The Ethical Barometer

In many cases, administrators receive bonuses. At some universities the entire MBA staff benefits if the rankings for their programs improved. The pressure is perhaps greater than that experienced by CFOs on earnings results. Temple University submitted data to U.S. News and World Report that was not accurate for four consecutive years. As a result, the MBA online program at Temple was ranked the #1 online program in the United States for 2014-2018.

According to a settlement agreement with the U.S. Department of Education, Temple submitted false information in the following categories:

(1) the number of Fox School entrants providing GMAT scores as part of the application process,

(2) the mean undergraduate GPAs of students admitted to certain programs offered by the Fox School,

(3) the number of offers of admission extended by the Fox School to applicants,

(4) the debt levels of Fox School students who borrowed loans to pay tuition, and

(5) the ratio of full-time technology support personnel to supported faculty members at the Fox School.

Without admitting any wrongdoing, Temple agreed to pay a $700,000 fine. Temple had already settled a lawsuit brought by current and former business students over the false data for $5.5 million. A report by the law firm of Jones Day that was commissioned by the University found that there were similar data reporting issues in six other university programs.

Temple administrators said that they had taken steps to ensure data verification prior to its submission for external use. Temple now has a data-verification unit. Temple also settled a suit brought by the Pennsylvania Attorney General, a settlement that also required certain internal changes to ensure data accuracy.

The dean at the time of the data falsification was terminated, but he has filed suit against the university for defamation. He has advanced an “under the bus” defense, calling himself a “scapegoat” for the university.

Oh, what a tangled web. Oh, what times are these when universities cannot be trusted to submit accurate data. Now if they could only do the same thing with faculty research.

New York City has a long list of problems, to which we can now add overtime pay fraud. Yes, five MTA employees were putting in for overtime, when, in one case, for example, they were actually bowling (Average score 196). Yes, in charges filed by the U.S. Attorney, one now-retired worker, Thomas Caputo, was the highest paid transit worker in 2018, with $461,000 being his take for the year. And $344,000 of that was overtime. That’s 1,682 hours regular time and 3,864 overtime hours.

How did the U.S. Attorney catch on to the overtime fraud? Comparing hours claimed to actual presence on the job. For example, according to the charges, Mr. Caputo put in for overtime for working a shift on the Long Island Railroad that began at 4:00 PM and ended at 7:00 AM the next day. However, Mr. Caputo was actually 55 miles away in Patchogue, New York, bowling away. And doing quite well. He was on his game, and being paid for doing so.

There were four other defendants named in the charges, and all of them made more than the MTA Chairman as well as Governor Andrew Cuomo. Matching of other defendants’ traceable activities also did them in. Michael Gunderson is charged with putting in for $2,481 in overtime hours in 2018, but he was not at work. He had hotel reservations in Atlantic City as well as tickets to a concert there. On his other overtime hours submissions, he was on vacation in Williamsburg, Va, doing a 5K race in New Jersey, or taking a vacation in the Hudson Valley. He earned about $348,000 in 2018.

The U.S. Attorney’s office found the high levels of overtime pay intriguing. They were originally found by a nonprofit group (Empire Center for Public Policy) pursuant to a public records request. From there, the investigation focused on verification of actual work and whereabouts. The charges are federal program fraud. Penalties include up to 10 years in prison and pay-backs plus fines.

Funny how truth percolates.

Regardless of how you feel about various issues that land at the U.S. Supreme Court, one must be willing to admit that Justice Gorsuch can write. Here is an excerpt from his concurring opinion in the Roman Catholic Diocese of Brooklyn v. Cuomo — S. Ct. —- 2020 WL 694835, released late Wednesday evening, November 25, 2020:

. . . the Governor has chosen to impose no capacity restrictions on certain businesses he considers “essential.” And it turns out the businesses the Governor considers essential include hardware stores, acupuncturists, and liquor stores. Bicycle repair shops, certain signage companies, accountants, lawyers, and insurance agents are all essential too. So, at least according to the Governor, it may be unsafe to go to church, but it is always fine to pick up another bottle of wine, shop for a new bike, or spend the afternoon exploring your distal points and meridians. Who knew public health would so perfectly align with secular convenience?

According to an indictment, Thomas Moyer, Apple’s head of security, promised to give 200 iPads to the Santa Clara County Sheriff’s Office in exchange for securing four-concealed-carry licenses for the Apple security team. Also charged were Undersheriff Rick Sung and Captain James Jensen were also indicted on a charge of requesting a bribe.

That’s $70,000 worth of iPads, gang. Mr. Moyer’s lawyer says that it is true that Apple applied for four concealed-carry permits. He admits that it is also true that Apple was considering donating the iPads to the Sheriff’s Office, but, he assures, the two are not connected. Apple just has an ongoing dispute with the Sheriff’s Office. Hmmm. A dispute with your local sheriff has not been a good thing since the days of Wyatt Earp. Perhaps we could arrange an O.K. Corral settlement for the dispute. Tim Cook vs. the Sheriff of Santa Clara County. The iPhone 12 vs. Smith & Wesson MP .38 Revolver.

We have been at the virus battle for so long, that there is indeed a new normal. The Barometer watches Hallmark Christmas movies whilst on the treadmill this time of year. The movies are good clean fun. No one swears. Folks fall in love. Romance blooms. Not to mention tree-decorating, flour battles whilst cookie-baking, carnivals, festivals, parades, really lovely houses, and small town charm. About 45 minutes into the first movie of the season, the Barometer was taken with one dominating thought: These lovely people had no masks. They were giving hugs and kisses, eating together, having parties, and, oh, were they happy. The Barometer was very sad. Hallmark always provided a joyous escape from pressure. Now, Hallmark was sparking feelings of jealousy, resentment, and just a smidgen of anger.

The Barometer thought about increasing restrictions and realized that PETA would be in court seeking injunctions if chickens were confined in the manner we have experienced and are facing once again. How the Barometer longs for the liberties of a free-range chicken. No mask. Ability to interact. To walk about. To eat together. The free-range human is extinct.

And it feels as if those doing the confining do not really know what they are doing. Elon Musk was tested four times for the virus using the same machine. Mr. Musk got two positives and two negatives. Singer Erykah Badu tested positive in a swab test from her left nostril and negative in a swab test from her right nostril. We have been wearing masks since March, social distancing, and closing down for a good part of that time. Physicians and scientists assured us that those were the solutions. However, we do have a virus surge once again. Mr. Musk may have a point when he concluded, “Something extremely bogus is going on.”

The virus is real and can be deadly. But the science may not be real and is proving deadly. The Barometer hopes PETA steps in for the ethical treatment of humans.

In April 2019, the following appeared this site:

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.

Fast Forward

On Tuesday, both the Wall Street Journal and the New York Times reported that both Mr. Brand and Mr. Zhao were indicted. The indictment alleges that Mr. Zhao paid for Mr. Brand’s car, his son’s tuition at Penn State, his sewer and water bill, and off course the extra $400,000 for the house. Mr. Zhao denies the allegations vehemently and his lawyer says that his children were academic stars in high school and “internationally competitive fencers.” However, most recruited fencers are in the top 10 of junior rankings. The Zhao boys never cracked the top 50. One son graduated in 2018 (fencing second-team All-Ivy) and the other son is a senior this year. The younger son has “fenced sparingly.” Coach Brand was fired in 2019. Mastermind Rick Singer of Operation Varsity Blue was nowhere near this one. What the means is the college admissions fraud may be wider spread than we thought.

You go online and, sitting in the comfort of your own home, view potential apartments and homes. You find the perfect place, because they all look perfect through a fish-eye lens. However, what a virtual tour cannot give you are the smells, nature of the neighbors, neighborhood, and view you will have from the windows. A virtual tour does not point out the mold, the warts, the cars on cement blocks nearby, and those perpetual sirens. There’s a sucker online every minute taking virtual tours.

In his autobiography, Bob Baffert, six-time Kentucky-Derby winner and two-time Triple-Crown winner, confessed that he gave a horse morphine in 1976. He said he was a college student who did it partly out of ignorance and partly because of the pressure to win. How are those two reasons consistent? There was either ignorance or there was not. How does pressure enter into a decision to do something that you did not know was wrong?

Be that as it may, the California Racing Board thought through the reasoning and suspended Mr. Baffert from horse-racing for a year. Apparently the punishment was insufficient. Mr. Baffert has had four horses fail drug tests in just the last six months. Over the course of his career, his horses have failed 29 drug tests. The Barometer has chronicled previously those last few tests, including Mr. Baffert’s “dog ate my homework” excuses.

Two Baffert-trained horses tested positive for lidocaine. One had won the Arkansas Derby on May 2 ($300,000 prize). The other had won the Acorn Stakes at Belmont by 19 lengths in record time. Justify, the 2018 Triple-Crown winner, had tested positive for scopolamine following his win in the Santa Anita Derby. The closed hearing of the California Horse Racing Board concluded (long after the Triple Crown results and well after Justify was sold for breeding rights for $60 million) that environmental conditions, not intentional doping, caused the presence of scopolamine. Apparently, scopolamine exists naturally in feed and bedding. The California Horse Racing Board is currently holding hearings to determine whether to revoke Baffert’s $600,000 Santa Anita prize. The issue is whether the amount of scopolamine in Justify was too high to have come from feed or bedding. Was it naturally occurring scopolamine or was it scopolamine that came in during the wee hours of the morning?

Two other Baffert horses, Carlatan and Gamine, tested positive for lidocaine. Baffert and others argued that the horses were accidentally exposed to lidocaine by an assistant trainer who had applied a medicinal patch to his own back, i.e., he used Salonpas, which transferred small amounts to the horses through the application of a tongue tie (keeps horses from getting their tongues over the bit — it is elastic wrapped around a horse’s tongue and then tied along the lower jaw). Following the hearing Baffert was suspended for 15 days and the first-place wins for the horses were taken back, along with the cash.

No wonder the horses do better with lidocaine — try tying your tongue down to your lower jaw.

Now, as three Baffert horses are set for the Breeder’s Cup (about $6 million in prize money), the rest of the pack (or their trainers) has noted that one of the horses, Gamine, has failed two drug tests. The owners and trainers wonder why Baffert has not been banned from the race. Not to worry — the regulators are looking into it. The Barometer guesses the investigation will wrap up after the race. For the moment, Baffert and those responsible for oversight are quiet. Perhaps tongue-tied? One owner who has stopped competing noted it becomes “difficult to win because of the cheating.” Seems appropriate for this period in our history.

As they saying goes, our true ethical standards are clear by our behaviors when no one is looking. There is an interesting way this principle comes out in business. When a company is attempting to go public (have its IPO or initial public offering), there is always a great deal of clean-up to do. Suddenly company accounting inches closer toward GAAP. Governance improves, or, in some cases, begins. In short, the companies and their underwriters know that going public takes some clean-up on loosey-goosey accounting, operations, and even business models. Having operated under the radar for years (or at least out of the glaring daylight in which publicly traded companies companies), what they should have been doing was suppressed by what they could do. With no one looking, why bother? Someone is about to turn the lights on in the kitchen, and no one wants to find roaches.

For example, We (nee WeWork) had some interesting accounting and even more interesting governance issue. Conflicts abounded and as was profligate spending. In fact, the company was so far gone on those issues that its CEO departed, and, well, between the discoveries and the dampening effect of COVID on the need for office space, the IPO was a goner.

Airbnb is about to go public. Airbnb has what is known as its “Party House” problems. Too many Airbnb properties offer short-term leases for bachelor, weekend, and fraternity parties. It is not just the noise, the weed, and the late-night hours. There have been shootings, fatalities, and significant damage to the rental properties and homes nearby. Regulatory movements by neighbors who have had to pull too many all-nighters due to the noise are taking hold. Airbnb made money as homeowners in the area watched their quality of life and property values decline. No one was looking, and Airbnb became an $18-billion company.

Now facing the risk concerns of potential investors on these party-house problems, Airbnb is busy banishing party promoters from its site, considering suits against the renters for damages, and scanning social media to prevent the large gathering one-night rentals. Not until the IPO did anyone care. Ethics do pick up when someone is watching.

The Wall Street Journal reports that Matte’s Barbie line is doing very well. Barbie is revitalized, groovy, but, at the same time, good at math. Barbie has been around for 60 years, but has not aged one bit. She’s not as thin (in some models of the iconic doll) as she once was, but who is 60 years later? Ken has changed a bit. You can now get “Ken, the Merman,” or “Orchard Ken” whose only accessory appears to be an apron. Ken looks like a surfer in all his versions and does not show much interest in Barbie or her many careers. The Barbie beach house remains available.

There is Barbie the art teacher, complete with an easel and a little tot set to study under the doll with perfect painted eyebrows. One Barbie comes with a doggie stroller and two tiny dogs. Barbie the polar marine biologist seems to come with a penguin. There are historical-figure Barbies. Florence Nightingale with no patient or even a medicine cabinet, and Rosa Parks with no bus.

There is HBC (Hudson’s Bay Company) Barbie, who comes with a jacket and oar oar in the iconic HBC stripes. Doctor Barbie comes with a cart and two tiny infants. Pilot and Astronaut Barbies do not come with a jet or rocket. There is a pink helicopter available for separate purchase. There is even an Elton John Barbie — no piano nor rocket man.

Chewbacca Barbie is enough to scare the living daylights out of any 9-year-old. So could some of the Ken haircuts. Is a Black Widow Barbie in a skin-tight white suit with Barbie’s 1959 figure really necessary? Barbie female gymnastics coach complete with a pink pommel horse is perhaps Mattel’s best idea. Given the history of male coaches in women’s gymnastics, putting Ken with “sculpted dreadlocks” in that role might not fly off the shelves.

If you thought your choices for cold medicine at CVS were confusing, browse the Barbie website. The Barometer’s hat is off to the folks at Mattel. They have found some well hidden market niches. The Barometer just wonders what the creative staff consumed before coming up with some of the dolls and their accessories. Perhaps the dolls are just a reflection of society. Bug, what is missing is a fairly large chunk of society’s composition: Barbie the mother or Barbie and her family. In fairness to Mattel, there is shower-gift Barbie who is holding a stuffed animal. A must-have for every mother-to-be.

Purdue Pharma LP has agreed to enter a guilty plea to three felonies related to the company’s marketing and distribution of OxyContin. The penalties and fines would total $8.34 billion. The federal government will get $225 million and the remainder will go to the states in order to compensate them for the high costs of coping with addicted users and resulting harms. Purdue is currently in bankruptcy, so the bankruptcy judge will need to approve the deal.

Here’s the most interesting part of the settlement. The Sackler family has proposed turning the company into a corporate trust that will continue to sell OxyContin, with all the proceeds going to the public. The corporate trust would develop drugs for treatment of overdoses and addiction. Continue making and selling opioids in order to develop new drugs for treatment of opioid addiction and overdoses? You can’t make these things up. That oughta do it.

Greg Lindberg, an entrepreneur, began purchasing small insurance companies in 2014 and then used the insurers to make loans to himself. $2 billion in loans. He was convicted of two counts of conspiracy to bribe the North Carolina insurance commissioner. The insurance commissioner office is an elected position in North Carolina.

Testimony at the trial revealed that Mr. Lindberg, a billionaire (perhaps the loans facilitated that?), pledged to make $2 million in campaign contributions to the insurance commissioner in exchange for the termination of one of the regulator’s employees who was riding herd on Lindberg insurers (probably undercapitalization). Mr. Lindberg reported to prison on October 20, 2020 to begin a seven-year sentence.

He had sought bail so that he could remain free during his appeal. Because he has access to 18 bank accounts in foreign nations, the judge agreed with prosecutors that he was a flight risk. However, his sleep apnea and vulnerability to COVID-19 resulted in a judge granting a delay until the virus issues calmed down. Apparently, it is calm enough — three months after the delay Mr. Lindberg is in prison. Also, the CDC had concluded that there is no correlation between apnea and getting COVID-19. One last shot — Mr. Lindberg’s partner is pregnant with another child (Mr. Lindberg has four children) due December 4, 2020. The judge was not moved.

However, chin up — Mr. Lindberg does have a suit pending against the Wall Street Journal for alleged defamation in the paper’s reporting on the finances at Lindberg insurance company as well as allegations that Mr. Lindberg used surveillance on women who had applied for jobs at his company. Mr. Lindberg said that was all just part of the company’s background checks.

This is a made-for-TV movie.

It is a first for the company that has been laddering, short-selling, and backing not so backable mortgage-backed securities. Goldman-Sachs entered a guilty plea to charges tied to bribery charges related to paying $1 billion in bribes in order to win a $6.50 billion bond offering for IMBD, a Malaysian bank. About $3 billion of that went to Malaysian government officials. The general counsel for Goldman entered the plea to “knowingly and willingly” violating the Foreign Corrupt Practices Act (FCPA). The amount paid in the bribery scheme is the highest ever for the cases handled by the U.S. Justice Department.

Goldman’s fine in the U.S. is $2.9 billion, and it has also agreed to pay $2.5 billion to the Malaysian government. Goldman also announced that it would be clawing back $174 million in compensation paid to Goldman executives as a result of the IMBD deal.

The complaint against Goldman alleged that the company’s compliance officers accepted the questionable explanations of payments made by Goldman executives handling the IMDB account. Those executives have also been criminally charged.

In 151 years since its founding, Goldman has pulled some stunts and been embroiled in what could only charitably be called some sleazy deals. The criminal guilty plea is a new experience for the company. However, with the Goldman’s past behaviors of pushing the envelope, it was only a matter of time.

A Michigan-based group known as the Wolverine Watchmen were disbanded when the FBI got wind of their plans to kidnap Michigan’s Governor Gretchen Whitmer and Virginia’s Governor Ralph Northam. Their goal was apparently, “LIBERTY!” Fed up with COVID-19 controls, these chuckleheads had plans, weapons, and an electronic trail. Their actions are rightfully charged under Michigan’s antiterrorism statute.

The Barometer echoes the assurances of the FBI that Governors Northam and Whitmer were never really in danger but for a different reason than the ineptitude of the Wolverines. Having heard these two governors speak, lecture, and respond to questions, the Barometer believes that the Wolverines’ fate would have been similar to that of O. Henry’s misguided kidnappers in the short story, “The Ransom of Red Chief.” Two unwitting ne’er-do-wells chose an incorrigible child, Johnny Dorset, as their victim. Johnny does inflict harm quickly on the kidnappers and shortly makes them both crazy.

After the child’s father receives a demand for ransom from the two kidnappers, AKA “Two Desperate Men,” Ebenezer Dorset sends the following back to the kidnappers:

Two Desperate Men.
Gentlemen: I received your letter today by post, in regard to the ransom you ask for the return of my son. I think you are a little high in your demands, and I hereby make you a counter-proposition, which I am inclined to believe you will accept. You bring Johnny home and pay me two hundred and fifty dollars in cash, and I agree to take him off your hands. You had better come at night, for the neighbours believe he is lost, and I couldn’t be responsible for what they would do to anybody they saw bringing him back.

Very respectfully,
Ebenezer Dorset

The kidnappers seized the counteroffer, returning Johnny, paying Ebenezer $250, and securing a promise from Ebenezer to hold the lad for 10 minutes so that they could skedaddle. It’s like a friend of Bernie Sanders once said, “Bernie’s the last person you’d want to be stuck on a desert island with. Two weeks of lectures about health care, and you’d look for a shark and dive in.” The Wolverines would have returned the governors and begged for the county jail.