They Never Do Just One Thing

Hacienda Health Care in Phoenix is under investigation for two reasons:

A woman who has been in the Center since she was 3 in a comatose state was sexually assaulted. Since the now 29-year-old woman cannot speak or move on her own, the assault was discovered when she gave birth to a baby boy on December 29, 2018. A frantic 9-1-1 call found the staff member admitting that no one at Hacienda knew that she was pregnant. The Phoenix Police Department is now investigating and has taken DNA samples from all male employees.

The Center is now under investigation for Medicaid Fraud. From 2009 to the present, Hacienda has received at least $6.7 million in Medicaid funding. The recently resigned CEO’s pay doubled between 2008 and 2017 — to $674,212 for 2017 in compensation.

A case against Hacienda is pending before the Arizona Appeals court because of its refusal to turn over financial records in response to a subpoena from the Arizona Health Care Cost Containment System, which began an investigation at Hacienda for what it has called “suspicious payments” between 2013-2014.

The executive Vice President of the Hacienda board has indicated that Hacienda would “accept nothing less than a full accounting of this absolutely horrifying situation.”

Perhaps the board should have stepped in earlier — in 2016, when the first questions emerged about Medicaid payments. Where there is trouble with fraud, there is trouble because no one is watching, whether it be the employees with patients or different employees with billing. These events are tragic on so many levels. The most vulnerable among us are the victims when leaders and managers are asleep at the wheel.

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The Lying Thing

Over the past few weeks, the newspapers have been delving into the subject of lying.  The Mueller investigation has resulted in criminal charges for lying to various folks (FBI, Congress, Mueller and his folks).  Books have been written about lies and lying.  The truth is, we all lie.  When someone asks, “Do I look okay?”  We often answer (in fact, if the Barometer’s data are correct — it is 87% of us), in the interest of being kind, “Of course.” Even when we do not believe our friend, family member, or co-worker does indeed “look okay.”  That type of lie, often called the white lie, is not motivated by malice or intended to deceive.  We do not speak what we truly believe because of our concern for the other’s feelings.  

Yet, we have not spoken aloud what actually went through our brain.  Therein lies the rub.  We wear down our ability to speak the truth, and we chip away at the conscience that spurs us on when we need to tell the truth.  

Sometimes we are accused of lying, but we really have forgotten the truth and just spout what we believe to be the truth.  Again, there is no malice, but what we have done is still misleading,  We will eventually be confronted with, “But you said this,” or “Hey, you told me this!” In that careless moment we have compromised trust  and set up an incident that will be long in the tooth when it comes to what others remember about us and our actions.

Rather than trot down these two difficult paths of rationalization, use alternatives.  When the Barometer seeks a spousal opinion on appearance, the spouse of 42 years responds, “Do you want the truth or do you want to feel good?”  If there is not a 42-year relationship whose terms include tolerance, humor, and heavy doses of reality, make a suggestion about appearance that causes you to believe that the person does not “look okay.”  “Let’s get that spot out.”  “Maybe we could press the jacket.”  These phrases offer some signal that sends folks back to the mirror for a more introspective and a rethinking of reality.  

Sometimes, generic advance suggestions head off the need for the “okay” appearance evaluation. For students who are headed into interview season, we sit them down and show them what will make them look okay before they are headed into the one-on-one,  If we wait until the day of their interviews, we face of choice and saying, “Lose the 15 bracelets,” or sending them into the interview with a lie and unshaken confidence because we do not want a last-minute discussion of the dangling bangles.  Topics of discussion in advance generic session include tight clothes, short skirts, shaving, footwear.  

For the second “lie” of misremembering, before spouting answers, learn some phrases to clarify your certainty, “I believe this is what happened, but let me check.”  Or, “I am not sure, but I may be able to look back through my e-mails.”  Or, “I don’t know.”  Warning:  That last one is tricky.  If you know, but you are saying “I don’t know,” then we are back into lying territory, and probably with intent.  The same with, “I don’t recall,” or “I don’t remember.”  If you truly do not recall, you have spoken the truth.  If you recall, but do not want to answer, then you have a lie. See congressional testimony of James Comes for 245 times of saying one of the following: “Don’t know,” “Don’t recall,” and “Don’t remember.”

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What Do Clients Want From Consultants?

The Barometer has done quite a bit of work with companies and organizations that are grappling with the fallout from ethical lapses. One common thread that emerges in gathering information about how these folks got into difficulty — they all had very positive reports from consultants. “Mature compliance program”. “Top tier of companies on employee engagement.” “Has all the components of a compliance program as recommended by the federal government.” Still, many of these organizations are under CIAs, despite the reassurances third-party consultants gave to them about their ethics and compliance programs.

The Barometer has concluded that management and boards commission these consultant reports to provide themselves with the cover of being able to check the dashboard measures of a good ethics and compliance program. Wells Fargo would be an illustration — off the charts in ratings on ethics and compliance. The consultants provide technical reports that provide the assurance that all is well.

While managers and boards relied on these reports, their organizations were spinning into legal and ethical difficulties, sometimes quite quickly. Julie Sweet, the CEO of Accenture, had an interview with the New York Times on her journey to and experiences as a CEO of an organization of 469,000 employees. Her closing key to success, “I don’t care what level you are, there is a need to offer straight talk when you’re working with clients. You have to have the courage to deliver tough messages. We’re living in a world where clients constantly are saying to me, ‘The most important thing you can do is to tell me what I need to hear, not what I want to hear.'” Enough said.

David Gellis, “Living as an Example of ‘Leading by Example,'” New York Times, January 6, 2019, p. BU6

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Carlos Ghosn: Oh, the Hubris!

There is little question that Carlos Ghosn, the former CEO and Chairman of the Board of Nissan, has experienced a stunning fall from iconic businessman to a jail cell in Tokyo. His arrest was based on charges of his failure to report income and the use of company funds for personal expenses.

Collecting information over the past month since his arrest, the Barometer feels the “deja vu all over again.” From Enron to WorldCom to Madoff to Musk to Kozlowski and Tyco. The pattern emerges again. Brilliant and visionary business people with ideas, drive, and stunning success. Wealth beyond even their dreams. The bizarre expenses, and then the fall, sometimes through financial collapse, sometimes through arrest, and sometimes both.

In Ghosn’s case, a recap of his lifestyle as CEO:

His compensation was 11 times that of the chairman of Toyota
Lear-jet, worldwide travel
He commissioned a sculpture for Nissan headquarters by a Lebanese artist and friend for $888,000 following his earning the moniker of “Le Cost Killer”
His second wedding was na extravagant event with Marie-Antionette costumes (oh, and the cake for eating too, lots of cake)
While driving a Porsche through he streets of Tokyo, he grazed a couple and injured them (not driving a Nissan was a bit of a problem for the Japanese)
Shareholders tried to rein in compensation, and Mr. Ghosn dismissed their arguments

More than the financials, more than management discussion, more than any financial analysis — the behavior patterns of CEOs offer the real story of where a company (and the CEO) are headed.

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One For the Books: The Businessman Who Paid the Cop is Convicted; The Cop Is Acquitted

It was a New York City corruption trial, so that may explain a great deal. However, even by New York City standards, this is one for the books. Businessman Jeremy Reichberg, AKA “the fix-it guy” expected favors from the NYPD, such as a police escort to a nail salon for a nurse he wanted to date. Then there was the transport by police boat to a barbecue. In exchange, foamier Deputy Police Inspector, James Grant, received a junket to Las Vegas from Mr. Reichberg (complete with a prostitute). Following the acquittal of Mr. Grant and the conviction of Mr. Reichberg, Mr. Grant turned to Mr. Reichburg and said, “You’re going to be okay.” One wonders if the jury saw that promise. Mr. Grant’s defense was that anything Mr. Grant did was based on “friendship.” The two grew up together in the Borough Park neighborhood, and Mr. Grant’s lawyer argued that friends ask for help and friends give help. The distinction of help coming from public funds escaped notice.

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Truth Percolates: Sometimes Through a PowerPoint Slide

Boeing was desperate for titanium — the nuts, bolts, rivets, washers, all thousands of them for its new Dreamliner aircraft (its fuel-efficient competition to the super-size Airbus). The parts had to be titanium because of the weight issues. However, in 2006, there was a worldwide shortage of titanium. For help with its supply chain issues, Boeing turned to McKinsey & Co., the gold standard for offering “best practices” to its clients. And McKinsey did come up with a proposal: Boeing would join a titanium mining partnership that would be financed by a Urkranian oligarch to mine titanium in India. The McKinsey proposal indicated that Boeing would have to do “character due diligence” on the deal because of the risks of doing business with oligarchs, especially oligarchs from the Ukraine who are close to Vladimir V. Putin. And throw in some other partners from Sri Lanka, India, and Hungary and you have warning buzzers.

In fact, a PowerPoint slide attached to the McKinsey proposal indicated that winning permits for the titanium mines would involve bribing officials of the Indian government. The slide emerged in the course of discovery that the Justice Department was doing on a case involving Dmitry Firtash, the head of the mining consortium.

Everyone denies that there was bribery, but the slide indicates that there were a number of Indian officials open to bribery. Boeing and McKinsey have both cooperated with the Justice Department.

This one smells. Funny how denials seem to be fade as PowerPoint slides emerge. That’s because :truth percolates.

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Madoff’s Former Secretary Released From Prison Early

Annette Bongiorno, 70, secretary to Bernie Madoff, was released from prison. She had been sentenced to 6 years in prison and had served about 2/3 of her term. She was eligible for early release under the new federal law, the First Step Act, which just became effective last week. Her advanced age was one factor in her eligibility for early release. At the time of her sentencing, the federal judge recommended that she spend her last year of her term at home.

During her testimony at trial, Ms. Bongiorno admitted to owning a Bentley and two Mercedes-Benzes. She also said that she had become frugal as she grew older, selling her Boca Raton home and downsizing by purchasing a condominium for $6.5 million. She had a $50 million investment account, a $300,000 salary per year, and the luxury of being shuttled to work in a car service each day. During her testimony she assured the court that the perks were not a means of keeping her quiet. She said that she never understood anything; she just typed what she was told to type.

Right there might have been a clue. Also, a secretary with three luxury vehicles might also have been a red flag. “I knew nothing” is a popular defense these days, in business and politics.

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Subway Fare Evaders: There Are More, and They Have Really Good Reasons

Fare evaders cost the New York City Metro Transit Authority $215 million this year. The number of fare evaders is up from 2017: 1.8% of riders to 3.2% for 2018. How do they do it? Use the open emergency exit door. Enter as passengers exit via this unauthorized means. About 61 people per hour do that. Vault over the gates — gymnasts do well with jumping the turnstiles. Children slip under the turnstiles. Why do they do it? The rationalizations abound:
1. “My Metro card was not working.”
2. “I don’t feel like going all the way there (one block to a machine) to put money on my card.”
3. “Sometimes it’s easier to use the door.”
4. “I’m sad that the Metro is losing money, but I’m more sad about what’s happening to black people.”
5. “They don’t fix the lights. They are not doing what they are supposed to do.”

There is the problem with enforcement. The Manhattan district attorney’s office decided to no longer prosecute fare evaders. Metro agents faced with people whose cards are not working often tell riders to just get on through the emergency exit. The emergency door exit alarms were disabled in 2014, so riders getting off the subways use that door to exit and then leave it open, a temptation for the fare evaders. The influx at the emergency door is so great that those exiting have to go back to using the normal exits — they cannot get through.

If it’s any consolation, the evaders interviewed do not feel bad about their evasion. For further consolation, evasion is worse for buses, about 16% of riders do not pay.

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Michigan State: Special Counsel Finds a Culture Problem

William Forsyth, the special counsel working with the Michigan Attorney General in investigating how Michigan State handled the sexual abuse allegations involving convicted sex offender Dr. Larry Nassar, has issued an interim report. That report concludes that there was and is a “culture” problem at Michigan State that continues as evidenced by the conduct of Michigan State during the investigation: “(1) issuing misleading public statements, (2) drowning investigators in irrelevant documents, (3) waging needless battles over pertinent documents, and (4) asserting attorney/client privilege even when it did not apply. Mr. Forsyth added, “These actions warrant extended discussion because they highlight a common thread we encountered throughout the investigation into how the University handled allegations against Nassar. Both then and now, MSU has fostered a culture of indifference toward sexual assault, motivated by its desire to protect its reputation.”

Michigan State has responded through a spokesperson noting the university has been “very cooperative,” and that it has a “right” to assert its attorney/client privilege. According to the report, university lawyers accompanied all employees to their interviews with the special counsel.

One of the problems with this investigation is that there are still criminal charges pending that the Michigan Attorney General’s Office is handling, including against the former president of the University, a former dean, and the former gymnastics coach. ‘Tis a fine ethical line to walk to have the same office conducting a public investigation as those defendants prepare for their trials. Mr. Forsyth admitted as much, noting that he could not issue a final report as long as those charges are pending. In the Penn State Sandusky case, Penn State hired a private attorney (former FBI director Louis Freeh) to conduct an investigation, thus freeing him to release a full report and conclusions apart from what are still the pending final dispositions of cases against administrators there. Michigan State did hire independent counsel to investigate the Nassar sexual abuses, however, the report was one that prepared the university for defending itself in anticipation of litigation.

While Michigan State has made process reforms on its investigation processes for allegations of sexual abuse, Mr. Forsyth is correct. The tone at the top still does not signal the critical need for transparency and truth. In short, there is a difference between legal posturing and ethical conduct. Michigan State is still in the legal Kabuki dance mode. True reform comes when the mask and fancy footwork are dropped.

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“I Read the News Today, Oh, Boy!” : A Day in the Life of Ethics — What, Me Worry?

Here are some headlines from Friday, December 21, 2018. They speak for themselves about the increasing prevalence of ethical lapses:

“Merrill Settles With Regulator,” Wall Street Journal, p. B10 (settlement of $6 million with FINRA for selling shares early in companies it was taking public (IPOs) early to family and friends)

“EU Probes Banks Over Suspected Collusion,” Wall Street Journal,” p. B10 — Yes, despite what happened with LIBOR rates in 2016, the EU has requested records from Deutsche, Credit Suisse, and Bank of America in an investigation into collusion on bond-market manipulation.

“McKinsey Had Dual Roles in GenOn,” Wall Street Journal, p. B10 –In an ongoing issue of conflicts with McKinsey’s role as a bankruptcy adviser, McKinsey failed to disclose to the bankruptcy court that its retirement fund held investments in hedge funds that were creditors of GenCo Energy. McKinsey was serving as an adviser in the GenCo bankruptcy and, ergo, had an interest in the outcome of who gets what in the distributions. McKinsey says its investment arm for its retirement fund is entirely separate and independent. However, just a question from the Barometer’s simple mind: Aren’t the folks working on the bankruptcy beneficiaries of their firm’s retirement fund? A judge screening McKinsey as a potential adviser in the Westmoreland Coal Co. bankruptcy said, “I don’t like being misled, and transparency and honesty are things I believe in.” We used to all believe in those things.

“German Magazine Says Reporter Made Up Facts,” Wall Street Journal, A7; and “German Reporter Made Up Stories and Now Critics Are ‘Popping the Corks,'” New York Times, p. B3. — Der Spiegel published the epic falsehoods of Claas Relotius, including made-up dialogues, characters, and story lines. In the U.S., it is called “fake news.” In Germany, it is Lugenpresse, or “Lying press.” In ethics, we call it just plain wrong. If you want composite characters and intense dialogue, write a novel, not stories for publication as news.

“After 2 Abuse Settlements, Why Is This Priest Still Saying Mass?” New York Times, p. A21. The Catholic Church is certainly all about forgiveness, even after paying two six-figure settlements to one accuser and the widow of another. Forgiveness is one thing; suggesting another line of work is the necessary next step.

Last one, and no day is complete without another #MeToo headline:

“Weinstein’s Request for Case Dismissal Is Rejected by Judge,” New York Times, p. A23.

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86% of Professionals Admit That Sayings Only Nice Things During a Reference Check Could Backfire

A Korn Ferry survey has some interesting insights into references and what they will and will not say. The survey concludes that “positivity” by reference checks is a problem.https://ir.kornferry.com/news-releases/news-release-details/positivity-problem-korn-ferry-survey-finds-saying-only-nice.

The survey has some other interesting data besides the overwhelming indication that references understand that saying only good stuff creates problems for their reputations and is not fair to those requesting the reference.

54% believe that it is more appropriate today to say something negative in a reference check than it was 5 years ago (the fact that many states have protection against defamation liability for negative references as long as the statements made are true may contribute to that comfort level

However, 51% will give a reference only if they can say positive things about the person.

The best part of the survey is that 97% say that they have never gotten into any difficulty by saying something negative about a job candidate to a potential employer. The respondents expressed the view that if something negative is offered in a constructive way, then it does not result in the candidate not being hired, but provides the new employer with insights into the new employee.

There you have it — the truth gives you protection against legal liability but also gives the prospective employer as heads-up.

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Johnson & Johnson: Baby Powder Campaign

Johnson & Johnson has run full-page ads in the major newspapers about talc in its baby powder.  Litigation against the company by women who used the used has resulted in claims (some of which have been successful) that asbestos fibers (asbestos is found near talc deposits, and talc is used in baby and other powders) caused their various forms of cancer.  The ads say that if there were any danger and the baby powder were unsafe, it would be off the “shelves immediately.”

J & J has carried a decades long brand reputation because of its voluntary recall of $150 million in Tylenol following the cyanide poisoning deaths caused by individual taking Tylenol capsules that had been tampered with to put cyanide in the analgesic. The company is studied as a wonder in social responsibility.

However, there is compelling internal evidence (obtained through Freedom of Information Act requests to the FDA), and there is a common thread of baby powder use by the female plaintiffs bringing the suits. The issue will float out there for some time,  but J & J offers information to counter the allegations in its ads (factsabouttalc.com.) and asks the public to decide for itself. The site is interesting, but it does minimize the findings of the studies that find a connection.  The site does discusses the internal memos uncovered through the FOIA request — documents that disclose a finding of asbestos in J & J products.  The company has explanations for the internal memo and conclusions about asbestos, but that section of the website seems to end abruptly in its discussion of the issues. 

Who knows?  Presently, the legal and PR battles continue. While we wait, perhaps cutting the use of talc powder might be a prudent and safe action. 

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That Word of the Year

There are quite a few times when the word of the year touches in the area of ethics.  For 2018, the word of the year is “justice.”  For 2017, the word of the year was “complicit.” (Oxford) and “Fake news (Webster). For 2016, “post-truth.” (Oxford) and “Surreal” (Webster).  2005 was “truthiness.” “Bushlips” was 1990 — for the lack of truth in “read my lips,  No new taxes.”

Social media terms rank right up there with ethical terms for word of the year, from “hashtag”  itself to hashtag slogans, i.e., “#blacklivesmatter.” For 2015, Oxford went with “Emoji.” “Selfie” was 2013.  “Gif” for 2012. 

The look-up rate is the driving criterion for the contest.  But, it appears that  phrases  qualify for words of the year. Not always a word, but close enough. There is a certain truthiness and post-truth in that.

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Something You Don’t See Every Day: CEO Fired Without Pay

Former CEO Les Moonves will not get any part of his $120 million in severance pay.  The reason?  The CBS board, relying on an investigative report by an external law firm, concluded that there were multiple grounds to fire Mr. Moonves for cause.  If there is cause for termination, under the severance pay clause in the Moonves contract, no severance.  Citing allegations of improper sexual relations with employees and the failure to cooperate in the internal investigation, the Board is refusing to pay anything.

Through his lawyer, Mr. Moonves denied any nonconsensual sexual relations and cited full cooperation in the internal investigation. Board members halted their support of Mr. Moonves when they said they learned of his attempts to find a job for one of the women who had accused him of sexual misconduct.  Mr. Moonves did not disclose that information to the Board. 

How rare it is for a board to stand firm when terminating executives.  The fear of litigation finds them paying out large sums despite the appearance of a termination for misconduct even as a bonus is paid. 

CBS will be sued over this one — folks in the Moonves power and wealth ranks do not go silently and leave $120 mil on the table.  However, it is worth the resources and fight to face the litigation and stand firm. 

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