The Price of Trust: Corporate Fraud and the Cost of Looking Away

(Inspired by “End Game” by Ava Kofman, The New Yorker, Dec 5 2022)

Introduction – Seeing the Wrong Thieves

Every society has its small cheaters—the person who exaggerates a tax deduction or quietly collects unemployment benefits while already employed. Those cases grab headlines because they fit a simple moral narrative: greed, laziness, punishment. But while the public rails against the imagined horde of petty cheats, the real drain on the system flows from another direction.

In Ava Kofman’s investigation of the hospice industry, the crime is not petty. It is organized, normalized, and often corporate. Companies learned to enroll patients who were not dying, bill Medicare for care that never occurred, and then vanish or rebrand when regulators took notice. The fraud was systematic, predictable, and highly profitable.

The deeper paradox is that these vast leaks in public spending are not caused by too much government but by too little of it. A system designed for compassion and dignity was hollowed out in the name of efficiency. Oversight budgets were trimmed; inspectors were told to “streamline”; billing moved faster than audits could catch up. When oversight is dismissed as bureaucracy, opportunists discover that honesty is the least efficient business model.

Section I – The Scale of Corporate Fraud

The hospice scandal is only one tributary of a much larger river. Estimates from the U.S. Department of Health and Human Services place Medicare and Medicaid fraud at roughly $60 billion per year—a number larger than the total budgets of most federal agencies. Much of it originates not with individuals but with networks of clinics, pharmacies, and billing firms that treat public funds as venture capital.

During the pandemic, emergency business-relief programs multiplied those vulnerabilities. Analysts now estimate that $200 billion of Paycheck Protection Program and EIDL loans were obtained fraudulently—many by shell corporations or self-certified entities that never existed before 2020.

By comparison, all individual unemployment-benefit fraud during that period may total between $100 and $135 billion, still smaller than the combined fraud estimated in PPP and EIDL business programs, but far larger than early state-level tallies suggested. Yet it is the image of the small-time claimant that dominates public outrage and talk-radio scorn.

Corporate deception also extends far beyond government programs. From the Wells Fargo fake-account scandal to the Volkswagen emissions-cheating software, the pattern is identical: a culture of performance metrics that rewards manipulation over integrity. The social cost of the 2008 financial collapse—triggered by systemic misrepresentation in mortgage markets—has been estimated in the trillions, counting lost jobs, homes, and savings.

These numbers reveal a kind of moral myopia. We have learned to measure the efficiency of government by how quickly it can move money, not how carefully it can protect it. Fraud, in that sense, is not a glitch in the system—it is the price of pretending that oversight is optional.

Section II – Efficiency as a Breeding Ground

“Lean government,” in theory, is a call to do more with less. In practice, it often becomes an invitation to do less with less. When oversight budgets shrink, enforcement agencies lose the very people who can recognize fraud before it metastasizes.

The hospice industry that Ava Kofman profiled is a textbook case. The federal reimbursement system was built on what insiders call pay and chase: pay the claim quickly—so as not to slow care—and chase down the bad actors later. But “later” almost never comes. By the time an audit begins, the corporation that submitted the false bills has dissolved, renamed itself, or declared bankruptcy.

This is not a failure of individual ethics so much as one of system design. Each policy to accelerate billing, reduce paperwork, or “trust the providers” saves a few dollars in administration but exposes billions in potential losses. Efficiency becomes a form of blindness, and the moral hazard is profound: the more the government trusts, the more profitable deceit becomes.

Meanwhile, companies that follow the rules find themselves undercut by those that do not. When enforcement weakens, honesty ceases to be competitive. What starts as fiscal conservatism evolves into a structural subsidy for corruption.

Section III – The Human and Civic Toll

The numbers are staggering, but the human damage is worse. In the hospice schemes, real patients were misled about their own conditions—told they were dying when they were not, or signed up for care they never received. Families were robbed not only of money but of trust in the institutions meant to protect dignity at life’s end.

In other industries, the victims are less visible but no less real. When a bank falsifies accounts, a homeowner loses creditworthiness. When an energy company lies about emissions, a community breathes toxic air. When pharmaceutical firms manipulate data, the public pays with both dollars and health.

The corrosion spreads outward like rust in a bridge: quietly, incrementally, until the structure of civic faith can no longer bear weight. Fraud and deregulation reinforce one another in a vicious feedback loop. Each scandal fuels public cynicism, which politicians then exploit to justify further cuts to the very agencies that could prevent the next scandal.

In the long run, this erosion of trust becomes more expensive than any oversight program could ever be. To restore a collapsed bridge costs more than maintaining it; the same is true of democracy’s infrastructure. Fraud may begin as theft of funds, but it ends as theft of confidence—an extraction from the moral capital of a nation.

Section IV – The Economics of Prevention

Whenever a new scandal breaks, politicians call for accountability. Yet the arithmetic of prevention remains oddly neglected. The U.S. Department of Health and Human Services’ Office of Inspector General operates on a budget of roughly $1.5 billion. Its work uncovers about $30 billion in recoveries and avoided costs each year—an efficiency ratio private investors would envy. But instead of expanding that oversight, Congress has often trimmed it, rewarding short-term savings over long-term stewardship.

This same pattern recurs across programs. During the pandemic, investigative journalists noted that a few thousand auditors were expected to monitor $1 trillion in emergency loans. The outcome was predictable: more than $200 billion in fraudulent claims. To have doubled or tripled the oversight staff might have cost a few billion dollars—a bargain compared to what was lost.

The “small-government” ideal too often mistakes auditing for waste. In reality, oversight is a form of insurance. Just as fire departments reduce the total number of fires through deterrence, visible regulators deter crimes that never need to be prosecuted. The most efficient system, paradoxically, is the one that spends generously on prevention so that little needs to be recovered later.

Fraud control is not simply about money saved; it is about reinforcing the expectation that systems are credible. When citizens see corporations punished for deceit, they are more likely to believe that honesty still has a place in the public square.

Section V – The Cost of Trust

In both ecosystems and economies, balance depends on feedback. Too much rigidity and growth stalls; too little oversight and parasitism overwhelms the host. The same dynamic governs our civic life.

A government capable of catching fraud before it metastasizes is not “big government”—it is competent government. The real question is not how small government should be, but how resilient. Oversight and regulation are simply tools for maintaining that resilience, just as immune systems maintain health not by punishing the body but by defending it.

When corporations learn that the cost of deception is negligible, the entire marketplace bends toward dishonesty. The honest firm becomes the evolutionary loser. To change that trajectory requires treating trust as infrastructure—something to be built, maintained, and funded.

The cost of trust, in this light, is not a tax on freedom. It is the price of collective survival in a system too complex to police itself.

Sidebar – By the Numbers: Corporate vs. Individual Fraud

(Figures approximate; for conceptual comparison only.)

Classroom Prompts and Discussion Questions

• Why do public debates focus more on small individual fraud than large corporate deceit
• How does “efficiency” sometimes undermine accountability?
• Can we calculate a fair “price of trust” in democratic systems—and should we?
• What parallels exist between civic oversight and feedback loops in nature?
• How might transparency and enforcement be redesigned to reward integrity rather than merely punish dishonesty?

Sources

• Ava Kofman, “End Game,” The New Yorker (Dec 5 2022). Investigates how the hospice movement’s noble ideals were corrupted by for-profit companies exploiting weak oversight — the essay’s central case study.
• U.S. Department of Health and Human Services, Office of Inspector General, Annual Report (FY 2023). Provides official estimates of Medicare and Medicaid fraud (~$60 billion / year) and enforcement budgets used for comparison.
• Pandemic Response Accountability Committee (PRAC), “COVID-19 Relief Fraud Report,” 2023. Quantifies roughly $200 billion in fraudulent pandemic-related corporate loans and details systemic vulnerabilities in emergency programs.
• U.S. Government Accountability Office (GAO), “Unemployment Insurance: DOL Should Continue to Address Risks of Fraud,” 2023. Supplies national estimates of individual unemployment-benefit fraud, used here for comparative scale.
• Federal Reserve Bank of Dallas, “The Cost of the 2008 Financial Crisis,” 2018. Estimates long-term social and economic losses exceeding $10 trillion, grounding the essay’s analysis of large-scale corporate deception.
• Volkswagen AG, “Diesel Emissions Settlement Documents,” U.S. Dept. of Justice, 2017. Illustrates how deliberate corporate fraud in emissions testing creates both economic and moral damage.
• Wells Fargo & Company Consent Orders, Office of the Comptroller of the Currency, 2020. Details systemic manipulation of customer accounts and the regulatory response that followed.

© 2025 Michael A. Pink