On one of our first transactions together, I had to decide whether to confront the group's leader about the authenticity of pay stubs I received from one of his associates. Deep down, I knew that the pay stubs were fakes, but I kept quiet with a laundry list of justifications, excuses and lies such as:

• I have no proof;
• I can't accuse this smart, friendly and nice guy of committing fraud;
• It's not my job to verify the authenticity of every document I receive;
• I didn't print out any fake documents; and
• No one said to me, "Hey, here are the fake pay stubs."

Looking back, I believe I had an underlying lack of self-confidence. I didn't trust myself or have the courage to ask the tough questions. Today, I notice that people who make unethical decisions or commit fraud often have difficulty trusting themselves.

People tend to move away from pain. When you are asked to do something or where it is implied that you do something that you know is wrong, it's often painful to disagree. This is especially true if the person asking is your boss, a co-worker or a client. It sometimes seems more pleasurable to agree, to go with the flow and to be the "yes" person.

But no one ever said that the right thing would always be pleasurable.

Persuasion techniques

Fraudsters often use age-old techniques of persuasion. You'll recognize some of them as regular sales techniques.

Fraudsters' red flags include:

Obligation and reciprocation: If someone does something for you -- perhaps completely unsolicited -- you will most likely feel obligated to do something for them.

Consider this scenario: A real estate investor refers two borrowers to you. Both loans close, and you make decent commissions. The investor then refers a third borrower who is less than perfect. In fact, the borrower needs a gift for a $15,000 down payment but doesn't have a relative to give this gift. The investor tells you to fax the gift-letter form to him and says that he'll work with the borrower on this.The next day, you get a revised purchase agreement on which the sales price has increased by $15,000, and it includes an executed gift letter for the $15,000 from some long-lost relative.

Commitment: Be mindful of people who ask you to do them a few favors at your first meeting.

First favors often will be simple, harmless requests. "Can I switch chairs with you?" followed by, "Could you get me a glass of water?" and then, "Could we open a window?"

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