“The culture went wrong, the governance went wrong, the board went in a very bad direction. I think winning gives some excuses for bad behavior.”

New CEO of Uber, Dara Khosrowshahi, in an interview with Andrew Ross Sorkin of the New York Times.

I should say. Here’s an astute CEO: Employees were quitting in droves, the board of directors suffered from infighting, there were five pending federal investigations(and counting)and #DeleteUber resulted in 500,000 customers deleting their accounts. Let’s not forget strained regulatory relationships, banishments from major cities, sexual harassment allegations, and one heck of a case study of what happens when pajama boys start companies. They quite nearly finish them off. All good wishes to Mr. Khosrowshahi. He is off to a good start with his candor. You can’t fix a problem (or many) unless you first acknowledge the problem(s).

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Chief of FBI’s International Terrorism Section Rolled in Charlotte, NC Westin: His Glock, $6,000 Rolex, and $60 Stolen

The police report indicates that agent Robert Manson met an exotic dancer in a hotel bar and took her back to his room when the bar closed at 2:00 AM. The Charlotte police took information for their report from other agents at 6:30 AM the next morning because Agent Manson was too “incapacitated” because of alcohol. The incident, which occurred in July 2017 and is just now coming to light, is the subject of an internal FBI investigation. That FBI runs a tight ship.

So many questions, so little space. The Barometer will leave the usual questions unsaid but must ask: How does an FBI agent afford a $6,000 Rolex?

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The “Situation” With the UCLA Basketball Players in China

UCLA officials released a statement explaining that it was “aware” of a “situation” involving UCLA basketball players in Shanghai. Coach Steve Alford announced that several players were being benched before an exhibition game in China sans explanation. Turns out that the players were benched because they are in the hoosegow on shoplifting charges. Some “situation.”

The Barometer cannot understand their need for shoplifting. All three players are freshmen. Given what some college players are raking in during recruiting, surely one of them could afford to pay.

The exhibition games in China are a means for drumming up interest among Chinese young people and their parents college education in the United States. The tuition the international students pay helps the universities and their deficits. Ah, the beckon call: Come study in the United States at a first-rate university. Learn shoplifting!

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“The confinement of the princes, said to be in the Ritz-Carlton hotel in Riyadh, could be a particularly strange experience for Prince Alwaleed, who owns stakes in a number of Four Seasons hotels.”

The New York Times on the round-up and arrests of 11 Saudi princes. “Confinement” and “Ritz-Carlton” are two terms one does not usually see in the same sentence. However, under Saudi standards, this combo means that they are getting serious about corruption.

The hotel is not taking reservations and WiFi is down. Just in case you were thinking of joining the princes in their confinement.

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The Ethicist at the New York Times: Priorities on Tattling

In the Sunday, November 5, 2017 “The Ethicist” feature of the New York Times, writer Anthony Appiah revealed a bias that afflicts society: the unwillingness to tell those in charge about bad acts or dangerous activity. A mother of a college student, who did not join a rowdy “football” fraternity, learned from her wise-beyond-his-years son that a friend of her son had been seriously injured as a result of his hazing at the football fraternity. Her son told her that his friend had asked that he tell no one about the events. The mother was writing to ask if she should let college administrators know about the injury and hazing.

The Ethicist stewed and fretted about keeping quiet, noting “there’re considerations in favor of keeping quiet.” Actually, no there are not. In this post-Weinstein, Spacey, Hoffman era of “we all knew and said nothing” even as the parade of horribles continued, this analysis is troubling. One of the basic questions of ethical analysis is to ask ourselves: Whom could my actions or, in this case, inactions be injured a result of my decision? Try a host of plebes coming in for initiation. Try thinking about the deaths of too many young men during the indignity of hazing. Try thinking of the mother of a young man, somewhere down the line, who would have to deal with the loss of a son or see her son through a permanent disability? Since when is tattling worse than these consequences? From Wells Fargo to Penn State, think of what could have been avoided if those involved had demanded that the conduct stop.

The Ethicist fretted that the injured young man could be identified as the tattletale if mom reports the fraternity. Let’s see. Was no one else present at the hazing? Did no one notice that he was injured? Did no one realize he quit the fraternity and the football team because of his injury? Such a report could come from anyone, anyone with a sense of responsibility.

The Ethicist added that the mother should discuss her need to let university administrators know with her son before making the disclosure so that her son could let his feelings be known. The Barometer would discuss it with her son first too. However, our discussion would vary slightly. Departing from the helicopter-parent syndrome, the Barometer would tell her son to talk with his friend and explain how important it is for others to be told. If the injured young man will not report his experience, then the son should report the fraternity himself. The Barometer would explain the harm that could come, the need to protect others, and offer reassurance that disclosure of bad acts is not the end of the world nor the worst thing that he could do. It’s not exactly the stuff of laying down one’s life. In fact, it can be anonymous. But, this mom needs to understand the need for inculcating the ethical value of taking the heat in order to stop bad actors and afford others the protection the son’s friend should have had. A simple, “Yo, you have hazing injuries going on over at the frat houses,” will get a rise out of any university administrator.

One more thought — Does this mother believe that no one is going to be able to pull together facts and self-identify the university from the details she has furnished to a national newspaper? Then again, maybe hazing injuries are so pervasive that the young man and his injury could be at any football fraternity across the land. Ah, all the more reason to play a small role in stopping the madness.

UPDATE: The New York Times reports this morning that a 20-year-old pledge to the Pi Kappa Phi fraternity at Florida State, Andrew Coffey, 20, majoring in civil engineering, was found dead on Friday morning (11/03). Tallahassee police believe alcohol might have been a factor in his death. Florida State has halted all chapter meetings, social events, and philanthropy of the sororities and fraternities. The rules were announced after a member of another fraternity member, at Phi Delta Theta, was arrested for cocaine trafficking. Just keep debating whether to tell.

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The Bathsheba Syndrome, Jeffrey Immelt, and Why GE Is In Trouble

By now, the story of Jeffrey Immelt, former GE CEO, traveling with, not one, but two corporate jets so that he always had back-up has made the rounds. The Board is outraged and sent out an explanation befitting of a coach for the 5-year-olds’ soccer team in their end-of-the-year ‘Everyone gets a trophy because everyone is a winner” celebration. The GE spokeswoman lauded Mr. Immelt’s 30 years of “dedicated service.” Worse was Mr. Immelt’s letter in which he explained the need for the second jet because he worked “100-hour weeks with more than 60 percent of my time of the road.” He also added that “GE had a difficult time keeping its planes flying.” The Barometer will keep that warm and fuzzy thought the next time she boards a jet with GE engines, which will be the next flight because GE supplies engines to all the airlines! The Barometer has not seen a chase plane at-the-ready for us in coach.

However, what is missing from the justifications, explanations, excuses, and platitudes is why internal audit missed the practice or said nothing about it. No one in corporate travel said a word until there was a change in the HR VP spot (the officer in charge of corporate travel). The head of HR and general counsel questioned the use of the second plane. So, they did what all bureaucratic messes do — they formed a committee and came up with the brave recommendation to stop the stupid chase plane. The recommendation or order or whatever it was, was ignored. Then came the whistleblower report. Neither VPs, nor corporate committees, nor boards, nor rain, nor sleet nor dark of night can stop a whistleblower. So, the new CEO stopped all private jets, is selling the fleet, and everyone will use commercial flights. Remember, they have GE engines!

GE is investigating so that we on the outside, including investors, can fill in the gaps beyond the “dog ate my homework” justifications being tossed about. GE might have a look at the Bathsheba Syndrome. The name comes from the story of David and…., perhaps the raciest story in the Bible. When the king gets too comfy, hanging around the palace, not fighting battles any longer, and taking advice from no one, you get adultery, a child on the way, the death of Uriah, or, in this case, a chase plane for the CEO’s private jet. There were a few in the palace who saw that something was awry, but no one listened because of an apparent fear of King Jeffrey. He might be doing something stupid and harmful, but he is, after all, the king.

If employees and leaders were willing to let this one slide, imagine all the strategic, production, marketing, and other cost issues they let go unaddressed for fear of the king. The corporate chase jet and the failure of anyone to stop it is symbolic. The events reflect a fearful culture at GE. With no resistance, Immelt took GE down a path of near self-destruction. Imagine, one of the good-to-great, great-to-excellent, built-to-last, Six-Sigma companies that everyone once studied going down in flames. Oh, the symbolism in that sentence. We continue to study GE now, but for a different reason. How is it possible for such a company to destroy itself? The Bathsheba Syndrome was no doubt a big part of it. And the chase plane events tell us it was in play.

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What Drives Behavior That Results in Indictments

The Barometer was reviewing the recent grand jury indictment of Paul Manafort, President Trump’s campaign manager for about 6 weeks in the summer of 2016. Mr. Manafort is facing money-laundering charges, so the indictment lays out wire transfers that were used to pay for a condominium in Soho in Manhattan and a brownstone in Brooklyn ($3,000,000), among so many other expenditures: A home entertainment company received $1,319,281.00. Antique rug store: $934,350. Men’s Clothing Store (Bijan):$849,215. Landscaper for the home in the Hamptons: $655,500. Priceless, eh?

The behavior patterns of those charged with white-collar crimes are the same. One pattern is levels of spending that would make a drunken yuppie blush. Dennis Kozlowski spent five figures on an umbrella stand for his Manhattan digs. The fellas at Enron went for the Maserati types of vehicles. The multiple homes. The Hermes ties. Whatever they buy, it is never enough. One more home. One more car. Another $5,000 suit. The insatiable appetite for stuff impairs judgment. They cross lines to keep the income stream flowing at the same gallons per minute.

Whether Mr. Manafort is guilty remains to be seen. But, his spending is a head-turner for all of us. A reminder that it is never enough, but we are ensnared by the desire to find out if we can reach the “Enough!” point. Sadly, that point comes too often when bail is set at $10,000,000.

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Update on Basketball Bribery

The Barometer checked in on the four assistant coaches in the FBI case of the alleged bribery scheme involving Adidas and payments for basketball recruits saying “Yes!” to their schools. University of Arizona assistant basketball coach, Emanuel “Book” Richardson entered a not guilty plea and was released on a $50,000 bond. Prosecutors originally requested $100,000 but Book’s lawyer, Brick Storts, persuaded the court that the amount of $100,000 was “totally unreasonable.” Dear reader, lest you think the Barometer dosed off in typing this paragraph, we do indeed have a defendant named Book being represented by a lawyer named Brick Storts. These names have made the spell checker give up, and this case just keeps getting better. Storts declined to reveal who was paying him (his brothers Clay and Lumber also refused to comment) but did offer that it was not the University of Arizona.

USC’s Tony Bland has hired the New York attorney who defended John Gotti Jr. and drug kingpin Joaquin “El Chapo” Guzman. The U.S. Attorney who brought the charges said that he was exposing the “dark underbelly of college basketball,” and he was apparently not kidding.

The University of Arizona said it was “appalled” at the charges and suspended Book. USC suspended Bland and said that it was “shocked.” Auburn University suspended assistant coach Chuck Person Auburn who was also charged, adding that it was “saddened, angry, and disappointed.” Oklahoma State said it was “surprised” and suspended assistant coach Lamont Evans, also charged. The NCAA found the charges to be “deeply disturbing.” The U.S. Attorney said that the men circled “blue-chip prospects like coyotes.” Former University of Louisville head coach Rick Pitino said the charges that Adidas had paid one of his recruits came as a “complete shock.” He was not charged in the indictment, but he was fired by the university, whose feelings at this point remain unknown. The Barometer expects that they too are shocked, surprised, appalled, saddened, angry, disappointed, and deeply disturbed.

The FBI was tipped off by a financial adviser from Pittsburgh who caught the FBI’s attention for embezzlement from his professional athlete clients. In exchange for the FBI telling his sentencing judge about his cooperation on the NCAA matters, Louis Martin Blazer served as the FNI’s cooperating witness on the basketball bribery investigation. The U.S. Attorney added that the investigation is ongoing and issued a warning to coaches who may be involved in such skullduggery, “We have your playbook.”

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Per The Yale Parenting Center: Don’t Punish Your Kids for Lying

Alan Kazdin, the director of the Yale Parenting Center, offers this advice, “The most common reactions to children who lie are explaining why it is wrong and punishment. As ways of changing behavior, these are ineffective.” The better way? Ask your child to tell you something that is true, and then say, “That was great! You told me what happened just like I asked. Wow!” Be sure, according to the Yale Center, to follow up with a hug or high five.

Here’s the problem the Barometer sees right out of the blocks: If you don’t punish your child for lying, how exactly would you know when he/she is telling the truth? The absence of punishment is license. The presence of license is more lying.

The Yale Center is correct about one thing — children lie if they see their parents do it. Let children see you in action when the stakes are high and you too tell the truth and try to avoid the following:

1. Lying to relatives to tell them you will not be at home to avoid a visit.
2. Saying you are sick to get out of work, parties, meetings.
3. Telling someone they look okay and then later saying (in front of the child), “Wow! Did you see him? He looked like a zombie!”
4. Not taking items back to the store when you did not pay for them (we assume it was an oversight, but even for intentional theft — probably a good idea to take it back and pay).
5. Speeding and then telling the police officer who pulls you over that you were not.
6. Saying that your child is under 5 in order to get them in free at the buffet.
7. Taking deductions on your taxes when you know they are not truly deductions and then bragging about it at home.
8. Not disclosing defects in items at your garage sales.
9. Claiming the better pair of sunglasses from the lost and found at Disney World. This was after lying about your kids’ ages to get them cheaper tickets into the park.
10. Changing the date tags on bread bags in order to sell the older bread without a discount.

All real. All confessed to the Barometer. Oh, and the list goes on. And we wonder why our children lie.

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Wells Fargo: The Gang That Can’t Shoot Straight

Let’s recap the problems at Wells: The fake accounts debacle, the fake auto loan insurance mandates, the mortgage changes without authorization (fake again), and the sacking of four foreign-exchange bankers along with the transfer of an executive from that area of operations. Now add a new development. The Comptroller of the Currency has issued a confidential report on Wells Fargo, which, naturally, was leaked to the New York Times. The report discusses the failure of the bank to respond to consumer complaints about the issues listed in the recap. Also, the report concludes that Wells failed to supervise what its contractors (i.e., insurance companies benefiting from the Wells mandate) were doing. Wow — the hits keep on coming at this bank.

The report does praise the bank’s hiring of consultants and launching of investigations. The question the gaggles of specialists are not answering is obvious except to anyone at Wells or the Office of the Comptroller: What is it about the culture of Wells that causes this type of conduct? The conduct is not isolated to the consumer division now. Until Wells gets at that question, the clean-up will continue. Clean-up does not solve culture problems. Clean-up is checklist. Clean -up is full-page ads pledging to do better. Clean-up is spending money. Clean-up is an expensive process for the privilege of moving on, but it is not a solution to the cultural problems that fueled all of the list. The Comptroller is praising clean-up. Think about this: In the midst if trying to clean up one of the most embarrassing and blatant abuses of customer trust, Wells had ongoing behaviors among employees in various divisions to whom it did not register that something was awry with their conduct, i.e., fake stuff. Causation here is deep in a culture that needs some work.

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Post-Pitino Scandal: Sports Illustrated Writer Wants to Lower the NBA Minimum Age

The Barometer always enjoys it when the experts offer their solutions, post-scandal. To fix the too-big-to-fail problem, we passed legislation that has resulted in even bigger banks. To punish auditors for their complicity in Enron, WorldCom, etc., we doubled down on audit requirements, for the financials AND a separate auditor for internal controls. The result was, of course, even more work for auditors, the very folks we determined messed things up in the first place.

Now comes a Sports Illustrated writer with a way to prevent basketball’s black market (shoe companies now alleged to have funneled cash to recruits’ families): Let agents sign and recruit high school seniors. Brilliant! That will stop the payments, eh?

The premise of Jeremy Woo’s argument (“The Case for Lowering the NBA Minimum Wage”) is the “failure to pay . . . student-athletes what they are worth.” Sports illustrated, October 18, 2017, p. 24. Let’s think about that for just a minute. There was a time when we understood that a free ride for a degree was a pretty good deal. Ask any of the graduates struggling to repay what they borrowed for an education and you would get an earful on what a degree is worth. Then take a look at the stats on the lifetime earnings of college graduate vs. high school graduate, earnings that are not at risk of an ACL injury.

Then, let’s think about the wisdom of signing an 18-year-old to a multi-million contract. Thomas Sowell once said that he was grateful that he had no real financial success until he was 50 because he had the wisdom to understand what to do with the money and the humility to accept it without pride or flash. Surely the adults can see the ethical obligation to offer some guardrails from the follies of youth and some advice on education and skills that are not subject to the high risks of a sport and the treachery of too much cash too quickly. Ironically, the FBI has had to step in as the adult because of the failures of coaches, colleges and universities, and the shoe folks to play by the rules already in place.

College basketball issues are not the result of too little cash. They are the result of misplaced values. The adults used to know that, including the parents of the players.

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The Ignored Warning

Equifax did not fix known problems with the shared security software it was using. Those problems were known in March. However, no one on the Equifax board or management team seemed concerned about index provider MSCI cautioning that Equifax was not prepared for “increasing frequency and sophistication of data breaches.” That caution was published in August 2016. MSCI removed Equifax from its index, citing the high risk factor of the lack of security. The list of items MSCI found as flags:

-no regular cyber security audits
-no employee training to recognize risks
-no emergency plans for handling a breach

Those are the kinds of findings, as well as a score of zero by MSCI, that should have motivated the board to action. Or the CEO, or the CIO. Someone, anyone. Or, perhaps at least refute the claims. Equifax continued on its merry, albeit risky way.
Sometimes these indexes, with which many find fault, have a point. They are worth looking at for their sheer detail.

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The Inspector General and the Cabinet Flights: The Honeymoon Issue

Treasury Secretary Steven Mnuchin has used military flights for private air travel to the tune of $800,000. One flight was a $15,000 trip to visit with Mr. Trump at Trump Tower in New York City. There was one additional flight that was requested, but later withdrawn — a flight for Mr. Mnuchin’s European honeymoon. That honeymoon started the whole investigation into Mr. Mnuchin’s because of his new wife’s post on Instagram about their dream trip.

The Inspector General for Treasury concluded that the remaining trips were properly approved through the processes then in place. However, the IG questioned the proof that was required for justifying the private flights. The IG’s advice is that there be more proof, more rigor, and more oversight. The Trump administration has already changed the process for approval of private flights — the request must go through the White House Chief of Staff (presently General John F.Kelly). Nothing like a military man screening impositions on the military by billionaires.

As in so many situations such as this in which there are questions of abuse government resources, the question is framed as, “How bad is one or eight flights?” Rather, the question should be, “Am I a good steward of the resources of the people of the United States?” If you frame the question as a steward you would get to New York City via shuttle or AmTrak, not via a $15,000 flight. Standards of proof for approval vs. standards.

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“Equifax Board Weighs Clawbacks.”

Wall Street Journal, Sept. 30- Oct. 1, 2017, p. B3. Whoa, hold on there boys and girls on the board. Don’t get crazy on us! You would not want to rush into some kind of sanction for officers on watch when a credit reporting agency experienced the biggest security breach since Yahoo’s 1-billion-customer hack (now updated to 3 billion). Generally, when we peons are asleep at the wheel at work, it costs us. When we make mistakes, we pay. Debate away on those clawbacks. That kind of hesitancy in the name of deliberation and parameters is what will cost you in the battle to rebuild trust. Swift and definitive action builds trust. Now that your CEO is no longer your chairman, you have a fighting chance at independence.

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