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James Chanos

Jim Chanos: Seven Traits To Identify Fraudulent Companies

Sunday, March 1, 2020 · Johnny Hopkins

In his recent interview with Jim O’Shaughnessy and Jamie Catherwood on the Infinite Loops podcast, Jim Chanos discussed one of the models his firm uses to identify fraudulent companies. It’s a model developed by Marianne Jennings, a Professor of Legal and Ethical Studies in Business at Arizona State University, which she outlined in her 2006 book, “The Seven Signs of Ethical Collapse”. Here are the seven traits that help to identify fraudulent companies:

  1. Pressure to maintain numbers
  2. Fear and silence
  3. Young ‘uns and a bigger-than-life CEO
  4. Weak board of directors
  5. Conflicts of interest overlooked or unaddressed
  6. Innovation like no other company
  7. Goodness in some areas atones for evil in others

You can listen to the entire interview here: