In the “Could you be any more shallow?” department

New York City canceled its annual marathon after Mayor Bloomberg’s determination to sally forth in the days following Hurricane Sandy, despite millions of New Yorkers without power, tens of thousands without homes, and many without food.  When the bone-headed decision was finally reversed and the marathon was canceled,
accountant Raffaella Romazzotti, who flew from Milan for the race at a cost of $2,500, complained to the New York Times, “I’m very angry. If Bloomberg decided to cancel, why couldn’t he do that before?  I know there is a big problem with Sandy, but not now.”  Continue reading

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In the feet-of-clay department and its division of denials: Former Penn State Pres

Former Penn State University Graham Spanier was charged with five criminal counts in connection with his response to allegations that former assistant football coach, Jerry Sandusky’s conduct on campus. Mr. Sandusky was convicted of 45 counts of child abuse and sentenced to a minimum of 30 years in prison. Dr, Spanier has been charged with criminal conspiracy to conceal Sandusky’s activities (along with former athletic director Tim Curley and operations VP Gary Schultz), criminal obstruction, and endangering the welfare of children. Through e-mails and notes, Continue reading

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“UBS was my family. Everything I did was for the benefit of the bank.”

Testimony of former UBS trader, Kweku Adoboli, accused of causing the largest unauthorized trade in the history of the United Kingdom ($2.3 billion).  He has entered a not guilty plea to the charges and confusion as to how multi-billion-dollar losses benefit banks. He did not see his practices of hiring trade losses in other accounts or violating bank rules as a problem because he did these things to make a profit because, “Ultimately that’s what everyone cares about.” Well, that, and avoiding $2.3 billion losses.

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Sarbanes-Oxley is Ten Years Old: Happy Birthday! Few Charges! Plenty of Acquittals!

Sarbanes-Oxley (SOX) is now 10 years old.  How’s that false certification thing working out?  The act that was going to stop companies from issuing false financial statements has been a bust.  Richard Scrushy, the former CEO of HealthSouth, one of the first executives to face false certification charges under SOX, was acquitted.  Richard Fuld, Continue reading

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“We’re clean, but we’re dirty-clean, rather than clean-clean.”

A Barclays representative when questioned by a British regulator as to whether the Barclays was involved in some untoward behavior with regard to fixing interest rates in order to make its credit position look better than it was.  The crackerjack British regulator responded, “No one’s clean-clean.”  Well, with complicit regulators such as you, Sir, what would be the motivation? If men were angels, we would need no government.  If bankers were honest, we would need no regulations. Regulations keep growing precisely because of the dirty-clean mentality. Dirty-clean is right up there with other statements folks make Continue reading

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“It’ll give me a chance to show my innocence.”

John Kinnucan, founder of Broadband Research LLC, a Wall Street analyst firm, in December 2010, after FBI agents raided his office.  Mr. Kinnucan also added “My research has nothing to do with ‘inside information’ and everything to do with a lot of hard work and insight.”  On July 25, 2012, Mr. Kinnucan entered a guilty plea to securities fraud for passing along confidential client information to his clients.  Oops! Seems sharing secrets is indeed inside information.

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The NCAA, Sanctions, and the Opining

“SMU got the death penalty for paying players.  What the NCAA did is not enough for what happened at Penn State. These were boys, they knew, and they did nothing.”

“You are punishing people who had nothing to do with what happened.  You are destroying small businesses and making students pay for something they didn’t do. The NCAA is wrong.”

There you have it – polar opposite views on the NCAA’s decision to impose monetary fines, scholarship limits, bans on post-season play, and stretch it all out for four years. Generally speaking, the poles have it wrong.  In fact, in
this case, the poles missed the issue. Continue reading

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“Either you were complicit, grossly negligent or incompetent.”

A member of Parliament confronting former Barclays CEO, Robert Diamond, on the Barclays’ settlement for fixing LIBOR rates.  The best part was Mr. Diamond’s response, “Is there a question?”  Sure is, buddy, which one is it? He just got better when he added, “I don’t feel personal culpability.  What I do feel is a strong sense of responsibility.”  Words, words. Parsing, parsing.  Mr. Diamond, this was on yoru watch.  Take a look at the rates charts and figure out how your bank’s rate paralleled the market’s.  For years.

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On Absolutes Coming Full Circle

For as long as the Barometer can recall, the mantra, “There are no absolutes,” has been repeated with reverence, deference, and unequivocal conviction.  The facile response has always been, “Well, there are no absolutes except that one that you just offered, to wit, there are no absolutes.”
However, time is on the side of us moral absolutists.  Some complicated developments have begun to bore
a bigger whole in the self-contradictory axiom, “There are no absolutes.”

For example, we are told that torture (think water-boarding) is wrong – an absolute.  Yet, drones are bumping
off al Qaeda members in hit-list fashion. The drones are moving through terrorists as quickly as the terrorists
move up the ranks in al Qaeda’s corporate governless structure.  The sum total of al Qaeda’s succession plan
is, “Next? Who’s willing to be fodder for drones?”Arguably, drones do not involve torture because death is swift.
But, as John Woo notes, drones are not exactly disciples of due process.  Taking people out because
someone gave them a promotion in a group of ne’er-do-wells seems to be something we might fit under the restraint that torture is absolutely wrong. Or perhaps we could go the other way and come to the conclusion that there are
times when torture is justified.  From there we could move into understanding when and how we reached the
justification for assassination as we condemned the Gitmo folks for putting terrorists there on a diet of Ensure.

Speaking of diets and drinks, New York is all a-flutter with the possibility that its 7-11s will lose their 32- and 44-ounce drinks (only if they have sugar).  New York is regulating sales of Big Gulps full of Coca-Cola as states around the country embrace medicinal marijuana sales and use.  To be fair, the sales and use of a drug the Feds still place in felony status are in the name of compassion. Permissible marijuana use and sales address eligible and serious
health issues such as hang nails and paper cuts.

Head to the public schools and you find the cherubs fencing Cheetos to the snack-deprived.  But thanks to Planned Parenthood’s partnership with Los Angeles County high schools, they can get birth control, treatment for STDs, and even morning-after pills.  All without parental knowledge or consent. An absolute ban on snack foods but moral relativism, indeed enabling support, for sexual activity among the young ‘uns.  And all without the emotional support they will need when teen intimate relationships go south.

And on it goes – a company is recognized with a LEED certification for its environmentally progressive building.  Solar power, recycling, and natural light get you a “good company” rating.  Renewable energy use – good, an absolute that protects you even if you use your building to launch an IPO without disclosing that your earnings projections are off because advertising isn’t panning out for your customers.

Moral absolutes do exist, but they are arbitrary and capricious.  They are enforced, but what
is difficult to decipher is why they were chosen as absolutes in the first place. Perhaps the standard is nothing more than, “Well, they are absolutes because they just feel right.”  Ah, moral relativism has come full circle to moral absolutes.

 

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Shana Madoff Swanson — The In-House Counsel and Compliance Director for Bernie Who Allegedly Used $30,000 of Company Funds to Pay Her Interior Decorator

And that is only the beginning of the allegations.  Prosecutors are now focusing on $241,958 in her rent payments made by the Madoff firm.  And $374,860 in personal expenses charged to her corporate American Express card that included clothing, cosmetics, and personal travel.  One would think the general counsel and compliance director might have used a bit more discretion and a lot more of her own money — that would be her $4.6 million in salary and bonuses.

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Peter Madoff: “Okay, so my wife was paid 100-grand per year and never showed up for work, who knew?”

Peter Madoff, Bernie’s brother, was sentenced to ten years in prison in exchange for a guilty plea to all manner of federal charges including lying to regulators, trying to squirrel away funds after he knew he and the Bernster had been running a Ponzi scheme, and paying family members for work never done.  “Who knew?” was part of Peter’s statement to the court, along with, “I was in shock and my world was destroyed,” and “I truly believed my brother was a brilliant trader.”  Yes, and he signed off on the firm’s 23 clients statements each month, even though the firm had 4,000 clients and never raised an eyebrow or a question.

In addition, the evidence showed that Peter’s wife was paid $100,000 per year by Madoff’s firm even though she never reported for work.  In addition, the firm funneled $40 million to Peter, funds that allowed him to purchase three homes as well as a 1995 Ferrari 355 Spyder.  Part of the plea requires Peter to turn all of his cash and property over to the court.  He withdrew money from the company to make charitable contributions and help his son with his medical expenses.  Even if your brother is a legit trader, you might want to question the use of company money for family salaries and your own charitable contributions.   The signals are always there — and the end result is never pretty for those who ignore them. Oh, and one more thing — Peter Madoff was the chief compliance officer at his brother’s firm.

 

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How About If We Just Tell the Truth? The Tech Problem with Health and CEOs

Google CEO and billionaire co-founder, Larry Page, missed the company’s annual shareholder meeting in June.  The company has announced that he will also miss the company’s July earnings call. The explanation given at the annual meeting was that Mr. Page “lost his voice,” and “can’t do any public speaking engagements for the time being.”

The demands for more information about Mr. Page were quick and numerous because the tech investors have been taken down the prim rose path of “Nothing to see here. Move along!” before via late Apple CEO, Steve Jobs.  Mr. Jobs and Apple held information about his health condition close to the vest, and Mr. Jobs was gravely ill. Eerily, Mr. Page sent the same kind of e-mail to employees that Mr. Jobs sent Continue reading

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“Why is it that defendants remember how much they love their family after they committed a crime that puts that whole relationship in jeopardy?”

U.S. Federal Ditrict Court Judge Jed S. Rakoff during the sentencing hearing for Adam Smith, Harvard MBA.  Mr. Smith was a portfolio manager at the Galleon Group hedge fund and turned state’s evidence.  He received probation.  Raj Rajaratnam, Mr. Smith’s former boss and Galleon’s CEO,  was sent up the river for 11 years after a trial at which Mr. Smith testified against him. Mr. Smith was the fellow who drove to upstate New York and dumped his computer in the trash when he knew his arrest was imminent.  You never trust the people you cheat with; they will throw you under the bus.

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“Everyone cheats. I thought ‘I can make this back.’ I wasn’t worried in the least. I was a good trader. I was a workaholic.”

Former hedge fund manager, Samuel Israel III, reflecting on his fraud – a $450 million Ponzi scheme that resulted in a 22-year prison sentence.  They always think they can keep things going until the news is better.

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