can purchase a parcel and not find out until later that it lacks a long-term (100 year) water source. The water table might be a mile underground. If a law doesn’t permit drilling, the buyer has to regularly haul in water by truck. A buyer can discover there are no storm drains or sewers, and too many septic tanks contaminate the land. Access roads in a wildcat subdivision aren’t paved, aren’t signed, aren’t maintained by the county, and sometimes don’t exist. Schools, police, fire protection, electricity, gas, and phone services aren’t provided. Wildcat developers use lower land prices to attract buyers and cause urban sprawl. Wildcat subdivisions destroy wilderness areas and don’t contribute enough taxes to cover any services provided by local governments.
Shaun McKinnon, “Developers Cashing In on Weak Water Laws,” Arizona Republic, June 27, 2005, pages A1, A6, A7.

 

Salutary Effect
An additional benefit or indirect improvement produced by an action. Several major banks paid multi-billion dollar settlements because they financed Enron’s fraudulent activities. Those litigation settlements have a salutary effect to encourage other banks to perform more due diligence on their customers and be more cautious in their lending practices. High profile arrests of corporate executives and televised “perp walks” of handcuffed senior officers have a salutary effect to discourage executives of other organizations from engaging in financial manipulations. A criminal statute of limitations has a salutary effect of encouraging law enforcement officials to promptly investigate suspected criminal activity. When a publicly traded company complies with the U.S. Sarbanes-Oxley Act of 2002 (SOX), it becomes more transparent and reliable in its reporting practices. SOX compliance has a salutary effect that improves the company’s ability to raise capital. Privately owned companies see the benefits of complying voluntarily. SOX compliance has a broader salutary effect of restoring investor confidence and strengthening the economy as a whole, an effect felt well beyond the employees and investors in any individual corporation. In a class action lawsuit, only the suing victim bears the hassles of litigation, but all of the consumers benefit from his efforts. Several courts ordered incentive awards to the successful victim to recognize his effort. The incentive awards have the salutary effect of encouraging more consumer vigilance.
Karen S. Henrie, “Sarbanes-Oxley Compliance: Brass Tacks and Best Practices,” IT Compliance Institute, www.itcinstitute.com/
display.aspx?id=35, August 10, 2005.

 

Buyer’s Remorse
Buyer’s remorse is a strong feeling of guilt or regret that a consumer has after making a purchase or signing a contract. She has doubts or second thoughts about whether her decision was correct or not. Buyer’s remorse is an emotion that often occurs after the purchase of real estate, a vehicle, or high-ticket retail items. Some buyers think they spent too much, got into too much debt, or might upset their family. Buyer’s remorse can involve the buyer’s dissatisfaction with the product or service after she received it. The buyer has her hopes raised prior to the sale, then she parts with her money and receives the item. The first time she uses it, she thinks, “Why did I buy this?” and wants to return it. To rescind a purchase, some buyers falsely file an affidavit of non-authorization or an affidavit of forgery for their bank check. Other buyers falsely notify their credit card company that they didn’t receive the merchandise, and request adjustments on their credit card statements. When a business owner has buyer’s remorse during an acquisition or merger agreement, the buyer might attempt to use a “material adverse change clause” (MAC) to renege on the deal.
“Handling Buyer’s Remorse After Making the Sale,” National Federation of Independent Business, www.nfib.com/object/1584087.html, April 11, 2002.
Image: Ken McLeod, http://unfetteredmind.org/articles/precept1.php

 

Non-buyer’s Remorse
A non-buyer can be haunted by deep regret if she failed to purchase something when it was on sale, or she failed to make an investment and the subsequent price went up. Non-buyer’s remorse might occur if she didn’t buy into a pyramid scheme or multi-level marketing scheme at the top level, where the monetary returns are the fastest and highest. A non-buyer may regret not investing in an IPO (Initial Public Offering), a corporation’s first offering of stock to the public. The non-buyer regrets that she missed out on a deal and believes, “I coulda, woulda, shoulda.”
Gary North, “Gold, Graduate School and Non-Buyer’s Remorse,”  www.gold-eagle.com/editorials_04/north021804.html, February 16, 2004.

 

Seller’s Remorse
Seller’s remorse might occur if the seller thinks the sale was too easy, or he could have sold an item for more money, or the buyer fraudulently took advantage of him. The seller might believe he should have kept the item longer and used it more, instead of getting rid of it. Seller's remorse increases when other prospective buyers later admit they would have been willing to pay a higher price. If a business agreement hasn’t been finalized, seller’s remorse can be a deal killer. Seller’s remorse or “cold feet” doesn’t occur as often a buyer’s remorse. For buyers, non-buyers, and sellers, their fantasies and remorse about past experiences might cloud their ability to make realistic assessments and decisions in the future.
Julie Garton-Good, “If You Want to Back Out of the Sale,” 2002, www.nice2know.com/articles/computer-inet/44.

 

Channel Stuffing
A common, deceptive business practice that ships unwanted inventory to retailers far ahead of schedule, filling the distribution channels with more product than is needed. Financial statements are manipulated by inflating sales and accounts receivable, and reducing inventory when the merchandise is shipped. Business managers and sales managers panic and use channel stuffing to meet market growth expectations for the period, or boost the value of the stock, or exceed their goals to earn bonuses. The short term sales boom can deceive investors and regulators. In the next period, the business might have to offer substantial discounts or extended credit terms to retailers, to keep them from returning the overstock or unsold merchandise. Frequent channel stuffing can snowball to cover up longer trends of decreasing sales volume. In 1986, the Securities and Exchange Commission issued stringent accounting rules, known as the Stewart Parness Criteria, to limit bill-and-hold transaction schemes.
Sarah Maranjian, “Stuffing the Channel,” The Motley Fool, March 28, 2002.

 

Larry C. Adams, CFE, CPA, CIA, CISA, teaches fraud examination at the Keller Graduate School of Management at DeVry University in Arizona. He publishes the book and online editions of “Fraud In Other Words.” His Web site is www.larry-adams.com. His e-mail address is fraudwritr@aol.com.

 

ã Copyright 2005 Larry C. Adams. All rights reserved.
“Fraud In Other Words” is a trademark of Larry C. Adams.
 

Fraud In Other Words - Order the book online
 Magazine Article Archive
Fraud Dictionary
Free update service