The Ethical Barometer

The World Bank publishes a report called, “Doing Business.” The report ranks countries according to their regulatory environments. Countries can improve their rankings by reducing bureaucratic burdens on starting a business and expanding access to electricity. However, since 2018, everyone from the World Bank’s then chief economist to the Center for Global Development have been pointing to possible corruption in the data used to put together the rankings. The most recent rankings find China, Azerbaijan, UAE, and Saudi Arabia soaring. For example, Azerbiajan, the country that comes to all of our minds when we think “business growth,” soared from 80th place to 34th in just a year. China climbed from 90th to 31st, right up there with Azerbaijan when we think of friendly governments and capitalism. The data point to what one expert said was “rot within the project.”

All data is only as good as the folks who put it together and those those who get their hands on it before publication.

The COVID-19 virus has certainly had its share of controversy. Lack of honesty in presenting data to the public does not help. One of the more blatant misrepresentations was uncovered in Kansas through a freedom of information request made by the Kansas Policy Institute. The Kansas Department of Health and Environment released a chart that purported to show that the 15 counties that had followed Governor Laura Kelly’s mask mandate were successful in reducing COVID-19 cases at a far greater rate than the 90 counties that failed to enforce the mandate.

The chart however, used different y axes for the county groups. So, of course the 90 counties would seem to have a higher number of cases.

The Kansas Policy Center decided to take the data it obtained and do what most of us learned in sixth grade: When doing comparison graphs, plot two different color lines using the same x and y axes.
https://kansaspolicy.org/wp-content/uploads/2020/08/Picture1-1.png.

Take a look at the graph and you will see the counties without the mandate did better. You will also see that the Kansas DHE chose not to start its graphs until July 12, which was 9 days after the mandate went into effect. The Kansas Policy Institute chose to start on Day One of the mask mandate, and the 90 counties did even better in that period.

Conflicting reports about COVID-19 data are troubling. One cannot really follow the science if there are two sets of data for the same events. The Barometer thinks back to a now departed and dear colleague who once said in a meeting during which we huddled over a PhD candidate’s puzzling research data, “Figures don’t lie, but liars do figure.” Politics makes for some figuring and even stranger charts in these “all is political” times.

‘Tis quite an accounting error at the German company, Wirecard. The company’s value went from 13 billion (Euro) in June2020 to 200 million (Euro) in August 2020. Wirecard owns a bank and does payment services and suspicions about fraud had been circulating since January 2019. So far, four Wirecard managers and executives, including its former CEO, CFO, and accounting manager, have been charged with fraud, breach of trust, and market manipulation. The allegations are that the managers began inflating revenue in 2015.

Apparently, the German government and regulators were all in with this financial wunderkind. Chancellor Angela Merkel was all in for Wirecard’s acquisition of AllScore Financial, a Chinese Company. And employees at BaFin, the German bank regulator, were trading Wirecard shares in 2019 and the first six months of 2020. In fact, the trading was ongoing whilst BaFin was investigating Wirecard. German officials agree that Wirecard is a financial disaster but that BaFin’s supervisory mechanisms are sound. VW and emissions falsification. Wirecard and revenue falsification, and apparently German regulators were enjoying the ride. Fahrvergnugen and all that.

A manager at American Express is in the news because she alleges that she was suspended for raising issues about the sales tactics of AMEX employees charged with sales of the company’s corporate card. Sophia Lewis and other employees say that they witness salespeople, heavily incentivized by commissions, to ignore the company’s requirement of $4 million in revenue. The applications, according to Lewis and other AMEX employees, were submitting the applications without verification of income.

If it all sounds familiar, think Wells Fargo and its new account incentives. Or think mortgage brokers during the subprime era. The more mortgages they wrote (without income verification), the more they earned. For AMEX salespeople, at $475 to $650 per application submitted, the temptation, pressure, and compensation are enough to entice even he pure among us. AMEX says Ms. Lewis was suspended for other reasons and is on medical leave. But her performance rating dropped after she reported the conduct.

Two sides to the story, but if 50% of it is true, AMEX should be investigating.

It feels as if the politics get in the way of the serious nature of the conduct of former FBI lawyer, Kevin Clinesmith. In order to represent that Carter Page, who was an adviser to the Trump 2016 presidential campaign, was not a source to another government agency, Mr. Clinesmith altered an e-mail from the CIA in response to his e-mail question on the source status. The CIA response said that Mr. Page “was or is a contact.” Mr. Clinesmith added “and not ‘a source'” to make it look as if the CIA had denied source status when it, in fact, had confirmed that Mr. Page was doing work for the CIA.

Mr. Clinesmtih plans to enter a guilty verdict. His behavior was a breach of all ethical standards lawyers pledge to uphold. To put I more plainly: This was wrong. If the FBI can make stuff up to get a warrant to spy on a presidential adviser and thereby on the presidential candidate, imagine what they could be doing to us? This stuff matters, even if Mr. Clinesnith felt he was saving the country from Trump.

UPDATE:  Mr. Clinesmith received no prison time because, in the words of the sentencing judge, “Anybody who has watched what Mr. Clinesmith has suffered is not someone who will readily act in that fashion.  Weighing all of these factors together — both in terms of the damages he has caused and what he has suffered and the positives in his own life — I believe a probationary sentence is appropriate here and will therefore impose it.” Charlie Savage, “Ex-FBI Lawyer Who Altered Email in Russia Case Is Given Probation,” New York Times, January 30, 2020, p. A20.

One year probation and 400 hours of community service.

An FBI lawyer, sworn to uphold the law, falsified a document that damaged the lives of others. including portraying Mr. Page as a Russian spy and subjecting him to unwarranted surveillance.  The judge should have weighed those factors as well.  As for the likelihood of Mr. Clinesmith’s recidivism? The lighter the punishment in relation to the harm of the crime, the more likely the offender offends again — ask any experienced prosecutor who witnesses the same defendants recycling through his or her court. Ask any judge who has given a light sentence and a lecture how effective both were in terms of preventing a repeat performance by a woe-is-me defendant. Even Laurie Laughlin, the ambitious and bribing Hallmark actress mother, got real time for paying to get her daughter into USC. Her press coverage surpassed that of Clinesmith’s.  And she is no longer on the Hallmark channel. And the likelihood of her hoping up with another college admissions grifter?  Zero.

Equal justice under the law?

The board of McDonald’s kinda, sorta did an investigation into the conduct of their then CEO, Steve Easterbrook, in November 2019. The board concluded that they did not have enough evidence to show that Easterbrook’s behavior (sending sexually explicit text messages, photographs, and engaging in FaceTime calls with an employee) involved “dishonesty, fraud, illegality or moral turpitude.” Those were the four grounds for termination in the Easterbrook contract. Instead, not finding a breach of terms, they sent Mr. Easterbrook away with a severance package of $700,000 in cash, and $17.4 million in stock grants. Various reports put the value of the package at $40 million.

Now come the results of a real investigation. After another employee disclosed that she had a sexual relationship with Mr. Easterbrook (something Mr. Easterbrook denied to the board in the first investigation), presumably new investigators searched the company e-mails under the employee’s name and found e-mails that Easterbrook sent from the company e-mail to his Hotmail account. And, well, as it turns out, the photographs as well as the e-mails to which they were attached were indeed hot. Easterbrook had deleted the e-mails from his phone. However, company e-mails are backed up; it just turns out that the original crackerjack investigators, treading lightly, only investigated the e-mail misconduct but did not take the time to go through the rest of the treasure trove of Easterbrook e-mails on the company server.

The board made it all this public. Good thing. A company trying to change a culture with new leadership cannot move on unless it acknowledges the reality of what was going on with its former CEO. How demoralizing it must have been to employees who knew the truth to witness the November result. The guy who did something wrong walked away with $40 million and probably lied to get that. The irony of the past few months of moralizing statements, pledges of zero tolerance, andforces of change from new leaders must have brought some chuckles.

Now the board looks silly. McDonald’s is back to square one in changing its culture, and the lawsuit will drag this all out for months. Is it any wonder we question the wisdom, depth,and backbone of corporate boards? And one last thing for CEOs everywhere: How many times must we go through this scenario before you surrender and find something else to do? One more thing: your e-mail is discoverable, sooner or later (depending on the quality of the investigation).

Jerry Falwell, Jr.took Liberty University from a small Baptist College to a University with 46,000 students and an endowment of close to $2 billion. He showed academia how to do online instruction. He held major sway in politics, particularly in the 2016 presidential election. A powerful and charismatic leader, he sadly fell victim to the Bathsheba Syndrome. Those who rise to leadership positions through hard work and charm. But like King David, they often fall victim to their own missteps and bad judgment. They are so iconic that no one around them feels comfortable issuing a “Whoa, Nelly” once in awhile.

Mr. Falwell stepped down from his position as Liberty’s president after a photo emerged on Instagram of Mr. Falwell and a woman, both with their pants unzipped, and Mr. Falwell with his arm around her. The caption, “More vacation shots. Lots of good friends visited us on the yacht. I promise that’s just black water in my glass.” The post was taken down, and so was Mr. Falwell. He has apologized, and explained that the woman in the photo was his wife’s assistant and is pregnant and could not zip up her pants. Mr. Falwell added that he had on pants that he had not worn in awhile and he also could not zip up his pants. So, the two decided on the fun of posting their unzipped states on social media. In what world is it okay for university presidents post photos in an unzipped state?

Social media exacerbates the Bathsheba Syndrome. When bad judgment is afoot, we now have the new temptation to post. It may be a chicken-and-egg issue. Is it bad judgment, or is it just the desire to have likes and tweets? Either way, this particular incident blows the needle off the gauge for bad judgment. Rev. Franklin Graham defended Mr. Falwell, “All of us in life have done things we’ve regretted.” True enough. But there is a lesson here — let’s not post those moments on social media, especially when you are the president of a religious-based university.

Hence, his former status. Now with Oakland, this gentleman is a remarkable person. His climb to the majors included detours for a broken back and asking to go back to a Class A team so that he could be near his mother who was terminally ill with cancer. He went to the hospital in Fort Lauderdale every day to visit her. He has sunned the spotlight about his role in revealing the Astros’ signal scandal. And in a profile in the New York Times those who were interviewed used adjectives and phrases to describe him such as, caring, we applaud him, great teammate, we love him, we’re very grateful for what he did, and those were all from fellow Astros. And one more, “Good dude.” Indeed he is. For more, see Joe Drape, “Shunning the Limelight After Exposing a Scandal,” New York Times, August 7, 2020, p. B11.

On July 27, 2020, Kodak executives were awarded stock options. Since Kodak shares were trading at $2.62 per share, the grants seemed like chump change. On July 28, 2020, Kodak announced that it would receive a $765 million loan from the federal government to produce drugs at its U.S. facilities. Kodak’s stock went off the charts to a $60 high.

However, before that official announcement there were some leaks to the media about the potential loan. The Rochester, NY hometown paper had a nice quote from a Kodak spokesperson in its July 27th edition about the drug initiative saying that it “could change the course of history for Rochester and the American people.” The Wall Street Journal was all over the rumblings, not realizing how close the deal was. Now the SEC is all over the rumblings and the leakers. The Barometer bets there night also have been quite a few stock purchases at $2.62 per share in the days preceding July 28. Dave Michaels and Theo Francis, “Kodak’s Big Loan Disclosure Triggers SEC Probe,” Wall Street Journal, August 5, 2020, p. A1.

C.S. Lewis

Nancy K., a grandmother from Irvine, California, wrote into “The Ethicist” at the New York Times. She explained that she lived with her daughter and that her 15-year-old grandson confides in her more so than with his mother. The lad told grandma that he has a 16-year-old friend who gives him rides to various places despite the 16-year-old’s parents’ wishes that their son not shuttle passengers. Grandma did not want to say anything for fear of losing her grandson’s trust. But, she was worried that there could be an accident and how could she live with herself.

If there is a 16-year-old with a car, there will be an accident, the only question is how much of one. They may back into something, or they could be caught doing 75 mph in a 35-mph zone. Good judgment is years away.

Grandma made the mistake of presenting her issue as an either/or conundrum: “If I tell my daughter or the parents of the young driver, my grandson will never tell me anything. If I don’t tell, what if there is an accident? I could never forgive myself.” The Ethicist gave the advice of someone who may not have raised teens, “”I’d tell him that he shouldn’t be accepting these rides and that you’re keeping his confidence on the assumption that he’ll stop.” That oughta do it right there. Especially using the words, “keeping his confidence.”

Did it ever occur to anyone to use the bond that grandma has formed with her grandson as a tool of persuasion? Did it ever occur to anyone to to discuss the risk issues? There are some awfully scary YouTube videos that could so the trick. In fairness to The Ethicist, there was this preface to the response, “Putting Covid-19 issues aside. . . ” Right– the gravest danger of a 16-year-old and a 15-year-old riding around in a car is a virus? Did it ever occur to grandma to express her love and concern by offering to ferry the young ‘un wherever he needs to go? Did it ever occur to grandma that the parents of the driver may have insurance rates based on the fact that their son will not have passengers unless an adult is with him? Did it ever occur to grandma that the laws in many states prohibit or limit drivers under age 18 on their passenger quotas? Did it ever occur to anyone that the grandma may be overestimating her access to inside information from the teen?

In the simplest of questions, there are so many issues and alternatives that seeking a promise from a teen by employing the “I’ll tell” sword of Damocles may not be the best tool for preserving the relationship anyway. It is certainly not the best tool for shaping a young life. Perhaps, most importantly, it is not a resolution to the issue of grandma’s concern for her grandson’s safety. A teen’s promise not to do something the teen wants to do is about as valid as a teen’s promise to do something the teen does not want to do. I’d like to see the young man’s room. Ah, their promises to clean that up. Frequent, but never kept.

The Barometer offers anecdotal evidence (despite how it is much maligned in these days of COVID-19 and science). A parent told his 16-year-old son, “No passengers.” His son agreed to the bargain. Experienced parent that he was, the father surreptitiously put tiny cameras on the car. The camera picked up something interesting. Here’s how the conversation went when the son was confronted with one of the camera videos, “Dad, the only reason I had someone in my trunk . . . ” Dear reader, you figure it out from there. Trust, but verify has a role in the teen-drivers-and-passenger thing.

Wilford Brimley died at age 85. He was in “Cocoon” and other movies. He pitched oatmeal, and, let’s face it, if you are going to endorse a product, why not go with a staple? And he said of his acting career, “I never get the girl. And I never get to take my shirt off.” We are all perhaps grateful for the latter. But his non-star status is praise for his talent. In a scene in Absence of Malice, playing s a Justice Department official sent down to Miami to clean up a prosecutorial mess, he gave us seven of cinema’s finest moments. And he gifted us quite a model for how to phrase the importance of honesty in law enforcement and sack those who fall short of that standard. He stole the scene, and Paul Newman and Sally Field were in it. He gave us what our imaginations tell us should be the way Washington bureaucrats handle misconduct in their ranks.

Directors say he was stubborn, but he knew how to nail a character. He was in “The Natural,” but he was himself a natural actor. There was no Wilford Brimley on the screen; there was only the character: defined, compelling, and mesmerizing. RIP.

There’s a line you don’t want to see in an 8-K filing with the SEC, especially when it is followed by another line about a subpoena from the SEC. Mohawk Industries stands accused of some new twists and turns in accounting chicanery. Going well beyond the old channel-stuffing trick of Sunbeam, Under Armour, and many more who never learn. Send the inventory to customers no longer in business, followed by a “Who knew?” in the next quarter, or the one after that, or the one after that. . . Or just ship out defective product, knowing that customers would exercise their UCC rights of rejection, but that’s a story for the next quarter, or the one after that, or … .

No worries though. Mohawk assures that it will fight the suit vigorously. Stunning that the realization of “Once you start this stuff, as it were, you can’t stop.” Hope springs eternal when companies fall behind on earnings goals. “We can make it up later.” They never do.

Translation: Insiders helped the process along. The employees were targeted by the hackers who requested password resets. Whether done intentionally or through lack of training, the hackers found the weak link in employees. The vulnerability of companies, tech and otherwise, is at the front lines. Do leaders ever think about what can happen when front-line employees do not do their jobs, engage in a security breach, or make exceptions to policies without disclosure?

Twitter has been warned three times previously by the FTC about its vulnerability with employees resetting passwords. Perhaps some security questions would help — the kind of questions that those of us who own the account cannot remember. “What as the name of your third-grade teacher?” Some of us cannot even remember the name of our third-grade school. Some of us cannot even remember if we passed the third grade. Some of us are not sure if all of our children finished third grade. Yet, we are sent packing when we request a reset. And seemingly charming and persuasive hackers are able to work the front-line employees. Twitter is not sure if perhaps some of the employees were in on the great hack.

The Barometer always gets the warning, “Calls are recorded for monitoring and training purposes.” They must be making that up. Or they are not listening to the hackers or my calls. I get shown the exit. The hackers sail through. I cannot get into my own accounts. The hackers got into those of Joe Biden and Elon Musk. Given the name of Mr. Musk’s child, it is stunning that he did not have a better password. Manipulation of employees is not a good thing. In fact, it is a dangerous thing. this time, only tweets were at stake. Financial companies should heed the lessons.