A November 13, 2008 Wall Street Journal article entitled "Inflated Credentials Surface in the Executive Suite" (here) reported on multiple instances where corporate officials lacked claimed academic or work credentials. The article is based on a survey conducted by Barry Minkow, a convicted felon who did jail time for his role in the ZZZZ Best stock scam, who now heads the Fraud Discovery Institute.

 

The article cites seven examples where corporate officials allegedly falsified credentials. The article notes that this "may be enough to raise investor concerns about executive credibility as well as company procedures for vetting by management and board members." The article also cites industry sources that as many as 20% of job seekers "are found to have inflated their education credentials."

 

The day after this article appeared, the Journal also reported (here) that J. Terrence Lanni, the departing Chairman and CEO of MGM Mirage, is now "in a dispute with his alma mater over his academic credentials." Contrary to the company’s published statements about Lanni’s education, USC business school has no record of Lanni having received an MBA there. The question about Lanni’s education only came to light after the Journal raised questions based on Minkow’s research.

 

The November 13 Journal article quotes a Wharton School business ethics professor as saying "I’m very concerned that if people believe you can lie and get away with it, then down the line people will start cheating on their expense report, they’ll start misrepresenting their billable hours, they’ll start misusing their corporate funds."

 

Credential Inflation and Securities Litigation: Given this sense that résumé falsification (or at least its toleration) could engender a culture of deception, it is hardly surprising that allegations of credential misrepresentation have from time to time made their way into securities class action lawsuits.

 

For example, in the October 2006 securities class action lawsuits filed against Xethanol and certain of its directors and officers (about which refer here), the plaintiffs allege that the company’s chairman and CEO had "fabricated his résumé" among other things, by allegedly falsely claiming to have worked at Unilever, Northrup Grumman, and Reed Elsevier.

 

Similarly, in the January 2003 case filed against MCG Capital (about which refer here), the plaintiffs alleged that the company’s November 2001 IPO offering documents misrepresented the "credentials, credibility and integrity" of the company’s Chairman and CEO. Specifically, the complaint alleged that the offering documents misrepresented that the individual had earned a B.A in Economics from Syracuse, when in fact he had not. (It should be noted that the case was later dismissed and the Fourth Circuit affirmed the dismissal.)

 

Securities lawsuits also frequently allege that companies have misled investors by failing to disclose key details of corporate officials’ backgrounds. For example, in the November 2006 lawsuit filed against Pegasus Wireless and certain of its directors and officers (about which refer here), the complaint alleges that the company’s failed to disclosure the CEO and President’s prior involvement with bankrupt companies, as well as with other companies whose histories the complaint suggests "suspected stock and market manipulation." The company’s CFO is also alleged to have a "history of involvement with failed and suspect ventures," as well as past ties to individuals with "felonious" records.

 

This last example arguably goes well beyond mere credential inflation, but it does underscore how integrally misrepresentations or omissions about key officials’ histories potentially can affect investor perceptions. That in part explains why disclosure of credential inflation or résumé falsification can produce a significant marketplace reaction. As Minkow is quoted as saying in the Journal article, "you have to ask yourself, as any good investigator would say, what else could there be?"

 

Identity Misrepresentation: A Short History: The problems of credential inflation and résumé falsification are not limited to the corporate world. There have been numerous recent examples in government, academia and elsewhere. Many readers will recall, among the more notable recent examples, the tale of George O’Leary, who was fired five days after being hired as Notre Dame’s football coach, after it was discovered that he had falsely claimed to have a master’s degree in education and to have played college football for three years. The Wall Street Journal has compiled an extensive list of other recent examples, here.

 

There is a temptation to classify these deceptive practices as just another byproduct of our iniquitous era of botox and breast implants, where packaging is valued above substance and identity represents not things as they are but as people can be made to believe them to be.

 

Identity misrepresentation is not, however, unique to our time. These kinds of impostures go back as far as biblical times, where, for example, Jacob’s mother disguised him as his twin brother Esau so that Jacob would received their father’s blessing, intended for Esau.

 

Similarly, history is full of royal pretenders and alleged monarchs. During the reign of England’s Henry VII, there were actually two pretenders. The first, Lambert Simnel, a commoner who was crowned by Yorkist supporters as the supposed "King Edward VI," and Perkin Warbeck, who pretended to the First Duke of York and the younger son of Edward IV. And of course, there was Anna Anderson, who was claimed to be the Grand Duchess Anastasia, youngest daughter of Tsar Nicholas II.

 

Literature is full of examples as well. These include the numerous instances of gender disguise in many of Shakespeare’s play, such occurs in Twelfth Night and As You Like It. More recent examples of gender disguise occur in Tootsie and Yentl.

 

One of the more entertaining examples of identity misrepresentation occurs in one of The D&O Diary’s favorite books, The Count of Monte Cristo, by Alexandre Dumas, in which Edmond Dantès dupes others into believing him to be a Count so that he can revenge himself on his enemies and tormentors.

 

Identity, Ambition and the Need for Affirmation: The most extensive literary examination of the interplay between the portrayal and the reality of identity may be F. Scott Fitzgerald’s The Great Gatsby. At one level, the book is about nothing more than Nick Carraway’s effort to understand who Gatsby really is.

 

The sycophants and partygoers that surround Gatsby at the book’s outset aren’t quite certain, but suspect that he may be a bootlegger and may even have killed a man. Gatsby tells Nick an elaborate tale of having been educated at Oxford and then having inherited the family fortune. But that Gatsby’s persona is a façade is so obvious that one of the uninvited partygoers at Gatsby’s house is astonished to learn that the volumes lining the shelves in Gatsby’s library are actually real books.

 

Gatsby’s self-portrayal is an elaborate invention, a manufactured identity that, as Nick puts it, sprang from Gatsby’s "Platonic conception of himself." Gatsby’s self-contrivance is all part of his involved effort to prove himself worthy of Daisy Buchanan. The origins of Gatsby’s obsession with Daisy are perhaps best understood in his explanation that Daisy’s voice is so fascinating because it is "full of money."

 

Driven by his obsession for Daisy, Gatsby (born James Gatz) attempts to recreate himself within an intricate structure of credential inflation. The Oxford education proves to have been only a five-month stint following the war. His wealth, supposedly inherited, was actually acquired by means that Gatsby himself is unwilling to discuss.

 

Gatsby’s determined striving helps explain the credential inflation to which contemporary corporate individuals seem particularly prey. Ambition and desire, combined with a desperate need for affirmation or acceptance, drives these individuals to represent themselves as improved versions of themselves, or perhaps even as somebody different altogether.

 

In any event, it is clear that when inflated credentials are involved, it may be indispensible to make certain that the books are real.

 

The Ultimate Inflated Credential: Divinity: Among the most outrageous identity misrepresentations in literature is that of Danny Dravot who, in Rudyard Kipling’s The Man Who Would Be King, is all too willing to be taken by the people of Kafiristan as a god, based on their delusion that he is the son of Alexander the Great. It all ends very badly for Danny and his sidekick, Peachey Carnahan, when the Kafiris discover that Danny is "Not god, not devil, but man!"

 

The story was made into a memorable 1975 movie (now somewhat disturbing for its colonialist presumptions) starring Michael Caine and Sean Connery. In this video excerpt, Danny and Peachy reckon the benefits of Danny being taken for a god, as well as the secrecy their deception requires:

 

 

http://www.youtube.com/v/3dJf5rO0-BM&hl=en&fs=1