The Ethical Barometer

The New York Times obtained a copy of McKinsey & Company from 2010, the high powered consulting firm compared its 90-plus-years of doing business as akin to the Marine Corps, the Roman Catholic Church, and the Jesuits. The report describes McKinsey as “analytically rigorous, deeply principled seekers of knowledge and truth.” However, actions do speak louder than words and McKinsey is an amoral technician. McKinsey pushes the envelope in its interpretations of the law. They elude illegality, but their actions feel slippery. Here is a summary:

Federal bankruptcy rules require that financial consultants and advisors in bankruptcy (generally Chapter 11) proceedings. Yet, as documented on this website, McKinsey paid an $11 million fine after it finally revealed that its retirement fund held investments in the companies involved or affected by the restructurings and debt resolutions in those bankruptcies. For example, McKinsey’s retirement fund held interests in two hedge funds that were creditors of GenOn Energy Inc. Yet, McKinsey served as an adviser in the Chapter 11 bankruptcy of that company. Bankruptcy rules require advisers to disclose all interests that may be a conflict of interest. McKinsey did not disclose its retirement fund’s investments in the hedge fund, let alone the hedge funds’ interests. “Not a problem,” was McKinsey’s take because it did not own any interest. Pure balderdash that those working with GenOn’s outcomes could benefit or be harmed by its bankruptcy restructuring. De minimis, said they.

McKinsey provided advice to Janssen Pharnaceuticals on how to market opioids to increase sales. The states of Oklahoma, Massachusetts, and New Jersey used McKinsey records to help build its case that the company engaged in irresponsible marketing of its fentanyl patch. McKinsey also advised Purdue Pharmaceutical on how to “turbocharge” its sales of OxyContin. McKinsey assured that its work supported” the legal prescription and use of our clients’ products” and that it was no longer “advising clients on an opioid-specific business on a global basis.” Does that mean they advise on a local or national basis? No worries, however, when an executive for the company was asked about its aggressive marketing plan using the language from McKinsey’s advice, McKinsey went under the bus. Twice the executive said that the marketing plan consisted of “McKinsey’s words,” not ours. However, McKinsey was not fired, and, in fact, is still used by Janssen today for “different projects.” Nothing illegal, just amoral.

When doing government work at Rikers, a McKinsey partner told government officials and members of his team to use Wickr, a messaging site that automatically deletes messages under a timetable set by the users for hour or days. Certainly avoids all those public records requests on the project — the records automatically disappear. Not illegal, but an interesting approach to transparency on government work.

McKinsey worked for Boeing exploring options for obtaining titanium (in short supply in 2006) for its planes. McKinsey came up with the idea of Boeing investing in a titanium mine in India and thus eliminating the suppliers and thereby obtain titanium at the source. There was a McKinsey PowerPoint slide on a potential investment in a mine in India in cooperation with a Ukrainian oligarch that would require influencing eight government officials, listed in the slide. The partner encouraged Boeing to “respect traditional bureaucratic processes, including the use of bribes.” McKinsey responded by saying that it did not encourage violation of the FCPA, but declined to provide the full slide set on the presentation of the mining opportunity. Let’s see, Ukraine, India, and a mine involved together in an investment in India. What could possibly go wrong?

The list could go on with the power company in South Africa, and the mess with the GSA and contract pricing rules that McKinsey got changed in its favor, something that the OIG concluded “violated requirements governing ethical conduct.” Not illegal, amoral.

Yes, onward march, ye deeply principled consultants seeking knowledge and truth. Just be sure to put it all on Wickr.

An employee at a waste and recycling center in Misomer Norton, GB opened a box during his sorting work and found 15,000 pounds (about $20,000). The box had been left at the center by a couple who had just cleaned out a deceased relative’s home. The employee took the box and money to the staff. The staff went through the security footage. They tracked down the couple via their license plate. The police traced the license plate and found that the owners lived 27 miles away in Burnham-on-the Sea. The police interviewed the couple without disclosing what had been discovered. When the police were satisfied with their account, which aligned with the tapes at the center, the police returned the money to them.

When the couple learned about the money they indicated that they were not surprised because the relative was known for stashing cash around the house. The police praised the center’s staff: “Without their diligent attitude, integrity, and assistance, the family would never have known about the money found, and we would not have been able to return it to them, especially in time for Christmas.” The honest employee chose not to be interviewed and was said to be “having a well-deserved Christmas break.” Indeed. His actions give us all hope about humanity’s condition.

There is another moral to the story: Check the boxes for contents before you toss, donate, or dump.

Former CEO of Nissan and Renault, Carlos Ghosn, fled from Japan for Lebanon, via private jet, of course. Even when CEOs are fugitives, commercial flights are not good enough. Although Ghosn was released from jail and was living in Tokyo, he was order not to leave the country. Generally, courts require passport surrenders when someone makes bail. So, it remain unclear how he escaped Japan or how he got into Lebanon. However, Lebanon is his homeland and the fact that he was featured on a 2017 Lebanese postage stamp might explain his uncanny ability to flit across the globe whilst facing charges related to his expenditures including the cost of a Louis the XIV costume birthday party at Versailles. Perhaps he used his costume as a disguise. However, a guy from Lebanon in a French king’s suit and a powdered wig probably should have raised a few immigration flags.

The Wall Street Journal reports that Ghosn remains defiant about the criminal charges. One could say that flight to a non-extradition country does not bode well for cooperation or even a trial.

In yet another example of how corporate boards cannot move decisively, after over a year of shoes dropping because of two crashes of the 737MAX, Boeing’s CEO has departed to spend more time with his family or whatever cover story given. That Boeing made a mistake in the design of the aircraft was a problem. However, the tin ear of now former CEO, Dennis A. Muilenburg, to the issues and scope of the crisis was stunning to watched as the clock ticked and the hits kept coming, financially and mistake-wise.

During the Q & A in a speech in May, a participant asked if Boeing’s CEO should be fired. The Barometer’s response, “I am mystified as to what the board [of Boeing] is thinking. He needs to go.”
Those who preside over the missteps at any company cannot buy credibility with customers or regulators. They were there. They are responsible, and they lack moral authority to assure. When a continuing CEO seems to exacerbate the problems as their idea of crisis management, they REALLY need to go.

Harvey Weinstein in an interview with the New York Post. Mr. Weinstein added, “I made more movies directed by women and about women than any filmmaker, and I’m talking about 30 years ago, I’m not talking about now when it’s vogue. I did it first, I pioneered it.” Mr. Weinstein used actress Gwyneth Paltrow as an example. Ms. Paltrow was paid $10 million for her 2003 movie, “View From the Top.” He said that she was the highest paid actor at that time in any independent film. “Higher than all the men,” Weinstein added.

Mr. Weinstein fails to understand that only alleged financial crimes are forgiven. Plenty of accused financial types are back in business. Their past record of performance counts. What you did for women counts little when you are charged for what you did to women.

Bernie Ebbers, the man at the helm when WorldCom, once the largest company in America (market cap) which turned out to be an $11-billion fraud. Mr. Ebbers was sentenced to 25 years, and had served about 13 years when a federal judge granted a release due to his frail health and what his daughter describes as dementia. WorldCom declared bankruptcy, which topped Enron at that time as the largest bankruptcy in U.S. history.

Testimony from former employees about being instructed to cook WorldCom’s books to reduce expenses in order to make WorldCom look profitable resulted in the Ebbers conviction. WorldCom’s CFO, Scott Sullivan, facing 25 years, sang like a canary, and got five years. After serving most of his sentence, he was released on home confinement and three years of probation in 2009. He lives in Boca Raton. Bankruptcy laws at the time provided homestead exemptions for many of the Enron-era execs for their Florida mansions. Mr. Ebbers will go home to Mississippi to live with family.

Spygate was in 2007 and involved allegations that the Patriots were stealing signs of rival teams. Then came Deflatgate in 2015 — an, as yet, unsolved mystery in the minds of Goddess, et al.,with the inflation levels of footballs used in NFL play when the Patriots are out and about. Now, 2019, we have someone, Belichick denies it was anyone associated with the Patriots, filming the Bengals. Kraft Sports Productions is responsible, as in Kraft, owner of the Patriots.

How is it that the Patriots are always in and around this stuff but never know anything? Beyond that presence is the bizarre fact that they were filming the Bengals with their mighty 1-12 record. It’s like the economists when they say it is not possible for one company to continually outperform all the other companies in an industry — it defies logic that they could be 50% better than the other companies as a means of explaining their 50% higher performance. Their advice? Look deeper on what exactly is going on with the accounting, the financial reporting, the sales practices, and their regulators. Talent and hard work explain some of the difference, but not consistent beyond-all-odds performance. So it is with the Patriots. Perhaps someone needs to really check what goes on as they “Do Their Jobs.”

Headline from today’s Wall Street Journal.” Could we have a current value comparison? And check back in a few years to see what has happened to the IPOs driving the numbers.

There is a diabolical side to some of the contestants in beauty pageants. For example, Andrea Piecuch, the Miss Universe of the U.S. Virgin Islands, was booed when she won that title. The locals said that Ms. Piecuch is a “pageant hopper,” or someone who moves from state to state competing until three possible end results: they win a big contest, age cuts them out, or they no longer have the funds to compete or even just get tired of the pageant circuit. In 2011, Ms. Piecuch competed in a Texas state pageant. In 2017, she was in a Florida pageant. In November 2018, Ms. Piecuch competed in the Miss Virginia pageant. In January 2019 she was a contestant in the Miss Utah USA pageant. The protests came when she competed in the U.S. Virgin Islands Ms. Universe pageant for that title in August 2019.

What are the rules? The U.S. Virgin Islands required only six-month residency status. Ms. Piecuch offered a lease as evidence of her residency to pageant officials, but declined to provide the lease to the Wall Street Journal reporter. Kris Frieswick, “‘Pageant Hopping’ Roils A Miss Universe Contest,” Wall Street Journal, December 9, 2019, p. A14. Some contestants provide university registration as proof of residency. One contestant provided class schedules from the University of Virgin Islands as her proof. However, the university could find that no such student ever enrolled there.

As one contestant who lost said, “Pageant hopping is wrong. It’s not illegal, but it’s wrong.” She deserves the crown in the Barometer’s mind.

Well, what with cameras and technology, the Astros were apparently able to see and decode the signs of their opponents. MLB has come down hard on this stuff. Cameras out of the dugouts now. At least this time the wrongdoing involves a team and not the whole league. As the league removes cameras, that juiced baseball controversy remains, well, a controversy. When MLB owns the company that makes the baseballs, one can understand the ethical issue. Maybe the signals discipline will atone for the juicy baseballs. Whatever happened to the simplest of joys in Mudville, to wit, “Play ball”? And do it without gaming, as it were, the system.

Those reviews placed by bots can be detected, and Fakespot, Inc. is the company that offers the service. Fakespot concludes that more than 1/3 of online reviews are fraudulent, meaning that bots placed them or they were made by folks being paid to do reviews. Apple has pulled all of its reviews in response (without explanation). Amazon, Walmart, and Sephora dispute that figure, but all three are taking new steps to crack down on review fakery. Fakespot says that it cannot evaluate Amazon reviews because it does not have access to Amazon’s proprietary data.
The Federal Trade Commission (FTC) is also cracking down on fake reviews. Sephora got nabbed already.

Without the analytics, one researcher offers a simple test: When you see a product with all favorable reviews, be skeptical. As he noted, “It’s impossible to have that many people happy.” Well said. Suzanne Kapner, “Giant Online Retailers Pressed To Curb Fake Five-Star Reviews,” Wall Street Journal, November 29, 2019, p. A1.

Can the reviews.

As if the ongoing troubles with the 737MAX are not enough of a challenge, Boeing now has a new plane – the 777X – the first new plane design since the 737MAX fatal crashes. And, there is intense regulatory scrutiny of the plane and Boeing. The lesson is that when there is a misstep by a company (and the 737MAX has been a huge misstep exacerbated by Boeing’s lack of transparency on all the issues involved), the regulatory microscope descends. What was once a relationship of trust is one of skepticism. Trust lost means delays, expenses, additional oversight, and losses. At the heart of trust is ethics. And at the heart of speed in transactions and regulatory approval is trust.

Now that’s not a headline one expects to read. Nonetheless, Pope Francis had a chat with the press on his jet and conceded that finances in the Vatican involve “things that do not seem clean,” and added, “What happened, happened: a scandal.” There is an ongoing investigation because Pope Francis added, “There is corruption, it’s clear, With the interrogation we will see if they are guilty or not. It is an ugly thing, it’s not nice for this to happen in the Vatican.” Your Holiness, it is not nice for it to happen anywhere. From FIFA to Ukraine to Baltimore, Chicago, and Detroit, there is corruption everywhere. Somewhere in that last sentence is the making of some kind of song. Bob Seger could do something with that line (Moline, Boston, Berkeley, Queens).

What we learn, however, is that human beings are human beings. Temptation is temptation. No one is immune. Pope Francis added that the investigation is going well. The Vatican Bank’s former chief and his 94-year-old lawyers have been charged with allegedly skimming the profits from property sales (50 million Euros worth). The Pope is also working on climate change, a world free of nuclear weapons, and corruption in Peru. That last one evokes a “Physician, heal thyself” moment (Luke 4:23).

The Barometer wrote too quickly — here is another texting tragedy.

A former Boston College student who broker up with her boyfriend sent him 47,000 texts in a two-month period. Her boyfriend, who apparently tried to respond, bringing the total texts between the two to 75,337 for the two-month period. Her texts included expletives and suggestions that he kill himself. He begged her to stop texting him. She did not. Sadly, her boyfriend jumped to his death from the roof of a parking garage. She is charged with involuntary manslaughter. Oh, that texting. It has become a tool of destruction in so many ways.