Funeral Funding Made Easy – Funeral Homes Should Not Be Banks!

In addition to being a professional speaker, I am also the VP of Marketing for American Funeral Financial.  This article was posted on the “Funeral News” blog and I asked permission to post it on my blog.  It’s nice when a firm performs so well that they get positive press.  The article appears below just as it was printed on “Funeral News.”

While the focus of Funeral News is to report on death-care related events, we consider our sponsor to be an important asset in the advancement of our cause.  As such, we have asked American Funeral Financial to provide this guest article to our readers.  The following was provided by the fine folks at American Funeral Financial, LLC.

You just received a first call.  The family is facing something that, for them, is unusual and, in many cases, unexpected – the death of a loved one.   Not only are they dealing with the emotion of their loss, but are soon to be faced with the costs associated with paying for – what for most is one of the most expensive single purchases of their life.

As funeral directors and/or death care providers the family comes to expect, especially in this day and age, expert service.  What the family may be unprepared for is the immediate need for payment for the goods and services that funeral professionals provide.  On the other hand, unless the family can pay with cash, a valid check or major credit card – you, the funeral service provider, are relegated to becoming a bank.

Times have changed and so have expectations.  Assume for a moment that you were to receive your paycheck on Friday and today is Tuesday.  Could you go to Walmart and purchase groceries with the promise of payment from your check on Friday?  Could secure a cell phone from Verizon with the promise of payment in the future?  The obvious answer to these, or similar questions, is a resounding – NO!  It is no longer reasonable to assume that funeral service providers should be forced to wait for their funds considering the difficulty that many face with insurance assignments today.

Due to the rising costs of goods and services, more and more funeral homes and cemeteries are requiring payment in full prior to providing funeral services or making the interment.  With the economy today, we find more and more families are relying on insurance as the funding vehicle to pay for those services.  Unfortunately, it can take weeks or even months for the insurance company to pay the claim to the beneficiary or funeral home.  In addition, the paperwork associated with funeral financing via an insurance assignment is becoming more complicated and time consuming, taking valuable time away from doing what you do best – serving families.

American Funeral Financial has created an industry leading proprietary system that takes the burden off of you and your staff and makes the process of funeral funding through insurance assignments easy.

• No longer do you have to verify the insurance assignment with the insurance company – American Funeral Financial does that for you.
• No longer do you have to due the burdensome paperwork – American Funeral Financial does that for you.
• No longer do you have to have experience waiting for your funds – American Funeral Financial pays you the next day following verification.

The process is simple.  Once you have signed on with American Funeral Financial – Your Funeral Funding Experts – you’ll have access to our simple web-based entry system.  Working with the American Funeral Financial web system is easy.  Sign in and in less than 10 minutes you will have the paperwork done and the verification process begun.  American Funeral Financial does the verification for you.  Once you have been notified that the assignment can be done, you will have the beneficiary sign the paperwork (that we prepared for you on the web) and we will fund your services.  It is that simple!  Fees to AFF are competitive and come directly from the policy assignment proceeds so funeral homes and cemeteries are paid their full fee for services rendered.  There is no cost to the funeral home or cemetery.

No waiting for your funds, no hassle, no problems!  American Funeral Financial is a full service firm that is run by professionals with years of experience in the death-care industry.  AFF knows what you need when you need it.

But there’s more!  American Funeral Financial knows that you need your money for services rendered.  You do not need to be the bank!  Likewise, so do the beneficiaries.  Therefore, as part of the process – when your firm has signed up with American Funeral Financial – the funeral funding experts – the beneficiaries of the life insurance policies being assigned are eligible to have advanced to them the remainder of the policy to take care of any short term funding needs that they may have personally.  That’s right – you are paid and they get the funds advanced to them for the remaining part of the policy (assuming they want a personal cash advance).

Our team working for your team when you need it the most – because the cash you have today can have a profound effect on the success of your business tomorrow!

Brad Stinn Sentenced – Every Choice Has A Consequence – Update by Chuck Gallagher Ethics Speaker

On of the most viewed Blog entries was the one about Brad Stinn and Friedman’s Jewelers.

Pump up those sales! We’ve got to make the quarter! How often are those command heard and how tempting is it to make the wrong choices in order to please the investing public and Wall Street?

Following six weeks of trial – Bradley Stinn, age 47, – former CEO of Freidman’s, Inc. and Crescent Jewelers, found himself being convicted of securities fraud, mail fraud and conspiracy. Likewise, in addition to Stinn’s conviction, the former CFO, Victor Suglia and form Controller, John Mauro have entered guilty pleas into what was a massive accounting fraud.

Having been found guilty, the wheels of justice in the federal system move slowly at times.  Many have wondered just what outcome would befall Brad Stinn  who some hated and others sympathized with.  Well, today the verdict has been handed down.

His sentence:

12 years in federal prison

3 years probation

$4M restitution

He should report sometime in the next 60 days

Speaking from experience, Stinn will be required to serve 85% of his active sentence, which means that he’ll serve 122.4 months – which is a long time!

US Attorney’s New Release:

Bradley Stinn, the former Chief Executive Officer of Friedman’s Inc. and its affiliate, Crescent Jewelers, was sentenced today to 12 years’ imprisonment for securities fraud, mail fraud, and conspiracy. On March 24, 2008, following a six-week trial, a federal jury in Brooklyn convicted Stinn on all counts in the indictment and returned a forfeiture verdict against him in the amount of $1,019,000. The trial and sentencing proceeding were held before Senior United States District Judge Nina Gershon.

The sentence was announced by Benton J. Campbell, United States Attorney for the Eastern District of New York.

During the period of the conspiracy, Friedman’s was a national jewelry chain whose shares were traded on the New York Stock Exchange. The evidence at trial established that Stinn led a multi-year securities fraud scheme that inflated Friedman’s reported financial performance and hid from the market the serious problems the company had collecting money owed for hundreds of millions of dollars of jewelry that it had sold on credit. As part of the scheme, Stinn and his co-conspirators repeatedly lied to shareholders and the investing public about Friedman’s financial performance, made false and fraudulent representations to Friedman’s auditors, and manipulated the company’s accounting in order to prevent auditors from discovering the falsity of Friedman’s financial statements. As found by the court at sentencing, Stinn’s fraud scheme resulted in Friedman’s shareholders and other victims of the scheme losing more than $20 million.

Several months after the announcement of the government’s investigation in November 2003, Friedman’s stock was de-listed from the New York Stock Exchange. Friedman’s ultimately filed for bankruptcy in January 2005.

As always, this blog is open for comments.

Do you think that this sentence is fair?

Would you, if you had the opportunity to serve on a jury, have given Brad – more, less or this amount a punishment for his guilty plea?

COMMENTS ARE WELCOME!

Ethics Speaker Chuck Gallagher to Address University of South Dakota Business Ethics Symposium

VERMILLION, S.D. – During troubled economic times, Chuck Gallagher isn’t afraid to share his story of success – and how he lost it all. Gallagher, a business executive and motivational speaker, will be a guest of the Beacom School of Business of The University of South Dakota on Monday, April 27 at 7 p.m. in the Wayne S. Knutson Theatre.

Gallagher, a former CPA who lost everything because of poor choices, will present the program “Choices: Negative Consequences, Positive Results” where he will discuss some of the decisions he made in his attempts to make a better life for he and his family. Gallagher eventually lost it all, spent time in federal prison, but has found success again by making the right choices – personally and professionally.

“My lecture deals with issues of business ethics, particularly the choices we make in life and the consequences that follow,” says Gallagher. “Having been a successful CPA in the 80s, spent time in federal prison in the 90s and risen to the level of senior VP in a public company in the 2000s, I can speak from experience that I’ve lived with negative consequences thanks to some very stupid choices I made. But I’ve also had some incredible positive results based on the choices I made after spending time in a federal prison.”

Gallagher’s message is sure to resonate with students who are seeking answers on what it takes to be successful in today’s business world despite the presence of poor ethics and negative consequences. Ultimately, he explains, it’s about students differentiating themselves – positively – from their peers.

“I’m the poster child of what not to do,” he admits. “Ethical issues aren’t always black and white. If you want to be successful, ask the question ‘what are you doing to differentiate yourself?’”

A professional speaker, business entrepreneur, and sales executive, Gallagher has led a $40 million sales region with 125 sales representatives and started his own training business with projects in 30 states. Gallagher currently helps employees increase their sales results and skills while realizing the ramifications of their ethical choices. In addition to addressing students and audiences at colleges and universities throughout the United States, Gallagher also shares his business ethics message with business-related and health care related organizations.

“Choices: Negative Consequences, Positive Results” is made possible by the Beacom Opportunity Fund and the Arthur A. Volk Symposium. The Beacom Opportunity Fund provides resources for initiatives that promote the Beacom School of Business’s students and programs. Funding from the Volk Symposium affords opportunities for the business school to bring together students, academicians, and business leaders for discussion of current topics of interest. For more information about “Choices: Negative Consequences, Positive Results,” please contact the Beacom School of Business at (605) 677-5455.

A photograph of Gallagher is available for download at www.usd.edu/urelations/images/Chuck_Gallagher.jpg.

About The University of South Dakota
Founded in 1862, The University of South Dakota is designated as the only public liberal arts university in the state and is home to a comprehensive College of Arts and Sciences, School of Education, the state’s only School of Law, School of Medicine, School of Health Sciences, the accredited Beacom School of Business and the College of Fine Arts. It has an enrollment of approximately 9,200 students taught by 400 faculty members. More information is available at www.usd.edu/press/news.

Funeral Fraud – LA Women Charged in $1 Million Fake Funeral Scam – AMAZING!

I have heard of many things, but this one ranks high in creative approaches to scamming.  The R I P button likely stands for Resides In Prison cause that’s where these two will go if the charges alleged are proven.

According to the US Attorney’s office in LA – two women – allegedly participated in a scheme to cash life insurance policies for fictitious individuals and stage  funerals to create the appearance that the individuals had died.

According to the indictment, Shilling, a phlebotomist, and Crump, an employee at a now-defunct Long Beach mortuary, defrauded multiple insurance companies over a three-year period by cashing life insurance policies for non-existent identities, whom they claimed had died. As part of the scheme, Shilling and Crump allegedly caused the preparation of bogus death certificates, purchased burial plots and staged phony funerals to lend credibility to the scheme. When staging the funerals, the women allegedly filled caskets with various materials to make it appear they contained actual corpses.

Shilling and Crump allegedly defrauded several lending companies that advance cash to cover funeral expenses in exchange for a portion of the decedent’s life insurance policy. Shilling, Crump and their accomplices allegedly filed false documents with the County of Los Angeles stating the remains of one man were cremated and scattered at sea, when in fact no corpse existed. The indictment further alleges that defendant Crump offered a medical doctor $50,000 to create records supporting the fake death certificate.

According to a report in Connectingdirectors.com:

The US Attorney stated said the “dead” were likely fictitious people, but said identities of real people may have been stolen.

In one funeral at a Long Beach mortuary, authorities alleged that the women loaded a casket with various items to simulate the weight of a corpse they called “Jim Davis.” They purchased a plot in a Compton graveyard, had a funeral and had the casket buried.

In addition to the life insurance claims, which included a $250,000 policy, prosecutors said the women secured payments from financing companies to pay for inflated funeral costs.  We talked with representatives from American Funeral Financial (one of our sponsors) to ask about precautions for such activity.

We (at American Funeral Financial) work hard to provide service to our customers – the many funeral homes and cemeteries across the country that rely on us for funeral funding.  This story is quite amazing and not remotely normal in the standard course of business.  We make sure that we know our customers and have a comfort level of their viability before we enter into any funding transactions.  The steps we deal with to make funeral funding decisions should prevent this type of fraud from happening.  Still this is quite amazing.

Shilling and Crump were charged with mail fraud and wire fraud in connection with a scheme to defraud insurance companies and lending companies out of more than $750,000.  Two other women, Lydia Eileen Pearce, 37, owner of a mortuary in Long Beach, and Barbara Lynn, 54, a notary from Los Angeles, previously pleaded guilty in the alleged scam, said Montero, and he believed that more arrests were likely.

If convicted, they could face 20 years in prison.

YOUR COMMENTS WELCOME!

Chuck Gallagher – Business Ethics Expert Speaks at United States Coast Guard Academy 20th Annual Ethics Forum

Given the increased complications junior officers face and what was seen as a gradual deterioration in moral and ethical standards of behavior within the government, the class of 1948, at their 40th reunion, felt that the Academy graduates should have the best foundation possible in the humanities, government, integrity, ethics and political judgment.  Furthermore, they felt that Academy graduates must be outstanding citizens, as well as good officers and leaders.

These words reprinted with minor modification are part of the program for the 20th Annual Coast Guard Academy Ethics Forum.

In 1989, the Class of ‘48 established an endowment fund, now supplemented by the Class of ‘57, “To provide a source of investment income to stimulate and enrich the training of the Corp of Cadets in good citizenship and ethics.”

As a business ethics speaker with strong ties to University and higher education presentations in ethics, I was honored to accept the invitation to speak to the United States Coast Guard Academy for their ethics forum.  Knowing that every choice has a consequence, I feel that it is part of my calling to remind, if not impress, on the minds of young adults the critical importance of understanding that consequences always follow choices made.

While many people cannot imagine making choices in life that can lead to disastrous consequences, the reality is we all are vulnerable to temptation and as soon as we say it will never happen to me, the likelihood is that a test of integrity or ethical decision making is headed your way.  Many of the cadets attending seemed to get the message, knowing that they are being groomed to be responsible for lives of US citizens and property of the US Government.

Prior to my presentation, many exceptional people (speakers and presenters) were assembled to make this 20th annual event memorable and effective for the participants.  A keynote presentation, made on opening night by Rear admiral William F. Merlin, was a highlight and set the tone for the event for the cadets.  Rear admiral Merlin spoke of (1) greed and (2) hubris – as the foundation of unethical behavior.  As I listened to his comments, I had to apply them to my own personal story, which I openly shared with the cadets in my presentations today.  While I didn’t start my venture into unethical behavior with greed in mind, I honestly must say that “greed” took over and “hubris” became the word of the day.  I was, self defined, as the smartest man in the room and felt that somehow the rules didn’t apply to me.

Wrong.  The rules do apply to me and to everyone else.  In fact the one rule that sticks out now most is the rule – you reap what you sow.  That’s true.  I did.  Prison following bad choices was the consequences of my sowing – so to speak.

Rear admiral Merlin completed his comments with one more word – humility.  Again, his words spoke directly to me.  When the illusion I had created was dissipated – the bubble burst so to speak – I was faced with the daunting task of telling my wife, family, business partners and friends that I was no more than a liar and thief.   There is nothing more humbling than speaking the truth and knowing that the illusion of success was gone.  Yet, as difficult as it was to communicate that truth, it was also freeing.  Unencumbered by illusion, I was able to make new empowering choices that (like all choices) would have a profound consequence – only this time in a positive manner.

Perhaps, though I may never know the impact, the words spoken in my presentations and those of others – may – just may – have an impact that is positive.

As I closed by thoughts I stated the following:

Before I took those 23 steps into prison – I thought I made good choices.  After I became 11642.058 (my prison number), I understood that every choice has a consequence.  If you want positive results in life you must build a foundation of good choices.

Before I took those 23 steps – I lived life as an illusion.  After I became 11642-058, I came to know that truth is freeing and though painful at times will always support a foundation of trust which is the backbone of all relationships.

Before I took those 23 steps – I thought I was successful.  After I became 11642-058, I came to understand that success has nothing to do with the things we amass, but rather success in life is defined by the impact we have on those we come in contact with.

Make wise choices – look past life’s illusions and claim your success by making a difference in the lives of those come in contact with.  As future leaders, we, the people, are placing our trust in you!

As a side note, the US Coast Guard Academy is listed as one of the top schools in 2009.  Congratulations.

Dumb but Premeditated Fraud – Stephanie L. Mayer of Simpsonville, SC Pleads Guilty

As I leave Pittsburgh, PA from a speaking engagement on ethics and fraud, I couldn’t help but stop when I read about a 38 year old Simpsonville, SC woman and her attempt at fraud.  A “Bernie Madoff” she isn’t as her fraud lacked creativity and ended quickly.

Every choice has a consequence.  That is a statement that I speak often as I address groups nationwide.  Whether it is Bernie Madoff, his accountant (now charged with fraud), Robert Stanford, Gordon Grigg or a host of others, the reality is whether the fraud lasts for some time or is short lived – in the case of Stephanie L. Mayer – there is a consequence for choices that we make.  If those choices are unethical, then the consequences can’t be good.

According to the US Attorney’s office:

In February 2008, Meyer opened accounts at four brokerage firms including the ultimate victims, The Vanguard Group and Ameriprise Financial.  Meyer then deposited worthless checks into the accounts, which resulted in fictitious or “phantom” balances.  Meyer then withdrew $175,000 from the credited Vanguard account and $130,000 from the Ameriprise account before the fraud was detected.

Without intending to sound judgmental, the “real impact” of the current recession wasn’t felt till late summer ‘08 or certainly the fall ‘08.  Therefore, the question is – what motivated Mayer to take such radical action.  She had to know that passing worthless checks to set up brokerage accounts was a venture that had a short life.

Of course – as reported in the Greenville News – “Until June 2008, Meyer deposited $5.4 million in checks spread across the firms from bank accounts that didn’t have sufficient funds to cover the checks, according to the charges.  She also pleaded guilty to mail fraud charges for mailings to Minnesota and Pennsylvania, according to the charges.”

BACKGROUND OF A FRAUD:

Frauds, regardless of type, need three things in order to take life – (1) Need; (2) Opportunity and (3) Rationalization.  The question related to the Mayer fraud is what was her (1) need and (2) rationalization?  The obvious opportunity was the method of execution of the fraud – which was amateurish and dumb.  How Mayer effected her fraud shows her lack of experience and hopefully will be taken into account in her pre-sentence report.

Her guilty plea could result in a penalty of up to 20 years in prison and a fine of up to $250,000.00 on each of the two counts to which she pled guilty.  While, I would suspect that Stephanie L. Mayer is an amateur fraudster, in the current environment, I would not be surprised if she received a prison sentence of well over three years.

If you know Stephanie and might comment on her motivation – please know that YOUR COMMENTS ARE WELCOME.

David G. Friehling, CPA for Bernie Madoff Investment Securities Charged with Fraud! And The Dominios Begin To Fall…

With a $65 Billion Ponzi scheme in play and Bernie Madoff electing to plead guilty, it is no great surprise that others will being to fall as the government widens the responsibility net for the largest Ponzi scheme in US history.

I must admit this hits home and was something I expected.  Although I wish I could say something different, I, too, was a CPA, created a Ponzi scheme and spent time in Federal prison.  It is no fun.  And, without a doubt, Friehling will spend time there himself – although my guess – his sentence will much longer than mine.

Yesterday, David G. Friehling, CPA (licensed in the State of New York) was charged with securities fraud, aiding and abetting investment adviser fraud, and  four counts of filing false audit reports with theExchange Commission (”SEC”).   Friehling is the sole practitioner at Friehling & Horowitz, CPAs, P.C. in New York.  As a point of reference, Friehling was the son-in-law of Jerome Horowitz (his former accounting partner) who didn’t live to see it all unravel.  He dided on March 12, the day Madoff plead guilty.

According to a news release issued by the US Attorney’s office:

From 1991 through 2008, F&H was the accounting firm retained by BLMIS (Bernie L. Madoff Investment Securities) purportedly to audit BLMIS’s financial statements. FRIEHLING created BLMIS’s certified and purportedly audited financial statements, including balance sheets, statements of income, statements of cash flows, and reports on internal control. FRIEHLING falsely certified that he had prepared such statements in accordance with Generally Accepted Auditing Standards (”GAAS”) and in conformity with Generally Accepted Accounting Principles (”GAAP”). Those financial  statements were filed with the SEC and sent to clients of BLMIS.   BLMIS paid FRIEHLING approximately $12,000 to $14,500 per month for his services between 2004 and 2007.

Sorry, but before going any further, one must question the payment.  $14,500 a month is a small price to pay for disgusing a fraud considering that Friehling will be facing certain loss of his license and a lot of time in Federal Prison.  But, there is more…  the news release goes on to say:

FRIEHLING failed to conduct audits that complied with GAAS and GAAP by, among other things, failing to: (a) conduct independent verification of BLMIS assets; (b) review material sources of BLMIS revenue, including commissions; (c) examine a bank account through which billions of dollars of BLMIS client funds flowed; (d) verify liabilities related to BLMIS client accounts; or (e) verify the purchase and custody of securities by BLMIS. FRIEHLING also failed to test internal controls as required under GAAP and GAAS standards. For example, FRIEHLING did not take any steps to test internal controls over areas such as BLMIS’s redemption of client funds, the payment of invoices for corporate expenses, or the purchase of securities by BLMIS on behalf of its clients. Further, commencing at least as far back as 1995, FRIEHLING did not maintain professional independence from his audit client, BLMIS.   Specifically, FRIEHLING and/or his wife had an account at BLMIS with a year-end net equity of more than $500,000 — the maximum amount that, under SEC rules, he could have invested with a broker-dealer client and still maintain his independence.

According to the SEC’s complaint, Friehling similarly did not conduct any audit procedures with respect to BMIS internal controls, and had no basis to represent that BMIS had no material inadequacies. Afraid that his work for BMIS would be subject to peer review, as required of accountants who conduct audits, Friehling lied to the American Institute of Certified Public Accountants for years and denied that he conducted any audit work.

Articles in Forbes stated the following:

“Friehling essentially sold his license to Madoff for more than 17 years while Madoff’s Ponzi scheme went undetected,” said James Clarkson, acting director of the SEC’s New York Regional Office. “For all those years, Friehling deceived investors and regulators by declaring that Madoff’s enterprise had a clean audit record.”

Madoff has said his business didn’t become a Ponzi scheme until the early 1990s, around the time that Horowitz retired and Friehling took over. He was not accused of wrongdoing in the court complaint.

Numerous reports claim that Friehling and family had $14 million invested with Madoff two months before his confession to the largest financial fraud in US history.  Since 2000, Friehling withdrew about $5.5 million from those accounts, the SEC stated.

WHERE FROM HERE?

Bernie Madoff, while perhaps brilliant (in his own way) is not capable – in my opinion – of pulling off a fraud of this magnitude without help.  I am not suggesting that Friehling knew about the Ponzi scheme (he says he didn’t), but it is likely that he’ll be found guilty on most of the charges as there is no doubt that he’s (at a minimum) negligent.  Selling his license for money seems very clear.

But, from these headlines, I suspect there will be a demand for more “accountability” for audited financial statements and regulations placed on compliant CPA’s.  That is not the answer.  I have stated before and will again, you cannot legislate or regulate ethics or morality.  If a person elects to be dishonest…they will be dishonest regardless of the rules in place.

Friehling was a puppet for Bernard Madoff.  Most people (although most will deny it) have a price.  It appears that Friehling’s price wasn’t all that much.  Comfortable yes – rich no!  And knowing that his reputation is ruined, his license all but gone and many many years in prison facing him, I know that Friehling wishes he’d never met Bernie Madoff.  Hind sight is 20/20 and there is no doubt with all that is facing this CPA – Friehling is just beginning to face the consequences of his choices.

Every choice has a consequence!

My prediction – Friehling isn’t the only pawn is this massive fraud to fall.  There will be others so stay tuned…

FRIEHLING, 49, faces a statutory maximum sentence of 105 years in prison.

YOUR COMMENTS WELCOME!

AIG Bonuses – Now Is Not The Time For Irresponsible Rhetoric Senator Grassley

How many adjectives can we use to describe the feelings associated with the news that AIG paid $165 million in bonuses when the Federal Government spend over $170 Billion – yes, that is Billion, in bail out money to save the ailing giant?

There is outrage and many in government leadership are expressing their opinions about how they feel about the audicity of AIG to effect those payments.  That said, it is also important to make sure that leadership on both sides of the isle don’t get carried away with their comments.

CNN reported the following comments:

Republican Sen. Charles Grassley of Iowa didn’t appear to be joking, however, when he spoke with Cedar Rapids, Iowa, radio station WMT.

“I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, ‘I am sorry,’ and then either do one of two things: resign or go commit suicide,” he said.

“And in the case of the Japanese, they usually commit suicide.”

Now I know that emotions are high, but come on Senator Grassley – that is political rhetoric and frankly is uncalled for.  I can’t believe for a minute that Grassley would, in fact, want anyone to commit suicide.  After all – we are talking about money and money can be replaced – human life can’t.

Perhaps as the night wears on cooler heads will prevail.  The right and ethical thing to do is reconsider how and when bonuses should be paid to a company that – but for the help of the taxpayers – would be bankrupt and out of business.  Further, more – this whole scenario should serve as a less for other businesses that line up to receive their bailout money.

Bonuses should be paid for outstanding performance.  When performance is lacking and, in fact, when a company faces the very real possibility of not continuing, then different choices should be made.  As a business ethics speaker, I understand Grassley’s frustration, but would hope that he would be more careful with his words.   Now is the time for level headed leadership, not sound bites spoken to garner media attention.

YOUR COMMENTS ARE WELCOME!

AIG Bonuses – Ethical or Insane? Business Ethics Speaker Chuck Gallagher Comments…

I want to make this clear – I am pro business!  I think that free enterprise is the life blood of our economic system and I fully support people making lots of money.  But, I have to question whether the payment of upwards of $165 million in bonuses to AIG employees is ethical or just insane?

QUESTION ONE:

The arguement in favor of AIG paying the bonuses is that the contracts that generated the bonuses were established before the economic meltdown and before AIG accepted government bailout money.  Employees who work(ed) for AIG therefore should be entitled to payment under the terms of their contract for services performed.

• Do you agree?
• Does the company have an ethical or moral obligation to pay regardless of circumstances?

QUESTION TWO:

AIG has accepted, according to published reports, upwards of $170 BILLION of government bailout money.  Sorry for the editoral content, but that is quite amazing by any standard that I could consider.  Nothing like that has happened in my lifetime and I’m over a half century in years.  So – here are some questions to consider:

• Should AIG be forced to void pre-existing employment and bonus contracts if they accept government bailout money?
• Should bonuses be paid?
• What basis or grounds for payment or nonpayment make sense for AIG?

QUESTION THREE:

If a homebuilder constructs a home and finds that he/she cannot sell it for the asking price and, in fact, finds that the market for his product is below the construction loan – what happens?  Most of the time, the bank will foreclose and the sub-contractors, who have mechanic leins against the property, lose their time and receivable.  In other words, they lose because circumstances have changed.

• Is AIG in the same circumstance?
• Should the employment compensation contracts be treated similar to a mechanics lien – void through forclosure?
• Is the government’s bailout of AIG in effect a forclosure to avoid bankrupcy?
• Is there any reason that AIG should be treated differently than other small businesses that are unable to honor their commitments today?

FINAL THOUGHTS:

The definition of business ethics is, in business situations, the discipline dealing with what is good and bad and with a moral duty and obligation.  The question for AIG is – what is the ethical thing to do?  As a business ethics speaker, there is no right or wrong answer to most situations, it rather is a function of doing the right thing considering all the facts and circumstances.  My opinion – the moral duty and obligation in this situation is to void the employment bonus contracts and accept that were it not for the taxpayers, AIG would not be in business!

Now is the time for AIG and any organization that accpets bailout money to make the tough decisions that honor the trust that the federal government and taxpayers have given them.  Look to Lee Iacocca’s example – when the government bailed out Chrysler, he took $1 as his compensation.  Perhaps the folks at AIG should take note.  One thing is for sure they are not winning friends and influencing people – at least not positively.

YOUR COMMENTS WELCOME!

Bernie Madoff – The Human Tragedy. Is Compassion Possible?

At the end of the movie – Saving Private Ryan – Ryan, as an old man speaks these words to his wife who walks up to his side:

“Tell me I’ve have led a good life.  Tell me I’m a good man.”

I must say that, although I’ve seen that movie many times, I am always brought to tears.  I am touched knowing that others come into our lives for a reason and, through their efforts, we find that our lives are shaped.  In Ryan’s case, his concern was living up to the sacrifice made for him and on his behalf.  Ryan wanted to know if the life he lived and the legacy he left was worth the price.

As the movie ended, I could not help but feel sadness for the tragedy that came to light some four months ago when Bernie Madoff admitted that his work wa nothing but a ponzi scheme.  As those words were spoken – lives were changed and, at least for now, not for the better.  The reality of lost investments came to light, financial futures were changed and Madoff’s legacy was forever etched in history.

THE HUMAN TRAGEDY:

From the standpoint of those who were victimized the loss is great.  But the tragedy goes much deeper than lost money.  I do not wish to minimize the loss of treasure, but it is – afterall – just money.  Money can be made and often is lost.  The question is how do we react to that loss?

I heard one of Madoff’s victims on a radio clip Thursday the day Madoff was sentenced.  She said, “My life is over…”  I cringed when I heard her comments.  I, too, (admittedly for different reasons) lost everything material.  I know the feeling of loss and despair, but LIFE IS NOT OVER.  In fact, while life will most certainly change, she still has her freedom and the ability to make choices to improve her life.

One part of the human tragedy is the natural feeling of anger that lost trust naturally brings.  That anger and the negative emotion that is a part of what we hear about Madoff does little to promote joy and healing.  Perhaps over time that will come.

There is grief over loss.  In this case the loss is not only the obvious – the investments that didn’t exist, but the grief over loss is the trust that forever is gone.  Many people have come to learn the pain of betrayed trust, and that is hard to heal from.  As I have talked with victims from other similar scams, many have said that they have a hard time trusting anyone.

MADOFF’S LEGACY:

Beyond the victims, I have to say that I feel for Madoff.  I do not condone his actions – they are abhorent.  But, I feel for the man.  Imagine for a moment the feeling inside as Madoff once again crawls into his prison bed.  As a child, as a teen as a young man, never would he have imagined that the end of his life would be spent in prison.  In his early years he was able to use his intellect to benefit others and himself.  Madoff is not dumb and certainly has a vast compentency.  Unfortunately, he elected to miguide his brilliance.

Again, at the risk of offending his victims, I do not express my feelings for Madoff in support of his actions.  He has earned every night he spends in prison.  The empathetic feelings I have are for him as a human being.  How tragic that his actions have not only hurt those whom he was entrusted with investments, but his actions have harmed his family and others closely connected to him.

As a human being, it is difficult to find your life relegated to the structure and environment of prison.  Here’s a man who has a brilliant mind, who now will wake at 6ish each day, eat prison food at designated times and eat only what is offered.  He will eventually be assigned a location which will likely be a medium to minimum security facility.  It is NOT “Club Fed” – the days are filled with counts, structure and work.  You quickly lose the feeling for the outside world as contact is kept to a minimum and while you may read the newspaper, you find that reading or TV is no replacement for contact that free people have with each other.

As time goes on as he languishes away in prison, those close to him will die – but, he’ll find himself disconnected.  He will have gone from high flying financier to just another inmate.  He will withdraw for his own protection finding that the culture in federal prison is something foreign to him.  He will hear and learn things that will repulse him and there will be those who will leach on to him hoping to make him their prey.  Perhaps, they might think, “If I can threaten or endanger him, I might get some money for my family on the outside.”  He may become a target or he may just fade into oblivion.

For a time, he will continue to have notoriety as the federal government seeks to unravel the true scope of his actions.  Did his wife and/or children know?  Were they involved?  Was his accounting firm in the know or where they just incompetent?  How was he able to maintain the grandeur of his illusion for so long?  These questions and many more will arise – but all the while, the human tragedy is that someone – Bernie Madoff – through his choices is ending his life sitting in a prison cell.

Beyond Madoff – for a moment – imagine being one of his children, grandchildren or greatgrandchildren – the name Madoff is tainted.  He will be remembered for his crime – for the effect he had on the lives of thousands who trusted him – for his last days spent in prison.  If you were a grandchild – think of what happens when you enter college and for the first time the teach calls the role.  When they get to your name and say “Madoff” – think of the looks you’ll get when folks quickly begin to wonder – “is he connected to that guy”?   Their lives have been changed forever as well – and not by their doing.

Charles Ponzi created this scheme.  The name “Ponzi” is forever associated with something negative – just like the name Hitler.  As we live our lives today, the same is true with “Madoff” – his name has been etched in history never to be associated with positive thougths.

FINAL THOUGTHS:

As a business ethics and fraud prevention speaker, I know what it must be like for Madoff – this his first weekend in prison.  While I wish I could say otherwise, I know because I’ve been there.   I earned my time there.  It was no fun, but punishment is a consequence of choices.  My choices led me to prison, and Madoff’s have led him there as well.

Perhaps, when the dust settles, we can all take a moment and, like Private Ryan from the movie, ask “have I led a good life?”  I pray when my life ends that I’ll be able to look back and see a life well lived.  I wonder though for Madoff if it is possible for people to find compassion while at the same time accepting that his life is prison is a clear consequence for the choices he made?

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