In yet another case that highlights a disturbing trend, Matthew Mencarelli, a 39-year-old from Belmont, Michigan, was sentenced to over eight years in federal prison for orchestrating a wire fraud scheme that defrauded investors of more than $1.6 million. His story isn’t unique—it’s part of a pattern I’ve seen time and again in fraud cases. The most fascinating and troubling part? Many fraudsters don’t start out intending to deceive. Instead, they fall into a psychological trap: they begin to believe their own lies.
How Fraudsters Convince Themselves Their Lies Are True
Mencarelli promised investors lucrative returns on fiber optic infrastructure projects that didn’t exist. Instead of funding these projects, he used the money to pay off earlier investors and finance his lifestyle—a textbook Ponzi scheme. But what’s striking is his statement to the court:
“I always intended to repay these investors.”
I’ve heard variations of this phrase from countless white-collar criminals. The reality? Most fraud begins with self-deception.
There’s a psychological term for this phenomenon: “cognitive dissonance reduction.” When people engage in behavior that conflicts with their self-image, they subconsciously adjust their beliefs to reduce discomfort. A fraudster who sees themselves as a “good person” won’t accept that they are stealing—they’ll convince themselves they are just “borrowing” money and will eventually pay it back.
This gradual self-deception is how small ethical lapses spiral into full-blown fraud. The brain starts rewriting reality, reinforcing falsehoods until the lie feels like the truth. Research even suggests that repeating a lie—whether to others or to oneself—can create false memories, making deception even easier to maintain.
Why This Pattern Repeats Itself
Mencarelli’s case is just another example of what I’ve observed throughout my career in business ethics and fraud prevention:
- It starts small. Someone bends the rules just a little—maybe shifting funds temporarily, thinking they’ll put them back later.
- The mind justifies it. Cognitive dissonance kicks in, making them believe their actions are not truly wrong.
- They go deeper. Once a lie is told, it must be maintained. To keep up appearances, the fraudster doubles down.
- It eventually collapses. Reality catches up, and the legal consequences follow.
The Critical Role of Ethics and Compliance Training
The problem is not just that fraud happens—it’s why it happens and how preventable it is. Most compliance and ethics training programs focus on what’s legal and what’s not. But knowing the law isn’t enough. If we don’t address the psychology of self-deception in training programs, we’re missing the root cause of most white-collar crime.
Companies need to take ethics training beyond check-the-box compliance exercises. Employees, especially those in positions of financial control, need to be trained to recognize the warning signs of self-deception in themselves and others. They must understand:
- How small ethical lapses can escalate into major fraud
- Why justifications and rationalizations are red flags
- The power of accountability and speaking up before damage is done
This isn’t just about preventing legal trouble—it’s about creating a corporate culture where ethical decision-making is the default, not an afterthought. When businesses fail to address self-deception, they leave the door open for fraud to grow unchecked. And as cases like Mencarelli’s show, by the time the truth catches up, it’s already too late.
The real question isn’t whether fraud will happen—it’s whether we’re willing to invest in the right kind of ethics training to stop it before it starts.
