The Ethical Barometer

Following a seminar, a participant approached the Barometer with an interesting story. He noted that his niece had posted photos of her new apartment and boasted in the not-so-private Facebook that she was finally “on her own” and completely “independent.” However, the gentleman also noted that his sister was still paying for her daughter’s cell phone, car, insurance, and, well, a host of other expenses that apparently do not count when a millennial makes the claim of “on my own” and/or independent.

Today, Forbes announced that Kylie Jenner is the youngest self-made billionaire ever. Hmmmmm! Granted, Ms. Jenner has had a career and lip gloss sales and such, but she did so with a little help from her friends, step=family, and family. The Kardashian connection, which all began when her mother, Kris Jenner’s, nee Kris Kardashian, first husband, Bob Karhashian, was a third- or fourth-chair on the defense team in the OJ Simpson murder trial. Kylie’s father, Kris Kardashian’s second husband, Caitlyn Jenner, nee Olympian Bruce Jenner, may have brought his daughter just a bit of attention. And the Kardashians and all their Kanyes might also have brought a bit of attention to their step-sister. Whirling dervishes of family drama no doubt dredge up a little attention to a make-up line in the self-made path to 21-year-old billionaire. Gates, Bezos, Zuckerberg, and all the Chap Seat, Gram-o-rama, and Pay-Day moguls mist be grinding their capped teeth. If only they had had a reality show.

A quote from Wells Fargo internal blog on the bank’s incentives and Pau and ethics. One employee, and a union activist said in an interview with the New York Times, “There’s a sense among the workers that most of the reforms the bank has made are very superficial and only being done for PR reasons.”

As the Barometer has noted in these pages, the nationwide ads the bank has placed focused initially on social responsibility issues. Can’t fix the internal issues with external programs. The latest ads have turned to “real change” and “innovation,” and, of course, a new logo. Innovation and a new logo do not a real change make. Were I at Wells, I would start with the frontline employees, the internal blog, and chip away at the issues they are raising. The very best information about culture is in the culture itself, those who are working with customers and their compensation and evaluation systems. The top-down changes should be reversed. Bottom-up change is best because bottom-up change is real.

It was a long and winding road through a mistrial, but former Nassau County executive, Edward Mangano and Linda, his wife, were convicted on corruption charges in the New York county. The charges involved the following actions:

Gifts to Mr. Mangano that included a $7,300 watch, vacations, and a $3,000+ massage chair
A no-show “food taster” job at a restaurant that paid $100,000 per year

The gifts were made by a business man, Harendra Singh, in exchange for Mr. Mangano steering loans, repayments, and beneficial programs to Mr. Singh and his businesses. Mr. Singh turned state’s evidence and was the key witness at both trials. You never trust the people you cheat with for they will throw you under the bus.

After reading the the resolution passed by the House of Representatives, the Barometer felt duly chastised. However, the Barometer and hundreds of millions of other Americans did nothing wrong. So, in response to the House of Representatives:

Whereas, hundreds of millions of us live our lives daily trying our darnedest to live a single admonition: Love one another.

Whereas, hundreds of millions of us admonish those around us when their words or actions are cruel to others and apologize sincerely when we have been cruel and, as part of repentance and forgiveness, seek to do better.

Whereas, hundreds of millions of us reach out to those who have been harmed by cruel words or actions with expressions of concern and love and offers to make things right.

Whereas, hundreds of millions of us long for elected officials to live by these simple rules and learn to love, admit, apologize, admonish, and heal (and preferably without the need for a week of debate and a 1300-word lecture).Also, when exercising righteous indignation, it is always helpful to actually note the impetus for the need for correction – i.e., a passing mention for what got your justifiable outrage rolling, not a litany of harms committed by everyone but the impetus, whereas).

You look at what computers can do, and the property looks fabulous. A wall is removed. The color of the trim around doors is changed. The kitchen cabinets are a different color. And, of course, the furniture is much better looking than what the owners modestly put in there. And digitally, the photos have all the household clutter removed. Instant model home, and all without a stitch of work by Chip and Joanna.

However, it is not real. The Wall Street Journal reports that those virtual listing photos may be misleading. May be? The photos show a contrast between what is an empty home and one loaded with furniture. One that is a haven for clutter to a slick, smooth, clean kitchen without so much as a coffee maker on the cupboard.

A word to the wise: See the property in person before committing. Virtual reality is a tad different from the house being listed. You need to see the virtual and the real.

Former Adidas executive, Jim Gatto, was sentenced to 9 months in prison, following his convictions on wire fraud and conspiracy. Sentenced to six months for their role in the basketball scheme to sign players to schools that Adidas sponsored were Merl Code (former Adidas consultant) and Christian Dawkins (an aspiring sports agent).

The scheme that the three concocted was to funnel cash from Adidas to the parents of talented basketball players in order to get them to choose Adidas-sponsored schools. The father of one of the players testified in the case about the tens of thousands he was promised if his son signed at the University of Louisville. The father also testified that his son knew nothing about the payments. Nonetheless, his son was banned from MCAA sports, the NBA did not want to go anywhere near the scandal, and his son now plays overseas. Somehow the adults did not act in the best interests of the young people.

Shakespeare viewed Richard III as a “poisonous hunchback’s toad.” A disfigured sociopath. However, in 2012, researchers uncovered a skeleton in an unmarked grave under a parking lot. The mitochondrial DNA was matched with the DNA of Richard’s maternal relatives.

What the researchers then learned from the skeleton revealed a king who had scoliosis, but not to a degree that a “bespoke suit of medieval armor” couldn’t straighten around. The foam hunchback worn by so many actors in playing Shakespeare’s view was probably overdone. The rumors of Richard’s deformity were probably the result of the Tudors seeking to place Henry VII on the throne. Power grabs then and power grabs now do spawn their share of untruths.

The skeleton, as described in Brian Switek’s book, Skeleton Keys did, however, show the brutal fashion in which Richard was killed in the Battle of Bosworth Field. A group of well armed Welshmen, who surrounded a marooned Richard stuck in the mud on his horse, used all manner of daggers, halberds, and swords in all the thinkable and unthinkable places in Richard’s body. Mr. Switek summed up Richard’s death as follows, “We are a cruel species, and the marks of our depravity are etched into Richard’s bones.” However, there was a long list of Richard’s victims whose skeletons reveal equal cruelty.

It make have taken 529 years, but DNA hatched the truth about Richard’s deformity. We also see both sides now. Richard was a sociopath, but the other side had its share of brutal murderers. By these behavioral standards, today’s British royalty fussing over Meghan Markle’s views, arguments, staff issues, and demands seem charming.

Jacob Wohl, a 21-year-old hatcher of online rumors, tales, etc. such as Ruth Bader Ginsberg being secretly held in a vegetative state. Except that Justice Ginsberg was just seen walking through Reagan National Airport. There is truth, and it is absolute. That we start an unverified rumor does not mean the concept of truth has changed. It just means that some information posted on the Internet is not verified as truth before it goes around the world 7 times. Posting falsehoods on the Internet does not make them true. Rapid transit of falsehoods does not make them true. The failure to withdraw a falsehood following incontrovertible
proof that it is a falsehood does not make it true. At age 21, confusion is possible, but ancient logic and reasoning trump new theories about truth. The truth may take a non-linear path to emerge, but there remains just one truth. And that is actually the way it works.

The bankruptcy of Enron (2001) was nearly two decades ago. Jeffrey Skilling, the McKinsey-alum-Harvard-MBA- former CFO, was released from prison after 12 long years. He was convicted of fraud, conspiracy, and insider trading. The last one means that he was selling off his stock even as he knew of the company’s imminent collapse.

One of the ironies of it all, as reported in today’s Wall Street Journal, is that many of the hard assets of Enron that were sold off as part of its liquidation have really produced, literally and figuratively. Enron’s drilling and exploration company was a pioneer in the technology for fracking — the use of those assets spawned EOG Resources. One of the officers who wisely got out of Enron before the fraud started, Richard Kinder, founded Kinder Morgan,now a company with a network of pipelines across most of the West. GE bought Enron’s wind-power assets and this strategic buy appears to one of the few things GE touched that did not fail.

All of this success of Enron’s lost talent and sold assets highlights a root cause of Enron’s collapse. If the company had stuck to what it and its founder, Ken Lay (now deceased), knew best, it would have been an energy giant today. It was the foray into derivatives and off-the-book entities and just generally mumbo-jumbo finance wizardry that brought about the company’s collapse. Unnecessary risk, wheeling and dealing, investments in and sales of barges, and a host of other highfalutin financial tricks of the trade were self-destructive. Enron execs were shooting for the status of #1 in the world. They should have stuck with the more modest and achievable and sustainable goal of #1 in energy. Of all the words of tongue and pen, the saddest are these, “It might have been.” Here’s to a wiser and prudent life to Mr. Skilling now that he has paid his debt to society.

Sheriff William D. Snyder, in charge of the joint FBI/Martin County, Florida task force investigating massage spas in Florida for human trafficking. The investigation became public when New England Patriots owner and billionaire, Robert Kraft, and former Citigroup president, John Havens, were caught in a sting operation and arrested for illegal activity in the Orchids of Asia spa on Jupiter Island.

The investigation revealed that the women working there (mostly from China) had been brought to the United States by traffickers under the guise of employment and were working off their debt or working in exchange for protecting family members being threatened at home. These young women are moved from spa to spa throughout four Florida counties so that building cases for prosecution becomes difficult. Some of the young women are runaways and some are foster children. They sleep on massage tables and prepare their meals on hot plates. Their passports have been confiscated so that they have nowhere to go or even identification to get them anything or anywhere.

The tales are far more lurid, but Sheriff Snyder is right — if there were no market for their services. . .

Messrs. Kraft and Havens have proclaimed their innocence. Well, they have said that they did nothing illegal. Ah, but the ethical questions remain. The ethical mind determines the effect of one’s actions on others before acting. Look what frequent flyers have wrought on these women. The ethical mind also answers this question: What would the world look like if everyone behaved as I do? The world would apparently look like four counties in Florida, with a massage spa in every strip mall from Miami to West Palm Beach. That is one scenic landscape.

Just these two simple questions could have helped these titans of business find other “hobbies,” or perhaps just more meaningful use of their time. There comes a time, and it should have been reached long before ages 77 and 62, respectively for Kraft and Havens, when the frat house hormones are brought in check. Once we get the seniors under control, we can proceed to the newsrooms, the television shows, Virginia, and Congress if the age restrictions have not cast a wide enough net in reining in bizarre escapades at the expense of others.

For over a decade, Deutsche Bank hid a $1.6 billion loss it racked up in 2008 on some municipal bonds it purchased in the wild markets that led to the 2008 market collapse. The loss was first reported on February 20, 2018.

Even more stunning than the lost decade was that the bank was able to convince the bank’s auditors that the value at which is was carrying the bonds was market value. It gradually acknowledged losses incrementally until its full position was finally liquidated after 9 years. The bonds were shuttled off to what the bank called its “noncore operations unit.” Internally, the process for this operation was “Project Marla.” Here’s a safety tip: If you have to refer to what you are doing as a project with a goofy name, you may have crossed a few ethical lines. See FBI efforts to investigate a presidential candidate and then a president as “Crossfire Hurricane.” Regardless of political views, the FBI seeking to remove a president through wiretaps and tries smacks of something a little above their pay grades.

All during this period, the bank was raising capital without disclosure of the valuation issues. Upon liquidation, the bank, its audit committee, and auditors debated whether it should restate its financials for those 9 years. Somehow they all agreed,”Let’s just move along without doing all of that.” They labeled it all “inline with accounting standards.”

Think of how many people at the bank were aware of this activity, and yet, for over 9 years, no one said a word. Now that’s a culture problem.

As the Barometer noted some months ago, McKinsey & Company, the management consulting firm, was under fire for its failure to disclose conflicts of interest in bankruptcy cases. The issue was McKinsey providing counsel and advice on distinction of estates and payment of creditors even as its retirement fund for its employees held positions in the debtors. Bankruptcy rules require disclosure of conflicts of interest, but McKinsey did not make the disclosures in the bankruptcies of Alpha Natural Resources, Westmoreland Coal, and SunEdison. McKinsey had maintained that it did not have conflicts because it was a different entity from its retirement fund.

The Justice Department’s United States Trustee Program, which oversees the U.S.Bankruptcy Court System, begged to differ and did so through a mediation process. The outcome is that McKinsey has agreed to pay $15 million distributed as follows: $5 million each to Alpha, Westmoreland, and SunEdison to be distributed to their creditors. Interestingly, the settlement also had to provide that McKinsey could not accept any repayments from the $15 million as creditors. In other words, the conflict prohibited McKinsey from accepting its own settlement money. There may be other cases that could result in settlements.

McKinsey admitted nothing but is grateful for the “clarification” it received during the process. And, as usual, it will “move forward and focus on serving its clients.” Translations: “Minimize, deflect, and tout goodness.” And this simple rule: You have to disclose conflicts between your role in bankruptcy reorgs and liquidations that involve, directly or indirectly, your company in any way, even your retirement plan.

There was an interesting characterization of the case by the Justice Department as “one of the highest repayments made by a bankruptcy professional for alleged noncompliance with disclosure rules.” There was also a warning from the Justice Department, “If this conduct is repeated in future cases, we will seek even more far-reaching remedies.”

A Deseret News study finds that millennials have the greatest trust in the military and colleges and universities. Those are the only two categories that garner a majority of millennials in trust. Oddly, their third highest level of trust is in professional sports and their fourth in organized labor.

Their lowest trust level? Corporate America. One wonders if they understand that professional sports are corporate America. The next lowest trust levels are in governors, news media, the federal government, and organized religion. Banks, the criminal justice system, Silicon Valley, and mayors (?) do not get to even 30% trust levels.

If we just did a gate tally on the categories of post on this blog, the shaker-and-mover generation might realize that their trust metrics may be a little off. That they trust mistakenly may be a function of perception based on incomplete information.

They are only 1.5% of the total number of scams reported to the Federal Trade Commission (FTC), but the amount lost is $143 million. “They, all 21,000 in 2018 alone,” are the reports that come in to the government agency that handles consumer fraud from the poor souls who have been scammed via an online dating relationship.

The plot is the same — the fraudsters build a relationship online with their targets. They do take their time, building up trust along the way. Then, they spring. There is a medical emergency, the loss of a job, something tragic that hits the con man/woman hard. Next thing you know, they are on the receiving end of cash from their online lovers. The money gets deposited into an account set up with fake ID. The things we do for love.

The FTC has some simple suggestions: Never give money or property to anyone you have not met in person. No wiring money. Try to verify information that they give to you online, including searching to see if the photo they use shows up in other places online.

Oh, the chutzpah of those who tug on the heart strings of the lonely. Love is blind, knows no caution, dismisses logic and reason, and those volatile combinations allow fraud to thrive on the Internet.