Lay and Expert Ignorance in a Massive Financial Fraud: A “Jurisdictional” Approach

• In Event: 4140 - Debt, Finance, and Financialization

Abstract

This work demonstrates the value of a “jurisdictional” theory of ignorance’s production. Blending insights from several subdisciplines, it defines “jurisdiction” as the union of normative and epistemic authority. All forms of expertise enjoy what Mukerji has termed the “moral authority to know.” The approach espoused here disaggregates that authority into its constituent parts, revealing that the interplay of normative and epistemic authority not only marks the divide between experts and laity, but, as an analytical frame, affords us a structural view of how ignorance is produced on both sides of that divide.
I apply this theory to the Stanford Financial Group fraud, a recent $5.5 billion Ponzi scheme. During its two decade run, the conglomerate sold bogus certificates of deposit to tens of thousands of investors, first in Latin America and then in the U.S. My research examines U.S. federal securities regulators, segments of which suspected Stanford of wrongdoing 12 years before the firm’s implosion; and, Stanford’s ill-fated depositors in the U.S. and Venezuela, its largest markets. On the expert side, regulators had the normative and epistemic authority to gather and analyze information about the firm. Moreover, that very authority exerted a gravitational pull on tips and complaints from all quarters, ensuring regulators a steady stream of information about Stanford. For their part, investors were no less defined by jurisdiction. In fact, they operated from a point of jurisdictional exclusion, that is, at a remove from normative and epistemic authority. If structurally subordinate, though, they were nothing like the passive victims much ignorance scholarship would suggest. Rather, of necessity, they produced their own interpretive accounts of Stanford, actively authoring the ignorance that would partly be their undoing. Indeed, the jurisdictional view developed here allows us to see both types of ignorance, expert and lay, as fruit of the same tree.

Author

• Camilo Arturo Leslie, Tulane University