By now almost everyone has read about Bernard Madoff‘s $50 billion Ponzi scheme that swindled his customers, employees, friends, and relatives over a period of approximately 20 years. During this time, his operations received a “clean bill of health” from the Securities and Exchange Commission and the auditor. This fraud has received national and international publicity because of its widespread repercussions including the demise of charitable foundations and the suicide of a well-known international money manager, but there are many other lesser known money managers who have scammed investors out of significant sums.
In South Carolina, Albert Parish, a respected economics professor at Charleston Southern University and owner of Parish Economics, received a 24-year sentence for defrauding his customers (including the university) of an estimated $134 million, some of which was used to fund his $1.2 million pen collection.
High-profile C-level executives of companies such as Enron, WorldCom, Adelphia, and Tyco received prison sentences for misappropriating funds and defrauding shareholders and employees of hundreds of millions of dollars. The Sarbanes-Oxley Act was passed to prevent such future scams and legislate greater transparency.
How were these well-respected men able to fool sophisticated investors, and in some cases regulatory agencies, for so long? The answer is that each of them had a great deal of credibility. Bernard Madoff was a former head of NASDAQ, Albert Parish was a university professor and Kenneth Skilling, Bernard Ebbers, John Rigas, and Dennis Kozlowski were CEOs of large corporations.
On a much smaller scale, I recently found an ebook that I wanted to order until I checked the contact information on the website. There was no company name, address, telephone number or email address. Instead, the only method of contact was to fill out a form on the webpage and wait for a response. I won’t enter my credit card information on a website that I do not consider trustworthy (but I’m from New York and I lock my car in my own garage).
Obviously, credibility is one of the most important criteria for the success of both businesses and individuals. Following are ways to create and maintain credibility.
1. Acquire acknowledged expertise and obtain licenses and certifications to verify your credentials.
2. Ensure that the products, services, and/or work that you provide are of consistently high quality. Remember that a warranty or other guarantee is no substitute for quality control.
3. Provide outstanding service to effectively prevent and/or rapidly resolve problems.
4. Create and maintain the proper image and positioning.
5. Use advertising, marketing, and public relations to inform your existing and potential customers of your capabilities and successes.
6. Obtain and publicize testimonials and references.
7. Develop a code of ethics and act accordingly.
