The Calpers CEO and the Controversy Over Her Education

In 2016, the California Public Employees’ Retirement System (Calpers) hired Marcie Frost, the former director of the Washington Department of Labor & Industries, as its new CEO. Since the time of her appointment, Calpers is about to have it third CFO and a series of top executives have left. Calpers has 77% of what it needs to provide for future retirement benefits.

In addition, what has emerged are questions about Ms. Frost’s educational background. When she was appointed, the press release said that she was pursuing a dual degree at Evergreen State College in Olympia. However, a blog contacted the college and she was not enrolled. Ms. Frost was confronted at a staff meeting about how she had presented he educational credentials.

Ms. Frost explained that she had been honest during the interview process and disclosed that she did not have a college degree. The search firm Heidrick & Struggles had prepared a document on her background and described her as being “currently matriculated in a dual degree program” at Evergreen. That document was used as the basis for the press release on her hiring.

In fairness to Ms. Frost, she has had an amazing 30-year career, including a successful tenure as director of the Washington fund, keeping funding at 86% and standing up to the governor on combining government benefit units. She was a teen mom who worked her way up through the ranks in state government and stands on those credentials.

However, the issue is candor. Saying you have a degree when you do not is a common hiring deception. Trying to de-emphasize the lack of a degree with current enrollment is a typical cover. Being confident enough in your work experience that the lack of a degree is overcome gives candidates the chance to explain the life story — and Ms. Frost has a compelling one.
Unfortunately, with Calpers’ hiring processes now under investigation and the taint of the press release, Ms. Frost is at the center of the resulting turmoil. And all because of the use of the words “enrolled” and “matriculated.” Being a public pension beneficiary, the Barometer prefers someone sans degree who is willing to reduce the assumed rate of return to 7% and aims for 86% funding as CEO. Enrollment at this point in a successful 30-year career is largely irrelevant — the problem is whether that point was made during her interviews and clear to the board members who hired her. That goes to Ms. Frost’s ethics and may be behind the struggle she faces with turnover and staff.

Posted in News and Events | Leave a comment

Sloan Kettering Does Not Get the Whole Conflicts Thing

As described here a week ago, one of Sloan Kettering’s cancer researchers, Dr. Jose Balsega, had received compensation from pharmas that was not disclosed either to Sloan Kettering or to the editors of the journals publishing his research on the efficacy of the drugs of those pharmas. Well, Dr. Jose Balsega resigned as a result, but there are new conflicts to explore.

Sloan Kettering staff members, Dr. David Kimstra (chairman of the pathology department) and Dr. Thomas Fuchs, head of the occupational pathology lab, founded Apaige.AI. The start-up has the goal of developing algorithms that can distinguish between cancerous and benign tumors, something that they say would revolutionize cancer treatment.

As part of the arrangement, Paige.AI has been given access to Sloan Kettering’s 25 million patient tissue slides and all of the work done by its pathologists over a 25-year period. To which the pathologists responded, How come those two get to profit from all the work we have done at a nonprofit research center?

The response was that the work was so incredibly important to cancer research and access to such slides so expensive that this arrangement was the one way the AI could be developed.

The problems that emerged? For starters, the privacy of the patients. Patients have their records there for purposes of treatment and have not consented to commercial use. Another problem was the difficulty of obtaining investors. In this highly risky field, Paige.AI could not get the capital it needed. As a result, three Kettering Sloan board members became investors. On deals such as this, nonprofits must show that they did not provide assets to insiders for less than market value. However, no one bothered with an independent evaluation of the transaction, either its value or legality. There was no competitive bidding for the use of the pathology slides and work. The response of the scientists: The AI work would help everyone in cancer research and treatment and Kettering Sloan would be sharing its findings. Still, details for sales, profits, and their distribution remain a mystery. No worries though, Dr. Balsega is on the advisory board of Paige.AI and can handle deftly any conflicts issues that might arise.

As for the pathologists, they say they are not interested in compensation. What they are interested in is input into how, why, and when their work can be transferred and on the interests of patients.

Brilliant scientists still need help with conflicts — Dr. Klimstra’s response was that the only thing he cared about more than his family was running the pathology department. Ergo, in the minds of medical researchers, there is no conflict. Oh, but there is, This deal that needed non-scientific vetting, supervision, disclosure, and some legal advice. Nobody at one of the nation’s finest seemed to be able to spot the issues, conflicts, or the appearance of impropriety.

Posted in News and Events | Leave a comment

[There were] serious shortcomings in the organization of Danske Bank, where risk appetite and risk control were not in balance.”

Report commissioned by the bank and completed by a Swedish law firm that found there was money laundering that was brought to the bank’s attention in 2007. The interesting part is that it was the Russians who warned the bank about the money laundering problems. So far, 6,200 customers have been investigated, “the vast majority of which have been found to be suspicious.”

In addition to he Russians, a whistleblower in the bank reported that employees were working with customers who had been known to break the law, kind of a basic tenet in the prevention of money laundering. Also, JPMOrgan, Danske’s correspondent bank, ended its relationship with the bank because it had so many nonresident customers, yet another red flag.

Posted in News and Events | Leave a comment

Mark Cuban Pays $10 Million, Hires an Ethics and Compliance Officer, and Installs a Hotline

The Mavericks workplace must have been one wild place. Executives viewed pornography and made sexual advances to co-workers, according to a 43-page report based on an NBA investigation. The report did not implicate Mr. Cuban, but employees told investigators that it went on for so long that they felt he must have been aware. Mr. Cuban issued an apology through ESPN:”I messed up. In hindsight, it was staring me right in the face andI missed it. I wasn’t as focused on the business as I should have been.” Yes, indeed.

The hotline will help. That way employees will not have to talk with Sports Illustrated reporters about the ordeals of working in the Maverick office (which is the way the NBA investigation started after the SI. article appeared. Now they can call or talk with the ethics and compliance officer. Those basic components of an ethical infrastructure can make a difference.

Scott Cacciola, “Handling of Harassment Will Cost Cuban $10 Million,” New York Times, September 20, 2018, p. B9.

Posted in News and Events | Leave a comment

The Real Reason the CBS Board Fired Its CEO, Les Moonves

Initially, Shari Redstone, the controlling shareholder of CBS, took the position that Les Moonves, the CEO had to go. The directors were resistant and said they were willing to stay until midnight to get an agreement to stand 100% behind Mr. Moonves as he faced allegations of assault and sexual harassment.

Two weeks later, Mr. Moonves was out. The reason: One of the woman was planning to go public with her accusations and Mr. Moonves was working to find her a job at CBS in order to have her continue her silence. Mr. Moonves did not tell the board about her or his work to ensure silence. In short, he misled his board.

The board did not have to deal with allegations, denials, and proof. The duplicity of Mr. Moonves did him in.

James B. Stewart, “Revelation of Moonves’s Deceit Was Last Straw for CBS Board,” New York Times, September 13, 2018, p. A1.

Posted in News and Events | Leave a comment

Sistine Chapel Choir Leaders Face an Investigation

“Vatican prosecutors look into possible money laundering, fraud, and embezzlement.”

Now that is a headline and story no priest, minister, bishop, cardinal, or pope wants to see.

Elisabetta Povoledo, New York Times, September 15, 2018, p. A8.

The suspicion is that two choir leaders were siphoning money from concert tours into an Italian bank. The two reverends deny the allegations.

The choir was started in the sixth century by Pope Gregory the Great. The choir of 20 adult professional singers and 35 boys between ages 9 and 13 is said to have “enchanting performance[s].”

On that note .. .

Posted in News and Events | Leave a comment

The Code Violations in Tennis

Under the Grand Slam rules in tennis, coaching during the match is prohibited (ATP Code). It is a Code violation, and for the first code violation, players get a warning. Under those same rules, racket abuse is also prohibited.

i) Players shall not violently, dangerously or with anger hit, kick or throw a
racquet or other equipment within the precincts of the tournament site.
For purposes of this rule, abuse of racquets or equipment is defined as
intentionally, dangerously and violently destroying or damaging racquets
or equipment or intentionally and violently hitting the net, court, umpire’s
chair or other fixture during a match out of anger or frustration.

Racquet abuse could get a warning as well, but if it is the second code violation by a player during a match, the second violation would be a point losss.

Under the Code, Players may disagree with officials:

Responsible expressions of legitimate disagreement with ATP policies are not prohibited. However, public comments that one of the stated persons above knows, or should reasonably know, will harm the reputation or financial best interests of a tournament, player, sponsor, official or ATP are expressly covered by this section.

However, disagreement by players has its limits. For example, it is a Code violation for a player to engage in verbal abuse. Verbal abuse is defined under the code as “s statement about an official, opponent, sponsor, spectator, or other person that implies dishonesty or is derogatory, insulting, or otherwise abusive.”

For a first violation, players could receive a warning. For a second violation, players could lose a point. For a third violation in the same match, the penalty could be the loss of one game, which could mean the loss of a match.

In 2016, Carlos Ramos, a tennis umpire, issued a code violation to Andy Murray because he believed Mr. Murray had called him a “stupid umpire.” Murray responded that he had said, “Stupid umpiring,” and not “stupid umpire.” “Stupid” whether coupled with with “umpire” or “umpiring” is derogatory.

Serena Williams called Carlos Ramos a “liar” and a “thief” and also received a code violation. “Liar” and “thief” do not imply dishonesty. They are labels of dishonesty. She was given a one-game penalty, which Ms. Williams decried as unfair and an example of male players getting away with more than what she did. Actually, male players have been known to scream at refs, but they were not calling umpires “liars” and “thieves.” In fact, most penalties are assessed against men. As for the level of the penalties, it all depends on the number of the player’s violations per match. By the third code violation in the same match, an umpire could impose a warning, a one-point loss, or a one-game penalty. The application is not unfair. Sometimes cries of unfairness have resulted because of a lack of accurate information. Ms. Williams is comparing apples and oranges. Facts prove the umpire was correct and was just following the rules. New concept in this era.

Posted in News and Events | Leave a comment

The Doc With Undisclosed Conflicts

The chief medical officer at the Memorial Sloan Kettering Cancer Center in New York City, Dr. Jose Baselga, forgot to disclose the millions of dollars that he received from Roche and Bristol-Myers Squibb and others for his work on cancer therapies and break-through drugs, a requirement of the American Association for Cancer Research. In addition, the compensation and relationships with the drug companies were not disclosed in research articles published in Cancer Discovery. Also, Dr. Baselga did not make the disclosures when he served as editor-in-chief of Cancer Discovery. Charles Ornstein and Katie Thomas, “A Top Doctor Didn’t Disclose Corporate Ties,” New York Times, September 9, 2018, p. A1.

In conferences in 2017 and 2018, Dr. Baselga put positive spins on Roche-sponsored clinical trials without disclosing his Roche ties and compensation. Many physicians considered the trials to be disappointments. Dr. Baselga says that his relationships were public knowledge. And he added what all those whose conflicts are revealed: “While I have been inconsistent with disclosures and acknowledge that fact, that is a far cry from compromising my responsibilities as a physician, as a scientist and as a clinical leader.” In other words, “How could you think that I would ever compromise my integrity as a researcher?” I will give Dr. Baselga that he has more integrity on his research than any physician who has ever walked the earth. That assumption arguendo changes nothing. There was still a conflict, and the only remedies for a conflict are not doing the conduct or disclosure BEFORE the newspapers publish it. The disclosures in the case of research are for us and others so that we can evaluate the design, conduct, and conclusions of the research GIVEN the conflicts. But, we need to know that before we read and analyze, not after.

A Sloan Kettering spokeswoman said that Dr. Baselga had made all the required disclosures about his financial ties to the hospital. However, the spokeswoman also noted that it was Dr. Baselga’s responsibility to make the proper disclosures to the 17 journals in which his work has been published sans those disclosures.

The CEO of Sloan Kettering, Dr. Craig B. Thompson settled lawsuits brought by the University of Pennsylvania and an affiliated research center over a disputed allegation that he hid research conducted while he was at the University of Pennsylvania in order to start a new company on the basis of that research and not have to share the earnings.

When asked about the extensive relationships between physicians at Sloan Kettering and the drug companies, the spokeswoman noted that Sloan Kettering cannot fulfill its charitable mission without working closely with corporations.

The journals noted that they do not have the resources to check on author disclosures and that they rely on “trust and integrity.” Don’t we all? ‘Tis is a shame we simply no longer can.

Posted in News and Events | Leave a comment

Truth Percolates — In Tennis Matches

The Grand Slam prohibits coaching from the stands to players on the court. In Saturday’s women’s finals match between Naomi Osaka and Serena Williams, the chair empire, Carlos Ramos, issued a warning to Ms. Williams because he had spotted her coach, Patrick Mouratoglou, making hand gestures from the stands. Mr. Ramos believed the hand signals to be coaching, something that Mr. Mouratoglou later admitted to be true.

However, Ms. Williams saw things differently. She was upset and told Mr. Ramos, “I don’t cheat to win. I’d rather lose.” Her behavior disintegrated — racket abuse penalty (loss of a point), demands by Ms. Williams that Mr. Ramos apologize and announce that she was not being coached, then Ms. Williams calling Mr. Ramos a “thief,” which then resulted in a penalty of a lost game. Ms. Williams continued to argue with Mr. Ramos, the crowd got into booing, Ms. Osaka won, and the ceremony was tense. To her credit, Ms. Williams stepped in to stop the crowd’s booing and to offer her congratulations to Ms. Osaka.

We are all left with sad hearts. There are now cries of sexism over the penalties for Ms. Williams because, as she has argued, male players are given more latitude. However, the bottom line is that the call on coaching and an admission of its truth (a truth that emerged after the match with the coach’s self-admission) might have halted the inexorable march to anger, ruined rackets, confrontations, and a bittersweet victory for Ms. Osaka. This match was not a study in sportsmanship. This was a study in the truth percolating. When coach and player cannot keep their stories straight, the chair empire is correct in calling it as he saw it.

Posted in News and Events | Leave a comment

Recap on Elon Musk and Tesla

For those of you following the bouncing Elon, here’s a brief summary of his activities:

1. Tesla met its production goals of 5,000 S3 vehicles per week in June by adding a third production line in a tent, but has not met the 5,000 production goal since.
2. On August 7, 2018, Musk tweeted (always a good way to announce a stock-purchase plan) that he had secured funding for taking Tesla private at $420 share. The Twitter/weed subculture noted that 420 is code for marijuana.
3. The SEC announced an investigation because, well, those kinds of announcements about going private can affect markets.
4. Once the Tesla board got involved, Musk decided in mid-August there were too many problems with going public.
5. The SEC is still investigating.
6. Tesla’s chief accounting officer then resigns — suddenly, last week. He had just had his first day on August 6 and noted that “the Tesla culture proved to be a bad fit.” This kind of activity also tends to move markets.
7. Elon Musk showed up on a podcast with comedian Joe Rogan, drinking whiskey, and then smoking pot. With each assuring the other that smoking pot was “legal.”
8. Not announced yet — the Air Force will need to catch up on the marijuana — it may be legal in some states, but for security clearance, necessary for the work SpaceX does for the federal government, Mr. Musk needs to be drug-free, including marijuana. There is a notice on the security clearance form that reminds applicants for clearance that legality in the states makes absolutely no difference to the federal government. Marijuana is a no-no for federal contractors.

Erratic behavior, defiance, and a company sinking. Classic entrepreneur with a big vision who cannot do nuts-and-bolts of the day-to-day drudgery of running a business within legal and ethical boundaries. The pattern is always the same. Think Uber, American Apparel, and a host of Silicon Valley firms grappling with visionary CEOs who buck the system to develop their products and then continue bucking the system as they try to operate a business — unless they are reined in. That’s a board job, but the vision of strong directors who take charge is still missing and inaction has its effects. Tesla’s stock is down to $260 per share. The SEC has its case made.

Posted in News and Events | Leave a comment

Wells and Its Culture: A Dozen or So More Employees Fired for Violating Bank Expense Policy

There comes a point when those in charge at Wells must pause and wonder, “What’s up with this place?” As the bank trots through its rebirth (if the ads and billboards accurately reflect intentions), government sanctions, and board members ousted by the Fed, new issues keep popping up hither and yon. The hither this week was the termination of more than a dozen employees in its investment bank for altering time stamps on emailed receipts for their dinner.

The Wells policy on dinner reimbursement permits employees to order in food and be reimbursed if they are staying late to work on deals or with clients. Some employees were regularly placing orders for dinner at times earlier than the 6:30 PM time that the earliest the policy permitted for reimbursed evening meals. Those employees who altered the time stamps were terminated.

The irony is that some at Wells are questioning whether termination was too harsh. If this type of activity is not a line-crosser that is clear to employees, there is a cultural problem. That there is disagreement indicates a bigger cultural issue. If you are willing to falsify records in order to get free meals, imagine what you would do to meet your numbers and goals for your bonus. Why, you might be tempted to make up accounts or improperly charge customers for services or keep fees that should be returned to your portfolio customers. Oh, wait — employees at Wells did all those things and more, according to pending investigations.

There is something deep within the Wells culture that has not made its way to surface and has not yet been addressed. Sometimes employees do engage in behaviors such as these that make no sense given their employer’s regulatory status. However, when they do such things it generally means, as with VW:

1. The compliance function is still not operating well or is not trusted.
2. The management team gives lip service to its commitment to fly right, but lives in denial, and employees see it.
3. Employees and management believe that they just need to get through the investigations and oversight and then they can go back to the way things were.
4. Employees believe that they are doing and were doing nothing different from what other banks were and are doing.

Sometimes the root cause of a troubled ethical culture is a combination of these issues (and many others, more complex than these). Regardless, Wells needs to get at what is really going on in its culture. If at least 12 employees in your investment bank are falsifying documents, more yon events will be percolating to the surface.

Posted in News and Events | Leave a comment

“How McCain Got the Last Word Against Trump”

Headline, New York Times, top-fold, p. A1. August 30, 2018. The story beneath it describes anti-Trump symbolism in Senator McCain’s planning for his funeral.

There are some of us who, knowing that the last word rests with someone waiting beyond the surly bonds with our books of life, would prefer that our post-mortem headlines reflect character that rose above the pettiness of insults, egos, and vindictiveness:

“McCain Gracious and Inclusive to the End”

Somehow being a last-word freak is not the best legacy, particularly because its so detracts from Senator McCain’s other accomplishments.

Posted in News and Events | Leave a comment

VW Has Miles to Go, As It Were, on Ethics and Compliance

Larry D. Thompson, the federal monitor for VW, issued an interim report on VW’s progress. Mr. Thompson’s April report indicated that VW had not taken sufficient action to hold executives accountable and reform its culture. Since that report, several executives have been charged in the German courts. The continuing problem? Despite the arrests, many of the same executives are still at VW and, they are, living in denial.

Cultures cannot change when those who were in charge when the illegal conduct occurred remain in charge. ‘Tis an interesting phenomenon in organizations, post-ethical lapses. When executives remain in place, they see themselves as victims of overzealous regulators. Their view is that they just need to survive the consent decree, the deferred prosecution agreement, the sanctions, and the monitor. They can then return to business as usual. They are never the problem. They are the victims.

With this management issue, VW has a long way to go. Mr. Thompson reached the same conclusion. As one VW board member put it, going “from “shock to shame to change” is one tough slog. Yes, yes it is.

Posted in News and Events | Leave a comment

The Ad in the New York Times Recruiting Catholics

The Freedom From Religion Foundation (a group of agnostics and atheists) had a full-page ad in the New York Times today (August 28, 2018, p.A5). The title line is, “It’s Time to Consider Quitting the Catholic Church.” The remainder of the ad focuses on the recent whistleblower letter on Pope Francis’s alleged knowledge and excerpts from the Pennsylvania grand jury report on the predatory conduct of 300 priests and 1,000+ victims. A cartoon shows a priest reading a newspaper with the headline, “Pedophilia At Michigan State,” and the priest saying, “Amateurs.”

The vultures do circle when there is trouble.

These sad, similar stories of suffering in all types of organizations, from corporations to universities to churches to sports organizations to Hollywood cliques to television networks with their inactions, inadequacies, and insensitivity have been with us for too long. Have we not seen enough of a pattern to understand the patterns? Have we learned that it is the responsibility of every member, employee, coach, leader, an bystander to speak up until it stops?

Posted in News and Events | Leave a comment