Corporate Crime Built Into the Business Model

I am an old-fashioned kind of guy: when I do business with a company, I want to purchase good products and services for a reasonable price. Maybe it’s odd enough in these times, but I don’t want the company I am doing business with to be either cheating me or to be engaged in criminal enterprises. Call me crazy.

When the financial collapse happened, and I started reading the books and articles explaining what had gone down, I was appalled to learn how much the biggest companies in the financial sector were committing crimes as a regular part of their daily business. From the ratings companies giving false Triple A grades on bonds certain to go bust, to falsifying data on home mortgages, to the stunningly widespread practice of robo-signing to the LIBOR rate-rigging scandal, to laundering money for drug cartels to bankers regularly selling their clients investments they knew were bad, to Wells Fargo cheating millions of customers by creating false accounts, it was clear that fraud was literally built into the business model of many of the biggest banks on Wall Street. Big banks have paid over $209 billion dollars in fines for their crimes in recent years, but it doesn’t faze them a bit. They just build the cost of those fines right into their business model.

This was why it was so disappointing to see so few Wall Street execs personally prosecuted. There’s nothing like a few perp walks in corporate board rooms to change the culture of comfortable CEOs used to just paying whatever it takes to make problems disappear.

Lately, I have been working with a coalition of business, labor, fair housing, and disability rights advocates that is concerned about the impact of Airbnb on our communities. And I am starting to think that the Airbnb business model has some of the same crime-built-into-the-business model issues as big banks on Wall Street.

There have been a couple of extremely troubling stories that have popped up recently that reinforce this idea.

This story from the Daily Beast describes a scheme by Russian fraudsters, wherein they utilize Airbnb to launder money from their criminal enterprises. They recruit corrupt hosts who get a cut of the action or set up fake accounts that will facilitate the transactions.

And speaking of Russians, this story follows reports that one of the ways currently indicted Trump campaign manager Paul Manafort laundered money sent by his Russian friends was through an Airbnb-based scam. These stories show there is a mushrooming problem that law enforcement officials are just beginning to deal with, as organized crime, foreign governments, and wealthy tax avoiders start using Airbnb as a way to stash their cash.

Then there is the specter of political and corporate espionage. The Washington Post broke a story that an undercover operative for the right-wing political hitman James O'Keefe rented an Airbnb in a well-known Democratic operative’s basement. The Democrat involved had been a previous target of O’Keefe, so the odds of this being a coincidence are approximately a billion to one. So how many times has Airbnb been used to conduct corporate or political espionage, where agents stay with a targeted host and then search their house or eavesdrop on their conversations? We don’t know, but I would bet this incident was not the first and certainly won’t be the last.

Then there are scary stories like this one. Airbnb says that it carefully screens its hosts, but there are too many of these stories where people with a history of serious and repeated criminal behavior have passed the company’s screen. And there are plenty of stories where the reverse is true, where guests are caught dealing drugs or doing other illegal things out of Airbnb rentals, like this story out of London.

All of this is on top of the fact that the Airbnb business model is increasingly built on professional hosts: apartment buildings that are essentially illegal hotels, operating without health and safety rules or ADA rules; and real estate investors who run multiple listings. I’m not even talking about hosts that run two properties, but there’s a shocking number of hosts with ten or more listings, sometimes even 20, 30, 40 or more properties.

You put all of these things together, and it adds up to a lot of illegal activity flowing through the Airbnb business model. No wonder they keep trying to cut deals with cities to pay a little bit in taxes in exchange for no regulation of any kind on their business practices. To this old Wall Street activist, they are starting to sound too much like a Too-Big-to-Fail bank.

Like banks, Airbnb offers a useful service to society. In the banks’ case, it is lending money, allowing people to save their money, and facilitating the transfer of money. With Airbnb, it’s offering people an easy way to share their homes with travelers and make some extra dough to pay the bills. The problem for these businesses comes when they start making money through fraud. It becomes so lucrative, such a profit-driver, that they can’t turn off the spigot. They buy off regulators, or demand no regulation at all, in order to protect those profits. In other words, when their business model is built on corporate crime.