Varsity Blues Won’t Win an Oscar

Hollywood's Varsity Blue involvement

Paying for Advantage – Alive and Well

Pay to play scam involving high profile parents and Hollywood actresses in Operation Varsity Blues

The current news cycles is being dominated by stories of alleged college entrance fraud to secure an admissions advantage. In Operation Varsity Blues, high profile executives, actresses and affluential parents have been accused of paying millions of dollars to achieve favorable college admissions, and test score, results (advantage) for what the public perceives are their spoiled, underachieving children.

There are several underlying themes in this case. One centers around the fact that college applicants with stronger academic, extracurricular and elite sports related achievements were denied placement into highly competitive colleges solely based on the illegal fees allegedly paid by other applicant’s parents. In other words, the playing field was tilted towards individuals accused of “paying to gain advantage.”

Our legal system is based on a presumption of innocence until proven guilty. Some have already accepted plea deals but others are “rolling the dice” and taking it to trial. Federal prosecutors rarely bring cases of this magnitude without first conducting significant investigations. They’re looking for the evidence necessary to support the charges filed and get convictions. The gamble is that losing at trial brings far more severe prison time than offered in a plea.

If what the Massachusett’s U.S. Attorney’s Office alleges is true, and the evidence is strong, many of the defendant’s will likely be found guilty. Not only will defendants be “singing the big house blues” but the IRS will surely come knocking afterwards. Participant’s likely face hefty tax bills, penalties, fines and possible incarceration for the alleged misrepresentations in the taxes they submitted. Reprehensible, unethical conduct on the part of everyone involved.

Get Real! Fraud is Prevalent Everywhere

Fraud is a multi trillion dollar business which affects everyone

The real question is “should any of this really surprise us?” As sensational as this case sounds, given the amount of global fraud taking place every day, and the huge financial impact it has, this case doesn’t even register a blip on the global fraud radar screen.

Putting it into perspective, trillions of dollars are lost annually due to fraud. If fraud were a country it would have one of the top five economies in the world.

But even with these types of mind-boggling financial losses, the average person doesn’t really understand what fraud is. Neither do they know how pervasive it is in every facet of our lives. Simply put, fraud involves five key elements: A deception, which is deliberate, and relied upon, by the victim to their disadvantage.

Most people errantly assume that the advantage obtained by those engaging in fraudulent activity is always financial. Money might be the “root of all evil.” But as this case proves fraud can be about anything which tilts the playing field in one’s business, personal or political favor. Ultimately, for some part participants in a fraud scheme, it might not be about financial gain at all.

Clearly, while the individuals perpetrating this fraud were in it for the money. However, the end game for parents, who allegedly participated, wasn’t about money at all. It was about advantage and as we’ve seen advantage has monetary value.

Global Crime – No One’s Immune

Technology plays a big role in the amount of fraud committed
Trillions of Dollars Lost to Gain Advantage

Fraudulent activity is nothing new. Fraud is pervasive in every industry and every facet of our individual lives and has been for some time. Given technology advances involving the Internet, e-mail and social media apps fraud is now easier to commit than ever before. E.g. like photoshopping the face of one college applicant onto the picture of another person competing in a sport.

Let us not forget that despite the new age technology fraud also continues to occur via “old school” methods. E.g. telephone, fax and in person. Why? Because someone’s always trying to obtain benefits that they aren’t entitled to. They’ll use whatever new age technology or old school means necessary to do so.

People might think that “college admissions scams like this don’t really affect me.” The big picture here is that fraud, in whatever format, not only damages society but costs us all individually. It takes very little time to become a victim and often years to undo the significant damages done.

Case in point, with thirteen to seventeen million victims of ID Theft annually in the U.S. alone, one could become the victim of ID Theft in the short time it takes to read this article and not even know it occurred until some date down the road. Scary thought.

Business Translation

Businesses have to remain profitable in order to keep their doors open - revenue lost to fraud is passed through to consumers

For businesses, fraud is a “pass-through” cost. Defrauded businesses don’t simply eat the cost of the fraud committed against their organizations because doing so means that it is now more expensive to conduct business.

Given lost revenue and higher operating costs to combat fraud, it’s passed on in the form of higher prices for goods and services. Some businesses have been forced to close as a result of long-term, high dollar frauds. That ultimately affects everyone.

When it comes to fraudulent activity, business have other concerns besides revenue loss. In a competitive, “first to market wins” environment, fraud committed against businesses may also result in compromised: information, trade secrets, customer lists, proprietary data and intellectual property all of which might result in an unfair competitive advantage for another entity.

However, that’s only the half of it. When news stories about fraud become public, reputational damage, shareholder lawsuits, brand damage and a lack of consumer confidence often do more damage to the business than the actual revenue lost.

In It to Win It!

Gaining advantage is one motivator to commit fraud as evidenced in Operation Varsity Blues
Advantage Gained – Then Rescinded

In this case, the fraud laid out by the U.S. Attorney’s office was widespread. Most organized frauds are. The benefit? Coveted enrollment to prestigious colleges which were more than likely unattainable for the children of the adults involved absent the scam.

The story continues to dominate today’s news. The reality is that if high- profile executives and entertainment figures weren’t charged with gaming the system most of us wouldn’t have heard about it at all.

There lies the problem with the amount of fraud occurring around the world today. Unawareness, and an apathetic “it doesn’t affect me attitude,” directly contribute to the amount of fraudulent activity taking place. We shouldn’t tolerate any amount of fraud and cases like this not only highlight how prevalent fraud is but a real opportunity for society to take increased action to prevent it.

If your business is experiencing fraud, or revenue and data loss, contact Fraud Solutions for more information. Our services include: fraud risk assessments, implementing effective enterprise fraud risk mitigation programs, training and fraud consulting engagements to strengthen your anti-fraud posture:

Dan Draz is a fraud risk management consultant, keynote speaker, industry trainer and published author. Draz is an often-quoted fraud and investigations expert in industry, trade, online and news publications. Draz is the principal of Chicago-based Fraud Solutions, and consults with clients across industry verticals, providing enterprise fraud risk management consulting, strategies, assessments and training. He has a Masters in Economic Crime Management, is a Certified Fraud Examiner (CFE), a Fellow at the Governance and Accountability Institute and a 2018 “Top Thought Leader in Trust” recipient. He writes and records unique business and consumer public awareness material under the name of “Detective Dan.”