Bernard Madoff's Theory Of Social Pressure

Based on the book Annals of Gullibility, author Greenspan (2009) a psychologist, proposed the four ‘induced-social’ components in his theory of gullibility. The four factors that are in the favor of the achievement of Ponzi scheme are the situation, cognition, personality, and emotion.

For the first factor, Greenspan (2009) suggested that unsuspecting behavior is more probable to exist if the social and other circumstance pressures are strong and the contrary would be less feasible to happen if the social and other situational pressures are poor. Jacobs and Schain (2011) argue for the second component that is the cognition. Jacobs and Schain (2011) also pointed out that the perpetrators represent themselves as a moral and positive person.

A study by Nodon (2015) has demonstrated that the fraud triangle consists of three factors: motivation, opportunity, rationalizations. The first element is motivation or pressure, Buchholz (2012) clarified the main reason that pressure people to commit an act is due to financial complication. The incentive for Bernard Madoff was to keep a trend for a successful lifestyle Buchholz (2012). Hurt (2009) elaborated that Madoff was feeling pressurized due to the sum of money he has to repay to existing investors. The second factor of fraud triangle is opportunity, there are high chance fraudsters would not be exposed because of their powers and position and there is a direct relationship between fraud opportunity and weak internal control (Dorminey et al., 2010). In the Madoff case, as a leader of the organization, he had sufficient power to plan the internal control system and corporate governance in such a manner that would only be favorable to him. It was found that the segregation of duties in Madoff scheme was not present (Fuerman 2009). The last element of fraud triangle is rationalizations - it is important to note how the individual is justifying the act committed by him. Day (2010) evaluates that Madoff was practicing this scheme firstly for his own benefit and for the benefit of his family by taking advantage of investors. However, Henriques (2012) argues that for all the banks and funds that Madoff had cheated on, they should be aware there are some issues in the plan as they were monetary