Book Report – Other People’s Money, A Study in the Social Psychology of Embezzlement by Donald R. Cressey

The Free Press, Copyright 1953, 157 pages

This book was written almost 60 years ago. It is still frequently, if not always, cited or referred to in some manner during any discussion or class that deals with fraud. I decided to examine the source for myself.

He attempts to follow proper design and procedure for scientific research.

The criteria used for selecting cases were:

  1. Accepting a position of trust in good faith, and

  2. A criminal violation of financial trust.


“The legal concept of embezzlement was abandoned.” (p. 20) There is a lot of filtering based on the author’s strict definitions of criminal acts, embezzlement, forgery, confidence game and larceny by bailee.


There is also a lot of discussion regarding an innate defect, depravity or other mental abnormality. The subjects often describe themselves as not acting in my right mind, or other words to that effect. However, the author does not include any psychology as background or discussion or support for his hypothesis. It seems to me that an individual’s psychological makeup and health would be at least a factor in a discussion of criminal behavior.


Source of the case files was persons confined at the Illinois State Penitentiary at Joliet from April to September, 1949, the California Institution for Men at Chino from October, 1950 through May, 1951, and the U.S. Penitentiary at Terre Haute, Indiana from June through August, 1951.


503 files were selected for review, and the author did a significant amount of filtering based on his subjective criteria. He was left with 73 cases from Joliet, 21 from Chino, and 39 from Terre Haute., a total of 133. An average of 15 hours was spent with each subject. As he moved through the process of conducting initial interviews and examining case files, Cressey revised his initial hypothesis several times.


The final hypothesis is as follows:

“Trusted persons become trust violators when they conceive of themselves as having a financial problem that is non-shareable, are aware that this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.” (p. 30)


Chapter 2 examines the role of the non-shareable problem with respect to the hypothesis and the trust violation. Chapter 3 examines the opportunity for trust violation, and chapter 4 covers the violator’ vocabularies of adjustment, or the rationalization. The final chapter closes with conclusions and implications. Surprisingly, on page 153, Cressey states, “The theory which we have presented has few practical implications either for prevention and detection of trust violation or for treatment of apprehended offenders.”


As I read through the book, I get the distinct feeling that he is stacking the deck in his favor. Although the author takes great pains to describe his scientific rigor with respect to being objective in comparing the case histories to his hypothesis, I get the distinct impression, feeling and conclusion that he uses a lot of subjective rationalizations of his own to ensure the cases fit neatly within his theory. He claims that “The formulation of hypotheses was guided entirely by the search for negative cases.” (p. 17) But he admits that future revision will be necessary, if negative cases are found. He claims that he made a rigorous attempt to examine other data in an effort to find negative cases, that is, cases where the facts would not support his hypothesis.


To me, perhaps the most striking aspect of his description and narrative is just how much life, culture, business and technology has changed since the book was written. The narrative is completely infused with the perspective of the depression, World War II, and the environment immediately thereafter. The world he writes about and the world that defines his universe is completely alien to today’s world.


His subjects are all male. Although there is no discussion of it, I am going to go out on a limb and assume they are all white. Does anyone but me else detect a flaw in his sample? There was no automation or information technology in the 1940’s. The world worked differently. Businesses were organized, structured and run differently. Many examples concern bank officers and business owners shuffling and juggling funds and accounts simply to keep the business afloat. For example, back then, when a customer paid cash on deposit for any item, the culture and standard was to keep those funds separate, segregated and in escrow. Today, such funds are simply business cash flow. I believe that in today’s environment, many of his cases would have simply led to a routine bankruptcy instead of incarceration. So I question the relevance of his definition of embezzlement in today’s terms.


While reading Cressey’s book, it’s easy to be transported back in time, and you get a vivid feeling of a 1940’s film noir movie. You almost expect to see Humphrey Bogart or Jimmy Stewart step out of the pages. From today’s perspective, it seems quaint and unreal.


None of his examples involve collusion. Don’t we have lots of examples of fraud and embezzlement that involve collusion? Where is the “unshareable problem” when the fraud involves or requires collusion? There were no massive multinational corporate entities like we have today. No global markets with 24 hour-per-day trading. No derivative investments so complicated that virtually no single person can understand them.


Non-shareable Problem

I’m convinced that Cressey’s non-shareable problem leg is incomplete, if not irrelevant. Everyone has some non-shareable problem. One non-shareable problem that Cressey seems to virtually ignore is simple greed. Wouldn’t most of us love to have more? More of everything? Today, we are literally bombarded with media depictions of seemingly endless wealth and prosperity enjoyed by a limited few people. Doesn’t our base instinct for survival tend to drive us toward accumulating wealth? Clearly, in today’s world, this basic instinct has been allowed to flourish to absurd proportions in some cases. But the underlying drive is there in all of us, bonded deeply with our nature. Today, almost everyone seems to possess the non-shareable problem of being greedy. And everyone has a myriad of other personal problems. So everyone has a high capacity for fulfilling this “leg” of the triad. It seems to me that this is not in any way predictive of fraud.



I agree with the rationalization aspect of Cressey’s theory up to a point, except that I think it’s more often that once the perpetrator can manufacture an adequate rationalization for him/herself, that becomes the trigger for the fraud to begin. I also think that one of the most common rationalizations is, “Can I get away with it?” It also occurs to me that virtually all humans seem to be able to rationalize almost any conceivable behavior. Rationalization is a significant aspect of everyone’s personality. So everyone has a high capacity for fulfilling this “leg” of the triad. It seems to me that this is not in any way predictive of fraud.


I’m tempted to believe that there is an aspect of learned behavior here, too, that touches on cultural and individual behavior norm. We like to compare life in Maine with life in Massachusetts. There is a stronger culture in Maine of being proud of our reputation for honesty and our sense of shared community and shared sacrifice. Life in Maine is more difficult in many ways than life elsewhere, and Mainers need to look out for each other. The commonly held belief in Maine is that for folks in Massachusetts, and points south (people from away), it’s every person for themselves, and you grab what you can, when you can, before someone else beats you to it. So I would bet that, yes, there is less fraud in Maine, but I have no idea how much less. It might turn out to be insignificant, a myth.


I am always amazed at the number of people who view religion, religious behavior, piety, etc., as a reason why they or someone else could not possibly commit or be guilty of fraud. If you have ever had any formal interview training (as opposed to interrogation training), one clue that the person being interviewed is guilty is when/if they claim, “I swear to God I didn’t do it,” or, “As God is my witness…”



So, of Cressey’s three legs of fraud, the fraud triad, I think the first two are relatively insignificant if not completely irrelevant. We all have problems, and given enough time, the human brain can rationalize virtually any behavior. The place for us to focus our attention on is opportunity. That is where internal controls and risk analysis come together.


We need a new framework for understanding fraud, and a stronger effort to combat it.

Cressy’s flawed theory:

How the world really works:



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One Comment to “Book Report – Other People’s Money, A Study in the Social Psychology of Embezzlement by Donald R. Cressey”

  1. There is also what’s called Crowe’s Fraud Pentagon which adds competence and arrogance to Cressey’s three legs. Better, but not good enough. We need a new model.

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