White-collar fraudsters in an emerging market: the case of Interbolsa in Colombia

Abstract

Purpose Most corporate fraud literature focuses on its determinants, analyses fraudulent financial reports in developed countries and uses a quantitative approach. This paper aims to reveal how a leading stockbroker defrauded its investors and enriched a small group of owner-directors. It is a qualitative study of executive behaviour in an emerging market. Design/methodology/approach This paper developed a qualitative case study based on secondary information: judicial files, written press and journalistic investigation. The data were analysed using the theories of anomie and social capital. Findings Using three market strategies, a small stockbroker rose to national prominence. The first strategy was to gather abundant money through direct collection and triangulation with other companies and credits. The second was to identify illiquid financial assets whose accelerated valuation would go unnoticed in the market. The third strategy was aggressively multiplying the money available through sales operations with a repurchase agreement. Furthermore, the owner-managers sophisticatedly manipulated the market and used their political connections. Originality/value This paper contributes to the literature by integrating a sociological perspective with a case study from an underexplored context. Whereas most applications of anomie and social capital theories to financial fraud originate in Anglo-Saxon settings, this study examines the Interbolsa scandal – the largest stock market collapse in Colombia – offering a distinctive opportunity to adapt these theories to a Latin American context. Drawing on qualitative data, the paper advances beyond analyses of fraudulent financial statements to investigate executive behaviour, price manipulation and the use of repurchase agreements (REPOs) in an emerging market.