The Psychology of Long-Firm Fraudsters

Don't do fraud!

Long firms are one of the simplest forms of fraud: the long-firm fraudster buys a lot of goods on credit and then disappears before the bills come due. I recently read The Phantom Capitalists, a book from the 1970s about the psychology of long-firm fraudsters. Normally, the only kind of long-firm fraudster you can find in prison are ones who aren’t very good at it and get caught.¹ But a lot of long-firm fraudsters worked with the Kray twins; when their gang was taken down in 1968, it took the long-firm fraudsters with them. The author took advantage of this opportunity to interview competent long-firm fraudsters.

Leslie Payne, the Kray twins’s long-firm fraud man. I don’t know if he was interviewed for this book because the author kept his interviewees anonymous.

Of course—as The Phantom Capitalists warns the reader—you should be suspicious of anything said by a professional liar. Nevertheless, it seems likely to me that the long-firm fraudsters were accurately representing their motivations as they understood them, if only because I can’t imagine why anyone would tell a lie that makes them look that bad.

From teenagers carrying guns to rapists to Al Qaeda, there’s a consistent pattern. Most people committing a crime are basically normal people who have normal motivations, like being afraid of violence, making bad decisions on impulse, or wanting to be a hero. A small number of people, however, just like hurting people.² Often (as in the case of rape) these people are responsible for the vast majority of the crime, although they’re a minority of the perpetrators.

Pre-planned³ long-firm fraud does not follow this pattern! Normal people don’t commit pre-planned long firm fraud. Pre-planned long-firm fraudsters all do long-firm fraud because they enjoy hurting people. They will just straight-up tell you so in an interview.

You might think that long-firm fraud is an easier way of earning money than honest business. This isn’t true. Long-firm fraud doesn’t pay that much more than honest business. After all, your ultimate earnings are limited to the amount of credit your suppliers will extend you, and the fence typically takes a big cut.

Long-firm fraudsters work hours as long as any other businessperson’s: not only do they have to spend a lot of time faking references and planning their getaway and so on, they have to actually run the actual business, at least enough that their suppliers don’t get suspicious. Their jobs are more stressful, because they have to constantly worry about getting caught. Some interviewees commented that prison was a relaxing break from the stress of trying to avoid prison.

Why would anyone do long-firm fraud? Because they like it! They enjoy tricking people. It makes them feel powerful. The intensity and anxiety and constant improvisation of a long firm is fun. They see themselves as adventurers, charming rogues who make fools of boring creditors.

It’s true that prison offers an opportunity for long-firm fraudsters to think about their mistakes and learn a better way of life. Unfortunately, long-firm fraudsters almost always identify their mistake as “getting caught” and their better way of life as “doing long firms, but better this time.”

The tragedy of long firms is that they almost always require at least two participants (the organizer and the fence), and usually more. And yet all long-firm fraudsters love tricking people into giving them money, and don’t lose this preference when it’s about their fellow fraudsters. Doing a long-firm fraud involves constantly watching your back, prepared at every moment for your coconspirators to rip you off—and, naturally, to seize any opportunities to rip off your coconspirators as well.

Long-firm fraudsters mostly don’t seem to hold hard feelings for each other. They do switch, without a shred of irony, from complaining about how unreliable long-firm fraudsters are to discussing the greatest times they screwed over their coconspirators.

Long-firm fraudsters do, however, hold great resentment towards the Krays and other mobsters. Your fellow fraudster understands that, if they didn’t want to be defrauded, they shouldn’t have been out there looking so defraudable. Mobsters don’t take such an open-minded attitude. If you steal from them, they torture you!

Mobsters also had a real tendency to kill the goose that lays the golden eggs. A good long firm takes time to come to fruition. The fraudster needs to build up trust with their creditors, so they can buy a substantial number of goods on credit. Mobsters, however, want the money right now—and never mind that they’d make ten times as much if they waited six months.

I’m kinda on the mobsters’ side here. Long-firm fraudsters are, on the whole, substantially smarter than mobsters.⁴ If a smart scammer is telling you that—for reasons you don’t quite understand—if you wait six months you’ll dectuple your investment, you ignore them and demand your money! If long-firm fraudsters wanted to be trusted experts on a specialized field of criminal activity, they shouldn’t definitely just be waiting for an opportunity to steal the mobsters’ money.

A point I try to make often on this blog is that, most of the time, doing evil is not in your self-interest. If you would like to be trusted, you must be trustworthy. If you enjoy tricking people into harming themselves, you will be surrounded by people who enjoy tricking you into harming yourself, and it will be nearly impossible to get anything done. Just like altruistic jobs usually have lower salaries, jobs that pay in Getting To Hurt People pay less in money. Don’t do fraud. Aristotle was right: being bad is bad for you.

1. For example, some long-firm fraudsters got caught because they used the same paper and typewriter for their fraudulent firm and for the made-up firms it was using as references.

2. I am trying to avoid medicalized language like “sociopath,” “psychopath,” or “antisocial personality disorder,” which I feel impose very specific theoretical models of the "some people enjoy hurting people” phenomenon.

3. Obviously, lots of people commit long-firm fraud because they don’t want to admit that their business is failing.

4. This says more about mobsters than long-firm fraudsters.