Subject: Re: Sell BAM, buy BN?
We know people who have a personality type admitting mistakes and others that like to talk about their mistake. Yet do you know which is the two might be prone to conducting fraud? In fact I think observing humility is a poor predictor of dishonesty as dishonest people tend to master the art of appearing the opposite.

It is certainly true that many accomplished con artists mastered the art of false humility. It is also certainly true that Mr. Flatt cannot be accused of this.

I would suggest there is a difference between born con artists -- the snake oil salesmen -- and initially well-intentioned people whose egos will not permit them to admit mistakes. The latter group tends to take small, seemingly insignificant steps to obscure the mistakes they prefer not to acknowledge. Many of these initial steps seem perfectly harmless. But obfuscation compounds in much the way interest does, until it forms a cage that cannot be escaped.

Over the past few months, I developed a keen interest in reading up on some big business frauds. I wanted to know what made them do it, whether these crimes were intentional or accidental or some mix of the two. Without excusing any of these perpetrators, a couple of common elements shone through their very different crimes. Each of three high-profile frauds began with perfectly legitimate business aspirations. Each encountered unexpected difficulties in pursuit of these aspirations. And in each case the perpetrators were unable or unwilling to own up to these difficulties. It was in purposefully obscuring them -- in the coverups -- that they became criminals:

* At a very young age, Bernie Madoff covered up investment losses incurred with funds from friends and family by borrowing money from his father-in-law and making his investors whole. This was a well-intentioned, even generous solution, but it was rooted in his reluctance to admit his failure. Later on, he would employ more sophisticated techniques of subterfuge on a much larger scale.

* Elizabeth Holmes seems to have sincerely believed she could revolutionize the world of blood testing, despite her lack of background in medicine or science. This might well qualify as delusional, but she did not become a criminal until she refused to admit, and took pains to cover up, the fact that her device did not work.

* The boys at Enron definitely believed they were the smartest guys in the room. They pioneered energy trading techniques that proved highly profitable and confirmed to them the merits of a Darwinian corporate culture that rewarded money-making innovations. Bad trading outcomes and investment decisions were covered up with accounting tricks because acknowledging them would have meant admitting they weren't so smart. They devised a catalog of such tricks to avoid disappointing Wall Street, to avoid admitting a series of mistakes.

I am not suggesting Brookfield has taken any steps down this path. I have no knowledge that it has. Lots of people too egotistical to admit mistakes manage to obfuscate them legally.

I am suggesting that the inability or unwillingness to admit mistakes makes people and organizations susceptible to this noticeable historical pattern of the corruption of honest aspiration into deceitful obfuscation. If an entity required to report periodically to the public will not acknowledge mistakes, the alternative is to obfuscate them in some way.