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People with Power are Better Liars

Dana R. Carney, Andy J. Yap, Brian J. Lucas, & Pranjal H. Mehta
Graduate School of Business, Columbia University, New York, NY

People lie frequently and for many different kinds of reasons, including to protect feelings, claim undue resources, project a false self-image, or to be malicious. But lying does not come without cost.

Ordinary lie-tellers experience negative emotions, decrements in mental function, and physiological stress. Liars are also at risk of getting caught. Despite people's best attempts to get away with their prevarications, lies are often behaviorally "leaked" through subtle changes in body movement and speech rate.

Power, it seems, enhances the same emotional, cognitive, and physiological systems that lie-telling depletes. People with power enjoy positive emotions, increases in cognitive function (4-5), and physiological resilience such as lower levels of the stress hormone cortisol (6-7). Thus, holding power over others might make it easier for people to tell lies.

We investigated the effects of power on lie-telling with a sample of 47 volunteers in a 2 (high power vs. low power) x 2 (lie-telling vs. truth-telling) between-subjects design. Informed consent was obtained after the nature and possible consequences of the studies were explained.

Power was experimentally manipulated using a naturalistic role-playing exercise. Participants were assigned to the role of "leader" or "subordinate" and engaged in a series social interactions in which the leader had control over the subordinate's monetary and so social outcomes (9).

A manipulation check of the power endowment confirmed that "leaders" felt more powerful 2 (dominant, in control, in charge, high status, like a leader, powerful; M = 2.89; SE = .16) than
"subordinates" (M = 2.34; SE = .17), F(1, 46) = 5.76, p < .05.

Following the power manipulation, we manipulated lie-telling versus truth-telling using a high stakes theft paradigm (8). Individuals were asked to find $100 hidden in a nearby bookcase.
Half of the volunteers were instructed by a computer to steal the $100. The other half were instructed to put the money back (participants were assured—and believed—that the experimenter did not know whether they were assigned to steal or not steal).

All individuals were instructed to convince the experimenter that they did not take the money. If the individual could successfully convince the experimenter (regardless of whether they were lying) they could keep the $100 in cash. All participants were then interviewed about whether they had stolen the money: half were lying and half were telling the truth. The interviewer (blind to experimental condition) asked all participants the same critical questions (e.g., "Did you steal the $100?"; "Why should I believe you?").

After the interview, participants completed measures of moral
emotional feelings (rated emotion terms: bashful, guilty, troubled, scornful) and a computerized task assessing degree of cognitive impairment. All participants provided saliva samples before and after the experiment to assess changes in the stress hormone cortisol (9).

The interviews were videotaped and coded for two, classic nonverbal markers of deception: one-sided shoulder shrugs and accelerated prosody (9). Low-power individuals showed the expected emotional, cognitive, physiological, and behavioral signs of deception; in contrast, powerful people demonstrated no eviddence of lying across emotion, cognition, physiology, or behavior.

In other words, power acted as a buffer allowing the powerful to lie significantly more easily (less disturbing emotion, less cognitive impairment, less of a rise in the stress hormone cortisol) and more effectively (fewer 3 nonverbal cues associated with lying).

Only low-power individuals felt badly after lying (panel A), suffered cognitive impairment (panel B), spiked in levels of the stress hormone cortisol (panel C), and demonstrated nonverbal "leakage" (more one-sided shoulder shrugs and accelerated prosody; panel D). (9)

Our results suggest that powerful people can leverage the emotional and coognitive benefits of their power to lie more easily and effectively. Power thwarts the emotional anguish, cognitive taxation, physiological stress, and nonverbal "tells" of lying.

References and Notes
1. B.M. DePaulo, D.A. Kashy, S.E. Kirkendol, M.M. Wyer, J.A. Epstein, J.A, J Pers Soc Psychol. 70, 979-995 (1996).
2. S.A. Spence, M.D. Hunter, T.F.D. Farrow, R.D. Green, D.H. Leung, C.J. Hughes, V. Ganesan, Philos. Trans. R. Soc. Lond. 359, 1755-1762 (2004).
3. B.M. DePaulo, J.J. Lindsay, B.E. Malone, L. Muhlenbruck, K. Charlton, H. Cooper, Psychol Bull. 129, 74-118 (2003).
4. D. Keltner, D.H. Gruenfeld, C. Anderson, Psychol Rev. 110, 265-284 (2003).
5. P.K. Smith, N.B. Jostmann, A.D. Galinsky, W. van Dijk, Psychol Sci. 19, 441-447 (2008).
6. R.M. Sapolsky, S.C. Alberts. J. Altmann, J Arch Gen Psychi. 54, 1137-1143 (1997).
7. S. Cohen, W.J. Doyle, A. Baum, Psychosom Med. 68, 414-420 (2006).
8. M.G. Frank, P. Ekman, J Person Soc Psychol. 72, 1429-1439 (1997).
9. Details on methods and analysis can be found in the Supporting Online Material.

 

Powerful People Are Better Liars

The finding: A sense of power buffers individuals from the stress of lying and increases their ability to deceive others.

The study: Dana Carney (Harvard Business School) divided research subjects into two groups: bosses and employees. Bosses got larger offices and more power; they were asked, for instance, to assign employees’ salaries. Half of all subjects were instructed by a computer to steal a $100 bill. If they could convince an interviewer they hadn’t taken it, they could keep it. The other subjects were questioned as well. In the interviews, lying bosses displayed fewer involuntary signs of dishonesty and stress. On all measures, liars with power were hard to distinguish from subjects telling the truth.

The challenge: Does this mean the most powerful people in the world are adept liars? 

Carney: We measured subjects on five variables that indicate lying—involuntary shoulder shrugs, accelerated speech, the level of the stress hormone cortisol in their saliva, cognitive impairment, and emotional distress. Only the low-power liars could be “seen” as lying; the readings for the liars with power were essentially the same as those for truth tellers on all five variables. People with power lied more easily and effectively, which is troubling. Just as kids don’t touch a stove once they learn it burns them, people don’t like to lie because it hurts them emotionally and physiologically. These data suggest that powerful individuals—CEOs, portfolio managers, politicians, elite athletes—don’t get burned when they touch the figurative stove. They seem to be more physiologically “prepared” to lie, which could lead to their lying more often.

So power begets lying, which begets more power, and so on?

It’s hard to tell from this study, where power was a temporary situation. But if someone is constantly in a powerful position, does their lying improve? Does improved lying lead to more power? Those are questions for the next studies. What we’ve shown here is that if you give people power, they’re more comfortable lying, and it will be harder to tell they’re doing it.

It’s hard to believe you can suss out a lie based on shrugs, speech, and saliva.

>The nonverbal cues are extremely reliable to people who are trained to detect them. We set up a high-stakes lie about a transgression. When people commit that kind of lie, they do these involuntary half-shrugs and speak faster. That’s why we ask control questions about the weather, so we know how fast they talk and how much they shrug normally. I’m a trained expert, and I’m about 90% accurate in telling when people are lying based on these nonverbal cues. A-Rod? I could see he was lying. There are lots of other cases where it’s just unbelievably obvious.

But couldn’t these cues just reflect stress? Won’t I show them if I’m at the airport and nervous about flying?

No. While cortisol increases under any kind of stress, the nonverbal “tells” of anxiety are different. You’ll see people manipulate objects; they’ll flip the cap on a water bottle or roll a pen. They’ll fidget and do things like stroke their arms. Anxiety is non-goal-directed arousal. It’s just stuff coming out. Liars are trying to suppress something, so the cues are different. Now if you’re anxious and trying not to appear anxious, that will look more like lying.

How accurate are most people at spotting liars?

Between 50% and 60% accurate—barely better than random guessing. It’s unsettling to combine those two facts: Powerful people like CEOs are better liars, and most people are bad at spotting liars.

Still, how much can we tell about CEOs based on a study that used Columbia students as subjects? Does the behavior of your subjects really translate?

There are two questions here, a theoretical one and a methodological one. The theoretical one is, What is power? Our position is that it doesn’t matter what your status is, power is a relationship between two actors. You can feel more or less powerful compared with someone else. A CEO being attacked by shareholders can feel perfectly powerless and will probably not lie as well in that situation. Point is, it’s relative to the situation, and it produces the same physiological response. As for the methodological question, our study wasn’t all students. We had a rich, diverse sample with a nice age and ethnicity range.

What other evidence is there that powerful people are scoundrels?

We’re doing another study about power and risk. You know how peacocks spread their feathers? What they’re doing is taking up more space, an assertion of power that’s common in animals. Cobras rear; birds spread their wings. Humans do it, too. Think of the CEO with his feet up on the desk, leaning back in his chair, hands clasped behind his head with elbows out. This is not an accident. It’s a biological assertion of power. Conversely, there are subordinate positions—think of a person in a small chair, arms at his sides and legs held together.

How accurate are most people at spotting liars?

Between 50% and 60% accurate—barely better than random guessing. It’s unsettling to combine those two facts: Powerful people like CEOs are better liars, and most people are bad at spotting liars.

Still, how much can we tell about CEOs based on a study that used Columbia students as subjects? Does the behavior of your subjects really translate?

There are two questions here, a theoretical one and a methodological one. The theoretical one is, What is power? Our position is that it doesn’t matter what your status is, power is a relationship between two actors. You can feel more or less powerful compared with someone else. A CEO being attacked by shareholders can feel perfectly powerless and will probably not lie as well in that situation. Point is, it’s relative to the situation, and it produces the same physiological response. As for the methodological question, our study wasn’t all students. We had a rich, diverse sample with a nice age and ethnicity range.

What other evidence is there that powerful people are scoundrels?

We’re doing another study about power and risk. You know how peacocks spread their feathers? What they’re doing is taking up more space, an assertion of power that’s common in animals. Cobras rear; birds spread their wings. Humans do it, too. Think of the CEO with his feet up on the desk, leaning back in his chair, hands clasped behind his head with elbows out. This is not an accident. It’s a biological assertion of power. Conversely, there are subordinate positions—think of a person in a small chair, arms at his sides and legs held together.

So what we did was put some people into power poses and others into subordinate ones. The subjects didn’t even know why they were being put into these positions; they thought we were calibrating some measuring instruments. Then we ran some tests and asked questions. We found that people in power poses show higher testosterone levels and lower cortisol levels. They feel more powerful and less stressed out, just because they take up more space. When prompted, they take more risks than people in subordinate poses.

So when you combine this with the power and lying research—

Absolutely! No doubt about it! That guy at the head of the table running your meeting, leaning back in his chair, arms behind his head, he’s going to take risks. He won’t feel as bad about lying to you, and you’re going to have a real hard time telling when he is.

By David Carney Harvard Business School

 

Telltale Signs of Lying

For most people, lying is stressful and produces involuntary physical reactions. Disturbingly, high-power liars don’t display these telltale signs.

Speech

Liars utter more syllables per second at a higher pitch, and repeat words and sentences more.

Shoulders

Liars shrug more but in trying to suppress the lie, produce a distinct half-shrug.

Cortisol

Liars’ saliva contains a higher concentration of the stress hormone cortisol.

Eyes

Liars’ pupils dilate.

Mouth

Liars press their lips together and involuntarily smirk when they think they’ve gotten away with a lie.



 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Corporate Kleptocracy Report

Page 2>>

Intro Reading: How to Survive in Federal Prison

http://www.fbi.gov/becrimesmart.htm

http://www.fbi.gov/whitecollarcrime.htm

July 30, 2010: Samuel Wyly and Charles Wyly, the Texan brothers and entrepreneurs, were sued by U.S. regulators who accused them of misleading investors while selling hundreds of millions of dollars in stock. The Wylys used “an elaborate sham system of trusts and subsidiary companies” in the Isle of Man and Cayman Islands over a 13-year period to hide control of securities linked to companies where they were board members, the Securities and Exchange Commission said yesterday in a lawsuit filed in New York federal court. They illegally kept investors in the dark as they sold off holdings, and in one case made illegal insider trades, the SEC said. “The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws,” the SEC’s deputy enforcement director, Lorin Reisner, said in a statement. “They used these structures to conceal hundreds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders.”

June 19, 2009 US Dept. of Justice announced that Texas Billiionaire Allen Stanford has been arrested and indicted on criminal charges stemming from his alleged operation of a $8 Billion massive investment fraud operation that bilked potentially thousands of Americans. Stanford cast himself as an off-shore investment guru to the transatlantic jet set. Stanford was named by Forbes magazine as the 205th richest American in 2008. Stanford's attorney, Dick Deguerin, said that he is confident that a jury will find him not guilty of any criminal wrongdoing.

June 18, 2009 Birmingham, Ala. – A state judge on Thursday ordered former HealthSouth CEO Richard Scrushy to pay about $2.8 billion to shareholders who sued over accounting fraud at the rehabilitation chain.Richard Scrushy was sentenced to nearly seven years in prison for bribery, and a federal judge denied his bid to remain free pending appeal, putting the HealthSouth founder behind bars immediately.

June 28, 2008 Washington, DC: Major international airlines–Air France, Cathay Pacific Airways, KLM Royal Dutch Airlines, Martinair and SAS– have agreed to each plead guilty and pay criminal fines totaling $504 million for participating in a multi–year conspiracy to fix prices for air cargo rates.  Of the $504 million in fines, Air France-KLM, has agreed to pay a $350 million criminal fine, the second highest fine ever levied in a criminal antitrust prosecution.

Feb. 16, 2008 -- Refco Inc.'s former Chairman Phillip Bennett, faces possible life in prison after pleading guilty to fraud and conspiracy in a scheme that cost investors $2.4 billion. Bennett entered his guilty plea in Manhattan US Federal District Court for deceiving banks, auditors, and investors. ``I know I was wrong, and I deeply regret it,'' Bennett, told U.S. District Judge Buchwald, his voice cracking as he spoke. ``I take full responsibility for my conduct.'' Bennett, 59, pleaded guilty to all 20 counts in a federal indictment, including securities and wire-fraud, conspiracy, money laundering and bank fraud. Under U.S. guidelines, Bennett faces life imprisonment with a maximum penalty of 315 years, as well as forfeiture of $2.4 billion. Defendants in the ``post-Enron era'' of corporate crime prosecutions face the ``possibility that their residence in the US Federal Bureau of Prisons is the last residence they're going to have.''

Phillip Bennett, the former head of brokerage firm Refco was  sentenced July 2008 to 16 years in prison for a $1.5Billion fraud that ultimately destroyed the company. In February 2008 Bennett pleaded guilty in a New York City US Federal Court to 20 counts of conspiracy and fraud, two-and-a-half years after his arrest. Prosecutors said losses connected to the fraud topped $1.5bn.

August 7, 2007 Jurors in Federal District Court in San Francisco convicted the former chief executive of Brocade Communications Systems, Gregory L. Reyes, 44, on 10 counts of conspiracy and fraud. Mr. Reyes received his BS in Mechanical Engineering at Rensselar Polytechnical Institute and an MS in Management from Stevens Institute of Technology. Most of the backdating cases, including the one against Mr. Reyes, hinged on proving that the defendants knowingly manipulated an option grant date to defraud investors in publicly held companies. The verdict sent shockwaves through Silicon Valley and law offices around the country, which are representing dozens of companies and hundreds of executives who have been entangled in the widespread options back -dating scandal.

July 27, 2007 -- Joseph Nacchio, Graduate of MIT and former CEO of Qwest Communications International Inc., was sentenced to six years in prison for insider trading of $52 million in company shares. U.S. District Judge Edward Nottingham ordered Nacchio to forfeit $52 million and pay a fine of $19 million, refusing his request for a sentence of probation. Sept. 29, 2006 - A Denver federal judge Friday approved a $400 million class-action settlement of shareholder claims against Qwest Communications but slashed attorney fees from $96 million to $60 million.

January 17, 2007: Walter Forbes, Harvard MBA, sentenced to 12 years and seven months in federal prison and ordered him to pay $3.275 BILLION in restitution.  The former Cendant Corp. Chairman was found guilty of conspiracy to commit securities fraud and two counts of making false statements, and a decade-long accounting scheme that inflated income at Cendant. The accounting fraud caused Cendant shares to freefall $14 billion in market value in a single day in 1998. His co-defendant, former Cendant Vice Chairman E. Kirk Shelton, Harvard MBA, was sentenced to 10 years in prison and ordered to pay billions in restitution to the company.

In May 2006, Kirk Sean Wright, the founder and Chief Executive Officer of International Management Associates (IMA), was charged with 22 counts of mail fraud and three counts of Securities Fraud relating to his improper operation of IMA. IMA is a high-yield hedge fund in Atlanta, GA managing more than $184 million in assets, including those of a group of current and former NFL players.

Huge pay packages for corporate CEOs mentioned the breath-taking $124.8 million total compensation of United Health Group (parent of United Healthcare) CEO William McGuire. At UnitedHealth, there was significant evidence that options were backdated for insiders and employees at all levels of the company between 1994 and 2002. But among the most substantial and egregious, according to the law firm’s report, were those valued at $1.1 Billion awarded to Dr. McGuire, the company’s longtime chairman and chief executive who resigned October 16, 2006. Dr. McGuire, who has already received more than $500 million by cashing in some of his options and has others, worth at least $1.6 billion, still in his name.The Justice Department, the Minnesota Attorney General’s office, the Securities and Exchange Commission and the Internal Revenue Service are all investigating UnitedHealth’s options practices. Even the man named to replace Dr. McGuire as chief executive has been a beneficiary of backdated options. Through backdating, stock options can be manipulated to increase their value.The heads of three well-known technology companies lost their jobs this week as the result of a scandal sweeping through the business world over the improper backdating of stock options --135 companies implicated in backdating controversies are being investigatigated by the SEC, DOJ, IRS.

October 2006 Kobi Alexander is fighting extradition from Namibia on US federal charges related to his company's options practices.

October 12 2006 WASHINGTON -- More criminal indictments will come down the pike as corporate America struggles with the ever-growing stock options backdating scandal, ccording to an assistant director at the FBI.

"Backdating stock options is basically betting on a horse race that's already been run," FBI spokesperson said. "It's harmful to the company and does not create a level playing field for investors."

Dec. 22, 2005- A California jury on Thursday ordered Wal-Mart, the world's largest retailer, to pay $172 million in damages for failing to provide meal breaks to nearly 116,000 hourly workers as required under state law. Oct. 12 2006 — Pennsylvania: Wal-Mart Stores forced employees to work through rest breaks and to put in extra hours without pay, violating Pennsylvania labor laws, a state jury found Thursday. Plaintiffs’ lawyers say the damages could reach $162 million. "Today's verdict affirms that 'time theft' labor abuses are a chronic and systemic problem for Wal-Mart and its dangerous business model." The retailer "pressures managers to lower store labor costs, resulting in understaffed stores and 'off the clock' labor for hourly employees - which is why they're facing more than 40 other similar suits for labor violations nationwide."

Dennis Kozlowski was convicted on June 17, 2005 for misappropriation of Tyco's corporate funds, among other charges. The prosecution won a total of 22 counts of grand larceny for $150 million in unauthorized bonuses. He was convicted of fraud against the company shareholders for an amount of more than $400 million.

Sept. 26, 2006: Former WorldCom Corp. Chief Bernard Ebbers starts a 25-year federal prison sentence Tuesday for his role in the US $11-BILLION accounting fraud.

HOUSTON Octoer 24, 2006- Former Enron CEO Jeffrey Skilling, Harvard MBA, was ordered Monday to serve 24 years and four months in prison, the harshest punishment by far in Enron's scandalous collapse and one that capped a string of tough sentences for top executives in corruption cases.

The hedge fund industry is also a growth area on the FBI's radar screen.

WASHINGTON, Aug. 31 2006 - The Securities and Exchange Commission filed civil fraud charges Wednesday against two executives of KL Group, a hedge fund in Palm Beach, Fla. The S.E.C. charged that Won Sok Lee, Yung Bae Kim and another unidentified defendant "defrauded investors through misrepresentations and omissions concerning the profitability and security of their investments in the hedge funds." The whereabouts of Mr. Kim and Mr. Lee are unknown and they do not have any known legal counsel, according to the S.E.C. senior trial counsel, Scott A. Masel. In March, the hedge fund was shut down and its assets frozen by a Florida judge after the S.E.C. filed a civil action to halt what it described as an $81 million fraud. The March complaint charged that the KL Group, a related trading entity and the KL principals, Won Sok Lee, John Kim and Yung Bae Kim, fraudulently raised over $81 million, attracting investors by using fake account statements showing that the hedge funds were profitable." June 29, 2007 Yung Bae Kim, pled guilty today in US District Court to two felonies one count of conspiracy to commit mail and one count of wire fraud.  He faces a maximum period of twenty-five (25) years in prison, five years of supervised release, a fine of $500,000 and restitution to victims of the fraud.

Gisela Valladares, owner of PRN Home Health Care, Inc., a Miami health care company has been convicted on charges of defrauding the Medicare program of $20Million of fraudulent Medicare billings.

July 13, 2007 - Lord Conrad Black, former heard of Hollinger International, was found guilty of three counts of mail fraud and a single count of obstruction of justice by the Chicago jury. He faces 35 years in a federal prison.

According to the FBI, more than 90 hedge funds have been investigated in the past couple of years. The agency is concerned over the fast-paced growth and lack of regulation within the $1.2 trillion hedge fund industry and considers the industry to be a growing threat for average investors as more and more pension funds have startJed investing in the riskier market. Amaranth Advisors - a 32 year old, Brian Hunter, made brash bets losing its investors $6Billion dollars. Yet, "We have every intention of continuing in business and generating for our investors the same consistently high risk-adjusted returns which have been our hallmark, and we are fully committed to doing so," Nicholas Maounis said.

"Hedge funds are the wild, wild west of investing." "The problem comes when hedge funds become more and more like Ponzi schemes."

Average investors in pension funds may not know where their money is going. And given the lack of regulation and the generally secretive nature of the hedge fund industry, it's difficult for average investors to hash out when a hedge fund is defrauding them. Case in point: Bayou Management, which collapsed earlier this year as evidence emerged that the founder of the hedge fund lied to investors about its stellar returns.

Corporate Fraud remains the highest priority of the Financial Crimes Section and the FBI is committed to dealing with the significant crime problem. As of the end of Fiscal Year (FY) 2006, 490 Corporate Fraud cases are being pursued by FBI field offices throughout the U.S., 19 of which involve losses to public investors that individually exceed $1 billion.

Corporate Fraud investigations involve the following activities:

(1) Falsification of financial information, including:
(a) False accounting entries
(b) Bogus trades designed to inflate profit or hide losses
(c) False transactions designed to evade regulatory oversight

(2) Self-dealing by corporate insiders, including:
(a) Insider trading
(b) Kickbacks
(c) Backdating of executive stock options
(d) Misuse of corporate property for personal gain
(e) Individual tax violations related to self-dealing

(3) Fraud in connection with an otherwise legitimately-operated mutual or hedge fund:
(a) Late trading
(b) Certain market timing schemes
(c) Falsification of net asset values
(d) Other fraudulent or abusive trading practices by, within, or involving a mutual or hedge fund

(4) Obstruction of justice designed to conceal any of the above-noted types of criminal conduct, particularly when the obstruction impedes the inquiries of the Securities and Exchange Commission (SEC), other regulatory agencies, and/or law enforcement agencies.

Learn how to protect yourself visit

http://www.fbi.gov/becrimesmart.htm

Financial Crimes

Corporate & Accounting Fraud

Securities & Commodities Fraud

Health Medical Care Fraud

Mortgage Fraud Warning

Insurance Fraud

Mass Marketing Fraud

Penny Stock Pump & Dump Fraud

Internet Fraud

Hedge Fund Fraud

Brankruptcy Fraud

Asset Forefeiture/Money Laundering

 

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Do they look like criminals?

How would you know unless you look?

Charles Wyly, prison?

Samuel Wyly, prison?

 Bennett Prison

 Reyes Prison

Nacchio Prison

 

 

Forbes Prison

 

McGuire Resigned

McKelvet Resigned

Bonnie resigned

Alexander Extradited

S. Robson Walton $350 Million Class Action

Koslowski Prison

Ebbers Prison

Skilling Prison

Black Prison, released new trial July 2010