Duke Lacrosse Players Sue Duke University – Is This Going Too Far? Comments By Ethics Speaker Chuck Gallagher

Every time I speak to a group, I remind them that every choice has a consequence. (www.chuckgallagher.com) That has proven to be true in the unjust trial of the Duke lacrosse students and resulted in significant consequences for Mike Nifong – the former prosecutor. Apparently, however, the consequences for those directly involved were insufficient to give all involved a taste of what they might feel is a fair and just outcome.

Today, 38 of the 47 members of the 2006 Duke University men’s lacrosse team brought suit against Duke University and a number of other people claiming a multitude of damages that they feel compensation is needed to resolve. The complaint, among other things alleges:

• Intentional and negligent infliction of emotional distress based on the false and misleading information about the medical and physical evidence of rape provided by Levicy to the Durham Investigators that spurred on the rape investigation, the active suppression of exculpatory evidence, conduct and statements that maligned the lacrosse players and active conspiracy with the Durham Investigators and Supervisors.

• Breach of various duties of care owed the plaintiffs including the duty of care in conducting and reporting of forensic medical examination and the duty to warn of the hazards created by the Duke Defendants in providing false and misleading information to the Durham Investigators and not disclosing exculpatory information in their exclusive possession.

• Fraud, negligent misrepresentation, abuse of process, and violations of fourth amendment rights based on Duke University’s disclosure of confidential key card reports to the Durham Investigators in violation of FERPA and Duke’s attempt to cover-up that illegal disclosure by collaborating in the issuance and use of a sham subpoena.

• Fraud through abuse of the confidential relationship between various Duke Defendants and the lacrosse players during the rape hoax crisis when defendants advised team members not to tell their parents and not to seek or obtain legal representation and by steering the players to Duke’s chosen advisor, Defendant Wes Covington.

• Breach of duty based on Duke’s special relationship with its student athletes. Duke failed in its duty to seek to protect these students from harassment, harm to their reputation, a rogue criminal investigation

• Breach of contract for Duke’s failure to follow and enforce its own anti-harassment policy, cancellation of the lacrosse season, violation of procedural rights.

So what do these 38 people feel is a fair consequence to compensate for the pain and loss they feel they’ve incurred? According to the complaint, they have asked for damages to compensate for injuries to reputation, emotional suffering, past and future economic losses, invasion of privacy, constitutional deprivations, loss of educational and athletic opportunities, loss of future career prospects, legal and other expenses, and other injuries proximately caused and enhanced by defendants’ wrongful conduct; and for damages, in an amount to be established at trial, to punish defendants for fraudulent, willful and wanton, and malicious conduct; to punish defendants for outrageous conduct pursued with actual malice that recklessly and callously disregarded plaintiffs’ physical and emotional well-being and constitutional rights; to discourage defendants from engaging in similar conduct in the future; and to deter others similarly situated from engaging in similar wrongful conduct. The full complaint is listed here.

The suit was filed against Duke University, Richard Brodhead, Duke’s medical center, the City of Durham, and various city officials.

Consequences from the wrongful prosecution:

• The three accused players reached an undisclosed financial settlement with Duke in June, but later filed their own federal civil rights lawsuit against Nifong, the City of Durham and the police detectives who handled the case.
• Former Durham district attorney Mike Nifong, has since been disbarred and spent a day in jail for his handling of the case against the three players. Likewise, Nifong has lost his job and filed for bankruptcy.

Questions:

• Are the claims made by the 38 individuals reasonable? Better, if it were you, would you expect compensation?
• If the three players have had settlements, is this complaint a reach for deep pockets?
• What do you think should be the outcome from such a massive suit?

Feel free to comment.

Business ethics speaker, Chuck Gallagher, signing off…

Tax Fraud – Two Men Sentenced to Prison for Deducting Personal Expenses on Their Tax Returns – Ethics Speaker Chuck Gallagher Comments

Paul and Paul, both from Washington state, were sentenced to federal prison for making and subscribing to false income tax returns. Paul Austin, age 58, and Paul Werlink, age 61, were told at sentencing that “Our tax system will not work if people don’t comply with it and understand that it is for the betterment of the entire country.”

When the men pleaded guilty on October 25, 2007, they admitted that during the calendar years 1998 through 2003, PAUL AUSTIN, who was formerly the president, and a fifty percent owner of, The Safety Team, Inc. and PAUL WERLINK, who was formerly the corporate secretary, and the other fifty percent owner, directed that certain of their personal expenses be paid by the corporation. Their failure to report these payments as income caused a material understatement of their personal income and the income tax due and owing for each of these calendar years. AUSTIN has since paid $320,000 in back taxes, civil penalties and interest. WERLINK has paid $90,000 in back taxes, civil penalties and interest.

Now, just to make this clear, both men paid the government what was due – including penalties and interest. That means that whatever benefit they thought they were getting in the short run, was eliminated and perhaps the cost of restitution to the government was more than the benefit they received.

The Safety Team, Inc, is a business located at 670 South Lucile Street in Seattle, Washington, which specialized in the installation of fire extinguishing systems, the sales of fire prevention equipment, and consulting on fire safety. For each year in question, the aggregate amount of these payments for personal expenses was omitted from PAUL AUSTIN’s and PAUL WERLINK’s personal income tax returns, but was included as a corporate expense on the corporate income tax return of The Safety Team, Inc. In addition to understating their personal income, PAUL AUSTIN’s and PAUL WERLINK’s actions also caused a material overstatement of business expenses and a material understatement of the corporate income tax due and owing on the corporate returns for these same years. PAUL V. AUSTIN and PAUL WERLINK later sold their interests in The Safety Team, Inc., and are no longer involved as owners of the business.

Sure enough – Every choice has a consequence. For those who read my blogs regularly, you know that statement will resonate. You can make choices that you think have no consequence, but the reality is – you do reap what you sow.

At AUSTIN’s sentencing Assistant United States Attorney Robert Westinghouse told the court, “for more than ten years Mr. Austin systematically cheated on his taxes. He made a knowing decision to shirk his duty as a taxpayer…. The message should be ‘when you cheat on your taxes you are going to go to jail,’ and that is a message that will resonate with the public.”

As the gavel was dropped and the sentence handed down, Judge Martinez agreed with the prosecutor by telling the men, “Every time you used the corporate credit card to pay your personal expenses you cheated the rest of the taxpayers.”

TAKE NOTE: As a business ethics and white collar crime speaker, (www.chuckgallagher.com) I know first hand the effect of the choices you can make. Be honest with the government. Pay your taxes. Don’t take risks in this area. The price is too great. Federal prison is not fun!

Whoever Thought A Car Loan Could Land You In Prison – Melvin Van Holloway Guilty of Bank Fraud

As a business ethics and white collar crime speaker, (www.chuckgallagher.com) I often tell groups – Every choice has a consequence. The strange part about choices and consequences is – if you don’t see an immediate consequence, often you find yourself caught in the illusion that there isn’t one. When I speak about the Truth about Consequences – I share that one can never escape the consequences that follow ones choices. I know. I speak from experience.

Today, as announced by the US Attorney’s office in the Southern District of Texas, Melvin Van Holloway, age 40, had to step forward and begin the process of accepting the consequences of his actions by pleading guilty to bank fraud in connection with loans he made at Capital One Bank.

According to the news release: Holloway made material false statements in connection with his applications to obtain over $100,000 in automobile loans from Capital One N.A. and its subsidiary, Capital One Auto Finance. He was confronted at the bank by United States Secret Service in the process of trying to secure an additional $25,000 personal loan. In making the loan applications, Holloway used the social security number of another person without authorization.

Sentencing is scheduled for June 2, 2008. HOLLOWAY faces a possible sentence of up to 30 years imprisonment and a possible fine of up to $1,000,000.

Considering the pool of “free money” has seemingly dried up and lender are taking a more careful look at loan applications, it makes no sense to make false statements in connection with any loan application. Remember, every choice has a consequence. Making false statements is a crime, so is obtaining money under false pretense. In Van Holloway’s case, it appears that he also participated in what most would call identity theft by using the social security number of another person.

While I doubt that Van Holloway will get the maximum sentence, there is no doubt that, in the prime of his life, Van Holloway will spend time in federal prison. Having been there myself, I can state categorically it is not “club fed.” Federal prison is something to be avoided. It is not fun and Van Holloway will find that his life will be altered in dramatic ways.

One this is certain, Van Holloway will learn the lesson that I learned the hard way – crime doesn’t pay.