'Deception Detector' Hunts for Wall Street’s Secrets

JP Morgan'sJamie Dimon doesn't want to take a pay cut. The Fed's Ben Bernanke doesn't think the Europeans will solve their financial problems correctly.

Philip Houston

In retrospect, Nasdaq's Bob Greifeld doesn't think he should have been on an airplane when the Facebook IPO was going on. And Jon Corzine was potentially involved in the transfer of missing money at MFGlobal.

Those are all conclusions of a veteran CIA "deception detector" asked to review videotapes of interviews and testimony of some of the highest profile financial figures under scrutiny in recent months — based on his years of experience drawing confessions out of spies for the US intelligence agency.

Philip Houston was once the CIA's leading expert in "deception detection," or the fine art of telling when people are lying or hiding the truth. In fact, Houston was one of the lead specialists who created CIA techniques designed to spot lies and interviewing strategies to get people to confess.

Over the course of his career in the CIA's Office of Security, he sat across the interrogation table from CIA employees he interviewed for security clearances as well as foreign agents he was probing for lies. But now, he sells his lie detection expertise to financial firms, corporate executives and other private clients who are trying to understand whether people they are doing business with are telling the truth.

And Houston has written a book designed to make his CIA deception detection techniques understandable to average people, called: "Spy the Lie: Former CIA Officers Teach You How to Detect Deception."

We thought the best way to learn how Houston detects deception was to see how it works in the real world. In an interview with CNBC, Houston reviewed videos of prominent people in the financial world to spot the indicators he says show deception, and to tell us what he thought they really meant.

Note: His analysis, of course, is just one man's opinion. There's no conclusive way to tell if someone is being deceptive if you don't know the underlying facts of the case. Houston's hypothesis about each case is just that — an interesting, but not definitive, way of looking at the meaning behind the answers.

Jamie Dimon CEO, JP Morgan

Jamie Dimon CEO, JP Morgan Interviewed by CNBC's Mary Thompson, June 13.

The CNBC Interview:

Thompson: Tell us how bad it can get. Some estimates say the loss could total $5 billion. Can it get any bigger?

Dimon: I've consistently told you I'm not going to tell you. On July 13th we'll tell the shareholders what it was in the quarter. I think in the testimony we made today we said that the risk has been reduced such that it could still lose money from today forward but the probability is less and magnitude is less.

The CIA-Style Analysis:

In this exchange, Houston focused on Dimon's aggressive response and tone of voice when he responded to Thompson's question about the size of the recent JPMorgan trading loss.

"That can reflect what we call aggression behavior, and we see that when we start getting close to issues that are really important, really significant, then we as humans often feel compelled to go on the offensive, to try to get you to back off a little bit," Houston said.

"And that's what he's trying to do here. He doesn't want to answer this. He doesn't want to pursue it."

The CNBC Interview:

Thompson: Will you give back pay? You said the buck stops with you. You acknowledged complacency will you be giving back any of your compensation.

Dimon: My comp is completely set by the board of directors. 100 percent is set, I assume they will incorporate this in how they evaluate me. But I'll leave that to them. I think it would be inappropriate for me to tell you what the board will do.

The CIA-Style Analysis:

Houston said Dimon didn't like this question — and that it doesn't appear Dimon believes he should have to turn over any of his own pay as a result of the trading debacle.

"He doesn't want to answer the question," Houston said. "He's clearly not going to voluntarily, you know give up any of his compensation. I think he, in the nature of his answer, the way he puts off on the board, he's also suggesting, behaviorally, that he doesn't think that he should have to perhaps."

Bob Greifeld, CEO, NASDAQ

Bob Greifeld CEO, NASDAQ Interviewed by CNBC's Maria Bartiromo, June 6.

The CNBC Interview:

Bartiromo: Where were you physically? Were you on a plane back to New York?

Greifeld: Not at that time. At 11:30 we obviously did the opening which you've pointed on and then we were on an open call. And at 11:30 when it was happening I was obviously on the phone.

The CIA-Style Analysis:

This was the second time Maria Bartiromo asked the question of where Greifeld was personally during the Facebook IPO during this the interview, and Houston pointed out that circling back can be an effective way to pull out new information.

"Maria does a good job of recognizing probably that he had ducked the question the first time," Houston said. "So she went back to the question and immediately when she did, you see another anchor point shift."

Anchor points, Houston explains, are those parts of our body that attach us to the earth — our feet when we are standing, or our hands when we are leaning on a table.

One of the indicators he says reveals concealment of information is movement of anchor points within 5 seconds of being asked a question. "It strongly suggests a little bit of a spike in his anxiety," Houston said.

Ben Bernanke Chairman, Federal Reserve

Ben Bernanke Chairman, Federal Reserve Press Conference, June 20.

Press Conference:

Mark Gregory, BBC: How much worse will the situation in Europe have to get before it starts seriously denting the prospects for recovery in the American economy and thus really changing the direction of Fed's policymaking?

Bernanke: Well, we hope it doesn't get worse. I think it's already one of the factors that has been a drag on the U.S. recovery. Not the only factor by any means — there are a number of others that I mentioned — but it has been having an effect, and it's been having an effect on the economies of other countries as well, of countries that export to Europe.

The CIA-style Analysis:

Houston said he saw a "very large deceptive cluster" in Bernanke's response to this question — that is, he manifested several of the indicators that Houston looks for when people are deceiving their questioners.

"Right at the beginning of his response he did something we call an 'inappropriate level of concern,' or what the psychologists call 'duping delight:' He smiled," Houston said. Often, he explained that a smile that is inappropriate to the subject matter — in this case economic decline, which would not normally provoke humor, is an indication that a person is about to be deceptive.

And after reviewing another comment from Bernanke about European leaders ability to deal with the economic crisis, Houston said, "It clearly suggests a lack of confidence that they could get it right."

At a minimum, Houston added, Bernanke "believes it could get much worse."

Jon Corzine, Former CEO, MF Global

Jon Corzine Former CEO, MFGlobal Testimony before Senate Agriculture Committee, December 8, 2011

Jon Corzine Testimony:

Rep. Frank Lucas (R-OK): Did you authorize a transfer of customer funds from these segregated accounts?

Corzine: I never intended to break any rules, whether it dealt with the segregation rules or any of the other rules that are applicable.

Rep. Lucas: Are you aware of any transfers, authorized or unauthorized, of funds out of customer accounts?

Mr. Corzine: I'm not in a position, given the number of transactions, to know anything specifically about the movement of any specific funds. And I will repeat: I certainly would never intend to direct or have segregated funds moved.

The CIA-Style Analysis:

In this exchange Houston spotted what he called "a lot of deceptive indicators." "His response is very problematic," Houston said, "behaviorally my antenna goes way up."

Part of the reason, Houston explained, is that Corzine doesn't answer the question of whether he authorized the controversial funds transfers from MFGlobal, and instead resorts to what Houston calls "convincing statements", which are designed to offer mitigating details, while not directly responding to the question itself.

Houston's opinion, based solely on the way Corzine answered the question, is this: "It suggests to me that there's a real possibility that he was involved in the process, potentially."

-By CNBC's Eamon Javers