On a recent visit to Salt Lake City, Alexander Dyck ordered Chinese takeout and received a branded fortune cookie wishing him wealth and promoting FTX, presumably packaged before the crypto empire’s epic collapse. “I should have saved it,” he said regretfully.

Dyck is a professor of finance at the University of Toronto, who just published a provocative new study on the pervasiveness of corporate fraud. The study has been passed around in the world of academia in recent weeks and has become a fascination among general counsels, corporate leaders and investors.

It suggests that only about one-third of frauds in public companies actually come to light and that fraud is disturbingly common. Dyck and his co-authors estimate that about 40% of companies are committing accounting violations and that 10% are committing what is considered securities fraud, destroying 1.6% of equity value each year — about $830 billion in 2021. “What people don’t get is how widespread the problem of corporate fraud is,” Dyck said about his study, which was published in the Review of Accounting Studies this month.

Last year, Trevor Milton, founder of electric-vehicle maker Nikola, and Elizabeth Holmes, founder of blood-testing company Theranos, were found guilty of fraud in high-profile trials. Holmes’ sentencing coincided with the swift fall of FTX, all of which left 2022 with a distinctly fraudulent flavor.

But the amount of fraud perpetrated at any given time stays pretty steady, Dyck said.

Dyck and his colleagues wanted to scratch the surface of misconduct in public companies to figure out how much of it goes undiscovered normally. To do this, they first examined a period of unique scrutiny in accounting history, the 2001 demise of auditing firm Arthur Andersen after the collapse of Enron.

At that time, the firm’s former clients were in the spotlight and new auditors were far more motivated to uncover wrongdoing, given the suspicions looming over companies that had worked with Arthur Andersen. That should make the rate of fraud they found more accurate than other measures. But the probes didn’t uncover more wrongdoing among Arthur Andersen’s clients than at other businesses reliant on other auditors. The same ratio of fraud appeared in a set of comparisons with other research, which led them to conclude it is consistent. They used this rate of fraud to conclude that about one-third of corporate fraud goes unnoticed.

Allison Herren Lee, a former commissioner and interim chief at the Securities and Exchange Commission, has worked as an enforcement lawyer and inside a mismanaged business. She said she’s very familiar with how people in business try to push the limits but was surprised by the study’s estimate that one-third of misconduct goes unnoticed.

Still, it’s very difficult to prove misconduct and target everyone involved in wrongdoing, Lee said. People involved often feel they are just testing boundaries rather than violating the law. “To prosecute fraud you have to show intent,” she said. “In big public companies that’s tough, because it takes a village to commit fraud.”

One way to address this would be to eliminate the need to show criminal intent and make it easier to punish executives for permitting wrongdoing on their watch, a move proposed by U.S. Sen. Elizabeth Warren, D-Mass., in 2019. The bill got little traction.

Corporate crime fighters agree that fraud is a major problem. But some are critical of the new study’s expansive take on the term.

“The use of the term ‘fraud’ in this article’s title is highly problematic. The authors themselves concede that they use the word ‘fraud’ ‘loosely’ and for ‘simplicity,’ ” said Joseph Grundfest, a Stanford Law School professor, former SEC commissioner and creator of a database that tracks federal securities fraud cases. “Alleged frauds are not frauds, and differences of opinion are also not frauds.”

The mindset of a typical fraudster is at the heart of the definitional issues, said Donald Langevoort of Georgetown University Law Center, a former special counsel to the SEC.

Prosecutors have to prove intent to defraud, but that’s not easy because perpetrators are often expert at lying to themselves and defiant about the rules, he said.

“People inside Enron were convinced accounting was bad and they are good,” he said. “Executives who think like that will cross the line.”