The Ethical Barometer

There were many tributes to businessman Jon Huntsman at his funeral, but there was one story told about his integrity that tells us how ethics is done. During the 1980s, Mr, Huntsman and his business were struggling. In order to get cash into his business, he entered into an oral agreement to sell 40% of the stock of his company to a buyer who had been a tough negotiator. Mr. Huntsman shook hands on the deal.

Shortly after the deal was negotiated, conditions in the market changed, and Huntsman’s stock climbed because the company’s earnings had increased five-fold. His lawyers argued that the oral agreement was not binding because no one had signed any paperwork. Mr. Huntsman still closed the deal because he said that he had made an agreement and his handshake was his bond. Members of he the chemical industry were shocked. He lost millions with the deal.

The rest, as the say, is history. Mr. Huntsman went toto enjoy even greater success and growth. The loss at the time of the deal was small from the perspective of bis billionaire status. Your word is you bond. Your handshake means something. Doing the right thing even when you could escape legally. Three lessons in Mr. Huntsman’s passing.

She was the first female billionaire in Silicon Valley. She had founded Theranos, a company touting a new blood test that could detect everything from diabetes to cancer. She raised $700 million from investors for the company that was touted as revolutionizing health care. Only 19 years old at the time of founding the company, Ms. Holmes captivated investors. The SEC said that she “lied” to investors. Neither the company nor Ms. Holmes, now 34 years old but still wearing the black turtleneck that was a Steve Jobsian signature of her company officers, admitted any wrongdoing. Ms. Holmes must pay a $500,000 fine and is banned for 10 years from being an officer or director of a publicly traded company.

The lies alleged were about the tests themselves. While people were getting their fingers pricked at Walgreen’s as the next means of medical diagnosis, those back at Theranos were keeping secret the fraud of the tests until the Wall Street Journal found an informant and broke the story in 2015. Too good to be true, in health and in money.

After learning of a security breach at his company, Equifax, CIO Jun Ying exercised all of his stock options and then dumped them on the market. Ying accomplished all of this activity before Equifax disclosed the breach publicly. The security breach compromised the personal information of 140 million Americans whose records are part of the credit-rating company. The convenient exercise and sale averted $117,000 in losses. The sales were discovered through an internal investigation at the company. When confronted with the activities in an October 2017 meeting, Ying resigned rather than be fired. Equifax noted that it takes “compliance very seriously.” He received no severance package.

This isn’t brain surgery. HUD Secretary Dr. Ben Carson was shocked, shocked that aides and his wife selected a $31,000 dining set as part of a HUD office remodel. However, an August 2017 e-mail from the HUD office administrator is accompanied by print-outs and describes, “printouts of the furniture the Secretary and Mrs. Carson picked out.” Other documents reveal staff concerns about the expenditures and lawyers offering their advice to Secretary Carson to “not buy the furniture.” Truth has a way of percolating.

Don Blankenship. former CEO of Massey Energy, the then-owner of the Upper Big Branch Mine in West Virginia, is now a candidate in West Virginia for the U.S. Senate. No matter that the signs of protestors outside his campaign events read, “You must be joking.” He is dead serious, and many coal miners support him. The miners say he was “railroaded.” Experts, regulators, and courts found that mine management allowed and covered up a build-up of combustible coal dust, which resulted in the explosion. The pressure that Mr. Blankenship and others brought to the miners was legendary: required hourly production reports, Blankenship descending in his helicopter for surprise checks, and safety shortcuts that resulted in guilty pleas or convictions for many managers. Mr. Blankenship’s platform? Coal is king.

Ben Brafman, attorney for defendant Martin Shkreli, at Mr. Shkreli’s sentencing hearing. With defense lawyers such as this, who needs prosecutors? Mr. Shkreli, who was found guilty of fraud earlier, was sentenced to seven years. The sentencing guidelines provided for up to 21 years. Mr. Shkreli said during the hearing, “This is my fault. I am not a victim here.”

In 1994, the Mollen Commission issued a report that concluded that police in New York City came up with various arrest strategies in order to increase their overtime pay. The strategies included questionable arrests, multiple arrests, and the involvement of additional officers so that more could earn overtime.

How soon they forget. Now pending in federal district court in Brooklyn is a civil rights suit by a defendant who alleges that he was arrested by New York City police officers solely for the purpose of increasing their income and not on the basis of a crime. For the arrest of Mr. Hector Cordero and others, the suit alleges that the officers pulled in $1,400 in extra pay. The suit promises to result in the exposure of the conduct of police officers in making arrests. Some of the allegations in the suit are that officers made up false information to justify the arrests. The charges against Mr. Cordero were dropped five months after his arrest. New York City says the officers had probable cause. The trial promises to offer insights into the old and now repeated “collars for dollars.” Be careful how you pay and what you reward — perverse incentives are dangerous.

He is a brilliant surgeon. He is a kind man. He is the Secretary of Housing and Urban Development. And, as HUD faces $6.8 billion in budget cuts, he chose to redecorate his office. The new dining table is a custom-made deal that went way over the maximum government allowance of $5,000. As the press got wind, the stories shifted — Dr. Carson knew nothing about the table. Dr. Carson had delegated the redecorating to his wife. Eventually, Dr. Carson recognized the optics and tried to cancel the order. The custom nature of the table may make halting the order difficult. Bright people sometimes get involved in the darndest things.

Congress is investigating the table deal because Mrs. Carson is alleged to have sought the help of an aide in circumventing the $5,000 spending cap. We will be at this one for some time to come.

Now there’s a headline that leaves you scratching your head. The Regents for the Arizona system are all over it — they asked for a meeting to seek legal advice on the coach’s $1,5 million per year contract. Yes, it would be better to keep him on as coach than risk a breach of contract suit?? The FBI seems to have him dead-away on a wiretap discussing a payment of $100,000.

Russian curler (you know, curling –the Olympic sport in which you watch a tea kettle glide down the ice) Alexander Krushelnnytsky and his wife took the Olympic bronze in this year’s competition. However, a drug test revealed that Mr. K had Meldonium is in his system, a drug that has been banned by the IOC since 2016. Meldonium is the drug that hurled Maria Sharapova from tennis for a season.

Meldonmium is said to increase the ability to concentrate.Yes, one would not want to miss one nanosecond of the break-neck pace of the sport of curling. Staying focused on that kettle as it glides down the ice is difficult to sustain.

The Russians explain that Mr. K took the drug only once and that there were just traces in his blood. When on thinks of doping, one thinks of baseball sluggers, Tour de France cyclists, fleet-of-foot track stars,and power-lifters. Squatting down to watch a drifting teapot defies the need for Meldonium or even toned quadriceps. However, the Russians leave nothing to chance — just the risk of getting caught.

The Wall Street Journal reports that folks are so obsessed with meeting their Fitbit goals for the day that they have developed techniques for meeting their activity level goals without participating in all that nonsensical and taxing exercise. Tape the Fitbit to your hamster’s wheel or tape it to your electric saw and then leave the saw running. The hamster’s motion and the saw’s vibration will get your steps tony level you want.

We chortle at these creative notions for padding our numbers, but we probably do it every day in some way in our jobs. The accounting interpretations that allow us to book revenue that isn’t real. The on-time records at airlines that do not include the regional jet routes. The ratings for television and radio that eliminate viewing during the holidays by calling the shows something different for tw weeks. Our little tricks to make it look as if we are doing better than we are seem silly when we are talking about fitness achieved through hamsters and saws. What exactly is the difference between those self-deceptions and the ones in business? Too many companies are using saws and hamsters to feign performance that is not real.

USA Today, February 7, 2018.

Observation 1 — Was it an out-of-body experience that they witnessed it? Perhaps “experienced”a candidate hitting on them?
Observation 2 — Is this really the best approach for landing a job?

The Inspector General came out with his report on Veteran Administration Secretary David Shulkin’s July trip to Europe. You can read the full report here: https://www.va.gov/oig/pubs/VAOIG-17-05909-106.pdf. Herewith, some highlights:

1. Less than two weeks before the 11-day trip began, the Secretary sent out a memo to VA employees titled “Essential Employee Travel.” The memorandum instructed staff that before approving any employee travel, managers must determine whether the travel is “essential” in order to decrease “employee travel and generate savings” within VA.
2. The trip included 3.5 days of conference and meetings in Denmark to study their veteran’s programs and facilities. Given the vast Danish army, one understands the need for that detour.
3. The VA paid for Dr. Shulkin’s wife’s travel because Dr. Shulkin’s chief of staff represented to the VA that Dr. Bari (aka Mrs. Shulkin) was an “invited guest” for an award ceremony. There was no award or ceremony. It strikes the Barometer that the VA has a way to go before being in award territory. The IG made a criminal referral to the Justice Department for possible prosecution for the fraudulent statements about the award. The DOJ declined prosecution at this time.
4. Dr. Shulkin and his wife received tickets to the women’s finals at Wimbledon from someone they called as friend of Dr. Bari (Mrs. Shulkin). When the IG’s office interviewed the “friend,” after 19 attempts to contact her, the “friend” could not recall or did not know Dr. Bari’s first name. The VA ethics officer had approved the gift of the tickets under the “relationship”exception to federal officials accepting gifts.
5. The total cost of the trip for Dr. Shulkin and his wife was $122,334, not counting the time a staff member spent arranging all of the leisure travel for the secretary and his wife. The OIG concluded that this VA staff member became the secretary’s travel concierge.

One observer said, “A lot of them may want him to go, but who would replace him?”

Perhaps someone who has respect for the limited resources of the VA and believes those resources should go to veterans and not European excursions. Can the VA really get better under a leader with such a tin ear on both spending and example?

Now there’s a headline that is a tad disconcerting. New York Times, February 15, 2018, p. A21.

Raphael A. Sanchez, the top lawyer for immigration in the Immigration and Customs Enforcement field office in Seattle was charged with wire fraud and aggravated identity theft (one wonders the proof requirements for “aggravated identify theft” vs. “run-of-the-mill identify theft). He is charged with stealing the identities of seven people who were in immigration proceedings that he was handling. Between October 2013 and October 2017, Mr. Sanchez is alleged to have used the identities to open credit accounts at American Express, JPMOrgan Chase, Bank of America, Capital One, Citibank, and Discover.

Here’s the best part — Mr. Sanchez used his government e-mail to send information for his aggravated activity to his Yahoo mail account. One e-mail had the following documents attached: a utility bill, a biographical page, and a Chinese passport from a Chinese immigrant who was seeking permanent residence in the United States.

The Barometer is without words.