The Ethical Barometer

Cook County State’s Attorney, Kim Foxx, indicated that she had recused herself from the Jussie Smollett debacle because she had communicated with outsiders (representatives for Smollett) who were concerned about Mr. Smollett’s fate. When text messages emerged that indicated her continued involvement in the case, including concerns about the number and level of charges, her office explained that when Ms. Foxx said recusal she did not mean it in the “legal” sense, she meant it in the “colloquial.”

“Colloquial” means not formal or literary. Funny, but “recused” is a legal term, not a colloquial one. Huck Finn did not have a term for “recused.” “Recusal” is used by lawyers, judges, and board members, and it means that you step out of the matter: no more participating in discussions, decisions, or voting. Period.

In the field of ethics, we would call Ms. Foxx an amoral technician. Amoral technicians find interpretations, ways to do what they want to do without technically violating the law. However, to the outside world, their conduct produces head-shaking, head-rolling, and exasperation. Colloquially speaking, it is weasel behavior.

UPDATE: April Perry, the chief ethics officer, and Mark Rotert, the chief of the Conviction Integrity Unit, for the Cook County State Attorney’s office, have submitted their resignations. Meanwhile, the Cook County Inspector General continues an investigation into the office’s sudden dismissal of all charges against Mr. Smollett.

In the Barometer’s experience, it is always a bad sign when your ethical officer resigns.

A friend of Lori Laughlin and her designer husband told ET (Entertainment Tonight, not the Spielberg character (the Barometer checked because, well, with this story being so over the top that it is hard to believe 90% of it all, so ET could well be an ace Hollywood celebrity scoop reporter)), “[Lori and her husband] claim they were under the impression they might be breaking rules, but not laws.They feel they were manipulated by those involved and are planning that as part of their defense.” Okay, so, if the Barometer has this straight, a grifter in a jogging suit with coaching connections convinced you that photoshopping your daughter’s picture on another athlete’s body and getting her admitted to USC as a crew athlete when she cannot row, row, row her boat was not a problem? What could possibly go wrong with this scheme?

Ignorance of the law is not a defense. Lack of intent is, however, a defense, and saying that you knew you were breaking rules may just provide prosecutors with that element. One never knows if the spokespersons have things straight, but if this one did: Find a new spokesperson.

One piece of additional piece of advice: When you are in a hole, stop digging.

The charges against Ms. Loughlin and her husband carry the additional issues of the money and laundering and then the tax deduction for the charity that got the funds (the grifter’s charity). The guilty pleas other parents took may not be the best option for this couple, but in criminal cases, contrition plays a role in everything from juror perception to sentences. One senses that the Hallmark nactress’s heart has not yet heard the call.

That rate is double the average free-riders in other cities and well above the 3.4% of subway riders who do not pay. Between the subway and bus free-riders, New York City loses $225 million in revenue per year. A reporter riding an NYC bus saw many riders, from a construction worker to an elderly woman with a walker bypass the fare box with the bus driver simply pressing the F5 button on the bus dashboard — F5 is for recording fare evaders.

So, not only do we know it happens, we know exactly how much is being lost. The reasons bus riders do not pay:

1. Do not have the right change.
2. They never get in trouble.
3. Constant fare increases anger them.
4. They do not want to pay for using a system that is unreliable.
5. Trying to manage children.
6. Could not get into my purse in time.
7. Cannot afford the fares.
8. Trying to get to work on time.
9. Bus drivers grow weary of confrontations and they slow them down.
10. Bus drivers are fearful — they do not know who is carrying a knife or a gun, and bus drivers have been killed or injured.

Do the riders feel guilt? Absolutely not! They hate the system.

By looking around the country and world, we can see how cities manage low evasion rates. Paris has an 11% rate, but it has 1,200 staff members on the issue and they hand out one million fines per year to evaders. London has a 1.5% evasion rate largely because the fine is $1,300 per violation. Washington DC has a 14% evader rate, but the city council recently reduced the fine for evasion for fear of harming the poor. Some experts say police officers being on the bus are a deterrent even if they never hand out a citation. Folks just behave better when the police are around.

There are the basics of economics at work here. The free-riders make it more expensive for those who do pay until the cost becomes too high, and then the bus service ends. The tragedy of the commons occurs when the free-riders destroy the commons through rationalizations and trying to artificially remedy economic disparity. if everyone pays, everyone pays less.

One guesses that successful burglars could list all the weak point in home security systems and advise accordingly. However, there is also the possibility that they might withhold some or employe false premises to convince homeowners to take or not take steps that would leave them vulnerable. You might never know.

Be that as it may, the consulting firm, without admitting any wrongdoing, that was fined for violating federal bankruptcy conflicts disclosure standards, has been asked to develop new rules that could be adopted universally by the bankruptcy courts. The problem is that McKinsey, without any admission of failure to disclose or recognition of the perceptions of a conflict its standards caused, is now drafting a the new bankruptcy court rules. McKinsey sees conflicts differently from the rest of us; its approach will be sophisticated, tolerant, and detailed. However, one can be assured that some conflicts will be able to slip through the cracks.

The Barometer could write the rule. If you are working with the trustee in a bankruptcy case, you, as a consultant, must disclose all relationships (including those of your subsidiaries, pension plans, etc.) with the debtor, the creditor, the judge, the lawyers for all of these. Relationships include contracts, investments, consulting, board memberships, joint ventures, joint sponsorships, and let your imaginations run wild for more. When in doubt, disclose. In fact, that last part is a conflicts standard many companies, board members, and government officials follow, and has served them well.

All done outside of probate, financial adviser Lawrence J. Mieras, Jr. received $500,000 from two annuities owned by his deceased client, Addie Belle Jones. The two variable annuities paid Mr. Mieras the sums outside of her probate. Not bad work if you can get it. A state investigator concluded that Mr. Mieras acted unethically and violated Maryland’s insurance law with the payments. An arbitration panel found that Mr. Mieras firm not only failed to supervise him adequately but also was not licensed properly for conducting operations in the state.

Addie Belle had left the funds to Mr. Mieras in her 2014 will, Just before she died she signed documents that permitted him to receive it independent of her estate.

Interestingly, Finra (the private financial oversight organization) took the time to take Mr. Mieras and his firm to task with words but then declined to take any disciplinary action, noting that the matters were regulatory issues to be handled by the state. However, the state disagreed with the investigator’s findings, concluding there had been no legal or regulatory violations. The investigator was then fired because his agency was “going in a different direction.”

So, to sum things up: Mr. Mieras walks away in good standing, with $500,000 in cash, and he and his firm are still operating in Maryland. The Maryland Insurance Administration stands by its decision, noting that now laws were violated.

They may be correct about the laws, but the ethical issues are another matter. Professions should be self-policing, but they are, from CPAs to lawyers to financial advisers to physicians, notoriously lacking backbone. However, it looks as if they have fallen between the Finra and Maryland Insurance Administration cracks. Taking toes right up to the line and a half a mil ends up in the hands of a widow’s financial adviser. Not exactly a positive comment on the roles and actions of financial adviser. These kinds of actions lead to the types of regulations about which the members of the profession will weep, wail, and gnash their teeth. They will groan about the heavy handed regulators when they brought on the legal and regulatory controls because they could not self-police.

As an author, the Barometer can appreciate how difficult it is to write a book, even more difficult to work for sales. However, the mayor of Baltimore, Catherine Pugh, has streamlined the whole process. Her Honor has a series of books, known as the Healthy Holly series (children’s books), that help children learn about healthy living. There are fewer words in children’s books, so that part of authorship was streamlined from the writing angle. Also, the books are self-published, leaving out that pesky step of editors, reviews, distribution, etc. No need for all that rigmarole, Her Honor also found bulk purchasers for her books. The former state senator served on a number of nonprofit boards, and the organizations would purchase large numbers of Healthy Holly books. The University of Maryland Medical System was one of of the book purchasers ($500,000 for 100,000 books), and the then-Senator Pugh went on to sponsor legislation that would have benefited the System (had it passed). In fairness to Mayor Pugh, there were 9 board members of the System that had contracts with the System. However, when Mayor Pugh took office (and let us not forget that Mayor Pugh was elected to replace the former Baltimore mayor who was convicted of embezzlement in 2010) contracts with the city were closely timed to book sales.Kaiser Permanente purchased $100,000 in books, and then received a $48 million contract from the city. Whoa, Nellie, that Baltimore/Maryland area is treacherous ethical territory.

Mayor Pugh is on an extended leave of absence (pneumonia). However, the entire city council has written to Her Honor asking that she resign because of the book deals. Mayor Pugh did issue this bizarre apology: “I sincerely want to say that I apologize that I have done something to upset the people of Baltimore. I never intended to do anything that could not stand up to scrutiny.”

The Barometer critiques apologies — this one should read, “I sincerely want to say that I apologize to the people of Baltimore for what I have done. I should have been more careful in thinking through my actions under a standard of strict scrutiny.”

Meanwhile, crime is up in Baltimore, along with police resignations, and the Feds have not yet taken a hard look at the book deals. “Extended leave of absence” may be optimistic and charitable language for the fate that awaits the mayor.

Gordon Caplan, former partner (and co-chair) at the Wilkie Farr & Gallagher law firm said in disclosing his plannedplea, “the remorse and shame that I feel is more than I can convey. I apologize not only to my family, friends, colleagues and the legal bar, but also to students everywhere who have been accepted to college through their own hard work.”

Taped phone conversations between Mr. Caplan and Rick Singer, the jogging-suited mastermind behind the national web of paid-for college admissions (and who has also entered a guilty plea), were devastating for any possible defense. Mr. Singer told Mr. Caplan, in exchange for $75,000, to have his daughter “be stupid” in a psychological evaluation in order to qualify for a learning disability that meant she could take the college entrance exam over two days at a testing center in California. Mr. Singer had a test administrator at that center on his pay roll who would then fix the test with the right answers. Mr. Singer told Mr. Caplan, “She will think that she’s really super smart, and she got lucky on a test, Does that make sense?” Mr. Caplan responded, “That does.” Well, it seemed to make sense at the time. In hindsight, it is difficult to believe that Mr. Caplan was American Lawyer’s 2018 “Dealmaker of the Year.” He missed a few loopholes on this deal for his daughter.

One nit, the Barometer has is that Mr. Caplan also said in his statements on his planned plea and apology that his daughter knew nothing about the scheme. As the Barometer reads the taped phone conversations in the criminal complaint, the then-high school junior had to participate at some level in the psychological evaluation. She may not have known about the $75,000, but she was part of using a system with testing exceptions that has left mile-wide gaps for gaming.

This is one for the book on the human mind having no limitations on creativity when it comes to desperation. Harvard is investigating its fencing coach, Peter Brand’s, sale of his home in Needham, Massachusetts to Jie Zhao, a wealthy businessman from Maryland, for over $400,000 above the home’s appraised value of $549,300. The Needham assessor described the home as vintage 1960s in “bad shape,” and that the sale for that amount made no sense.

Ah, but the assessor did not understand that shortly after the sale took place, Mr. Zhao’s youngest son (in high school at the time) was admitted to Harvard and, for a time, was on the fencing team. Mr. Zhao, not planning on relocating from Maryland to Needham, sold the house one year later, for $665,000. So, speculating here, Mr. Zhao got his son into Harvard and was able to write off a bribe paid to a coach as a capital loss.

Harvard has indicated that it does not believe the incident was related to Operation Varsity Blue, the sting operation that has nailed coaches and parents across the fruited plain. Nah, of course not.

The Barometer would like an answer to this question: How exactly do these conversations for these schemes go? “Say, coach, I am thinking of relocating to the suburb of Needham, MA. Know any good housing opportunities?” Coach, “Have I got a place for you! And I can get it for you for just $400,000 above appraised value.”

As the topper, following their fortuitous sale to the Maryland businessman with wanderlust, Coach Brand and his wife purchased a condominium for $1.3 million, just about $300,000 above the asking price. These folks were some awfully shrewd deal makers when it comes to real estate transactions.

Now, to add to the circumstantial pile of transactions, Mr. Zhao previously made a $1 million donation to the National Fencing Foundation. Who knew there was such a charity? The next year, Mr. Zhao’s oldest son was admitted to Harvard, as a fencer. When the son enrolled in Harvard, the National Fencing Foundation made a $100,000 donation to a private foundation started by Coach Brand and his wife. The donation was only one of two donations that the Brand private foundation received before it was dissolved within two years. Speculating here again. Before the Brands realized the 1960s home they were sitting on was a gold mine, they found the world of charity and all of its tax deductible/exemption glories. Oh, what a tangled web and all that.

Harvard issued a statement saying that there was a great deal it did not know about the allegations. No kidding!

An astonishing settlement by Duke University with the federal government received minimal coverage.Duke agreed to pay $112.5 million to settle claims that it knowingly submitted false data in federal grant work that brought in $200 million to the university for research. The false data, which resulted in the retraction of 17 of 38 research articles on the grant research, came to light as a result of a whistleblower, former Duke biologist, Joseph Thomas. Mr. Thomas will receive 30% of the #112.5 million, as provided under the False Claims Act and his qui tam claim. Mr. Thomas was a former lab analyst who reported the false data submitted to obtain and retain grants from the National Institutes of Health and the EPA. The false data were submitted over a seven-year period.

Erin Potts-Kant was the pulmonary researcher involved, and the Duke internal investigation into the false data issue began when she was arrested for embezzling $15,000 from Duke. Ms. Potts-Kant entered a guilty plea and has repaid the funds to Duke.

Interestingly, when Mr. Thomas raised the issue of the false data to the federal government, it declined to be involved in the suit. Mr. Thomas and his lawyers carried the suit through on their own with the Feds stepping in only at the last minute on settlement negotiations. There were over 300 motions and other court filings in the case, which began in 2013.

You better believe that universities around the country are now taking a hard look at federally funded research grants for irregularities. Duke has established a committee to develop new recommendations for research integrity and grant administration and oversight. The panel’s work is due June 30. Duke’s leadership is going about reform all wrong.

Duke might begin by looking at its culture of research. As Ms. Potts-Kant explained in her deposition, “Everyone needed a grant. Everyone needed money,” and that she falsified data “because researchers would be more happy if they could get a grant.” She also noted that the principal investigators on the research projects were “very vocal” about the pressure they felt to get and keep grants. One researcher explained in testimony before Duke’s Ad Hoc Investigation Committee, “if she (Potts-Kant) keeps brining good data, we get funded, she keeps her job, she gets a raise, everybody’s happy.”

Culture trumps integrity, ethics, and even federal regulations. Start there, not with new platitudes on research integrity.

Barbra Streisand, once a “Funny Girl” and not so “Funny Lady,” now channeling Che Guevara (see her appearance at the Oscars), does not understand apologies. Her apology regarding her bizarre remarks about Michael Jackson and the documentary, “Leaving Neverland,” were an act of moral disengagement, not remorse, “I am profoundly sorry for any pain or misunderstanding I caused by not choosing my words more carefully about Michael Jackson and his actions.”

Choosing your words carefully? Ms. Streisand said that the boys in the documentary who spoke of their molestation (something a bit more than actions) were at least not killed by what happened. Ah, escaping death is the measure for appropriate conduct. Then there was the passing judgment on the parents — their fault for allowing the kids to stay overnight. And the kids? Well, in Ms. Streisand’s mind and words, they were “thrilled” to be with them.

An apology means that you are sorry for what you said because it was wrong. You are not sorry for misunderstandings that resulted. You say you were wrong in what you said because “deep remorse” is not possible unless and until you acknowledge the errors. Saying you did not choose your words carefully does not address content.

Meanwhile, Diana Ross is tweeting her song titles to end the conversation, “STOP IN THE NAME OF LOVE.” It is not clear that halting discussion of what these men say happened to them as young boys in Mr. Jackson’s home is a resolution. The failure to review whether the criminal justice system and we as a society responded appropriately at the time awards an escape from the uncomfortable introspection we need to do. Ms. Streisand and Ms. Ross surely understand, as women who have portrayed victims of injustice, that films serve as a force of reckoning, review, and change. Denial and plugging our ears while humming tunes from the Supremes do not get at the issue of pedophilia and what we are doing or perhaps not doing to address it.

Martin Tobin, a Los Angeles finance guy, was the one who tipped off federal authorities about the Rick Singer bribes-for-admission scandal. Mr. Tobin was being questioned by federal authorities about a pump-and-dump scam. Pump-and-dump scams are the stuff of induced hype. Folks buy a stock and then pump up its values through touting the stock’s value, the company, or potential earnings, and then when they have pumped the value up sufficiently, they sell the stock and move along. Mr. Tobin admitted to authorities that he had already paid a bribe to Rudy Meredith, the head women’s soccer coach at Yale in order secure admission at Yale for one of his daughters. One of Mr. Tobin’s daughters graduated from Yale in 2015, and two other daughters are currently there, expected to graduate in 2019 and 2020.

Federal authorities asked Mr. Tobin to pretend to be interested in paying another bribe to Mr. Meredith for his last daughter, a high-school senior, in order to complete the family ties to Yale. Mr. Tobin’s meeting with Mr. Meredith in a Boston hotel room was recorded, and in the recording, Mr. Meredith allegedly agreed to designate the Tobin daughter as a soccer recruit in exchange for $450,000. In exchange for his help with the Varsity Blue operation, Mr. Tobin was not charged in that scandal, and entered a guilt plea to one count of conspiracy to commit securities fraud, and one count of securities fraud.

You never trust the people you cheat with — they will throw you under the bus.

The Barometer sees the charts in the newspapers. Charts to be filled out for March Madness, Sweet Sixteen, Elite Eight, and Final Four. The alliterations are clearly clever. Then there is the language of sportscasters: “Sky-walking with a big-time push.” Until the Barometer got the translation the assumption was that the TV had been switched to the space walk and a drive to finish the repairs.

As devoted as the fans are and as colorful as the shoes seem, there is that ethical cloud that hangs over this college sport. Yesterday’s Wall Street Journal provided the proverbial straw on the camel’s back. The players and staff are swiping the rugs from their locker rooms. Bless the NCAA’s heart, they were trying to make things “homey” for the players with area rugs here and there in the locker rooms. The NCAA has no idea with whom they are dealing.

Apart from the banished coaches, the X-rated recruiting scandals, and the bribery, there is the underlying erosion of the original noble goal of college sports scholarships: to provide the financial means to talented athletes to obtain an education. Today, colleges and universities provide future NBA players with a place to park it for a year before they turn pro. They are not in school long enough to even have to worry about grades for eligibility the following season. The academic world is now the farm club for the NBA. The problems with bribery, corruption, and hedonistic behaviors spring from the loss of the original soul and virtue of college sports programs. The NCAA is no longer running the show when it comes to ethics. Their little investigations and sanctions could not handle the level of misconduct. The Justice Department has stepped in with prison time as the punishment because the loss of post-season play or scholarships just was not doing the trick. The schools have adopted the CEO defense when fraud gallops through their organizations: “I knew nothing.” Okay, maybe an assistant coach here and there, but not the rest of us.

When it comes to playoffs and championships, we dutifully fill out the brackets and pretend for 4-5 weeks that none of the terminations, the shootings, the suspensions, and payments to parents matter. There may be corruption, but, man, can those guys play basketball. At least for a year.

The title of William “Rick” Singer’s, dynamic and now criminally indicted college counseling coach, presentation done in the financial services sector. One expert characterized Singer as someone with a seemingly “magic elixir” for parents on getting their kids into college.

The magic elixir for the affluent was affluence — you pay to get your child into school and Mr. Singer developed the method for cheating.

Why didn’t the affluent just give a building to the college? That’s the way the affluent usually get their kids into school. Saves the expense of the Singer middle man.

If you are looking for an investment, not to worry. Jeffrey Skilling is meeting with former Enron executives to form a new energy venture. He’s looking for backers. Get out your wallets!