Julia Lee, ‘Prosocial Fraud’

This Article identifies the concept of prosocial fraud – that is, fraud motivated by the desire to help others. The current incentive-based legal framework focuses on deterring rational bad actors who must be constrained from acting on their worst impulses. This overlooks a less sinister, but more endemic species of fraud that is not driven by greed or the desire to take advantage of others. Prosocial fraud is induced by prosocial motives and propagated through cooperative norms. This Article argues that prosocial fraud cannot be effectively deterred through increased sanctions because its moral ambiguity lends itself to self-deception and motivated blindness. The presence of a beneficiary other than the self allows individuals to supplant one source of morality (honesty), with another (benevolence), providing a powerful source of rationalization that weakens the deterrent impact of legal sanctions.

After examining the types of motives that typify prosocial fraud, this Article identifies structural and situational factors – definitional ambiguity, incrementalism, and third-party complicity – that increase its prevalence. Given the cognitive and psychological biases at play, this Article suggests that any efforts to curb prosocially motivated fraud focus less on adjusting sanctions and more on exploring alternative mechanisms of ex ante, private enforcement.

Lee, Julia, Prosocial Fraud, Seton Hall Law Review: volume 52: issue 1, article 4.

First posted 2021-11-16 15:00:56

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