The Rest of Us Don't

(Yale photo)

Billionaire short-seller Jim Chanos (Yale '80) now teaches Financial Fraud through History: A Forensic Approach at his alma mater. Chanos says that financial reform legislation such as Dodd-Frank and Sarbanes-Oxley has done little to stem the fraud and chicanery in our capital markets [bold added].

Corruption is everywhere in the business world, he warns, citing a survey in which 45 percent of chief financial officers said their CEOs had asked them to falsify financial results.

He lambasts the audit profession:

Chanos constantly nudges his students to challenge established opinion. When one of them remarks that a scandal-ridden firm had a reputable auditor signing off on its reports, he says, “They all have reputable audit firms. That’s one thing I want you to take away from this course: every big fraud had a great audit firm behind it.” He likens auditors and government regulators to archaeologists. “They’ll tell you what happened after the damage has been done.”

I wish that my school counselor had taken me aside before I went into accounting and said, "You won't get rich, you'll be ignored--there's a reason why they call it a back-room job, and you'll be blamed when things fall apart. The only consolation is that you'll be one of the few who know what's going on." Jim Chanos also knows what's going on, and short-sellers like him take some of the blame when businesses fail. The difference is that he's got $ billions to console him, and the rest of us don't. © 2013 Stephen Yuen