Rich Dad Poor Dad Ethics on the line – Robert T. Kiyosaki files for Bankruptcy. Choices Consequences and an Ethical Challenge!

Just a few days ago it was reported that Robert Kiyosaki of “Rich Dad, Poor Dad” fame filed for corporate bankruptcy through Rich Global LLC – one of his many companies.  Rich Global LLC filed for Chapter 7 bankruptcy protection on Aug. 20 in a Wyoming bankruptcy court.  The New York Post reported the following:

Robert Kiyosaki

After a long, lucrative career writing financial self-help books and giving seminars, “Rich Dad Poor Dad” author Robert Kiyosaki has filed for bankruptcy for one of his companies after losing a $24 million court judgment.

Kiyosaki’s Rich Global LLC filed for bankruptcy after being ordered to pay nearly $24 million to the Learning Annex and its founder and chairman, Bill Zanker.

US District Judge Shira A. Scheindlin in April ordered Rich Global to pay up $23,687,957.21 after a jury ruled Kiyosaki must give the Learning Annex a percentage of his profits after using their platform for speaking engagements, including a 2002 gig at Madison Square Garden.

The challenge here, at least for me, is not the bankruptcy filing – rather it’s the ethical implication related to the filing.  The short version is that there was an agreement with the Learning Annex to promote Kiyosaki and his brand for a percentage.  By all accounts they did their part.  The challenge is they claim that Kiyosaki didn’t do his.  In other words he didn’t pay up.  Again the New York Post states:

Zanker told us, “I took Kiyosaki’s brand and made it bigger. The deal was I would get a percentage, and he reneged. We had a signed letter of intent. The Learning Annex is the greatest promoter. We put his ‘Rich Dad’ brand on a stage. We truly prepared him for great fame and riches. But when it was time for him to pay up, he said ‘no.’ ” This has taken years in court. I won even more money than I asked for from the jury, then he declared corporate bankruptcy. Oprah believed in him, and Will Smith believed in him, but he didn’t keep his promise to us.”

Mike Sullivan, CEO of Kiyosaki’s Rich Dad Co., told us that Kiyosaki, said to be worth $80 million, was still doing very well thanks to investments in other companies: “The dealings we had with Learning Annex were with a company that hasn’t been in business for a number of years . . . I am not surprised Learning Annex is upset and angry, the money doesn’t exist in that company, and we can’t bring money out of the group.

The core question – If a jury in a court of law says that you failed to honor your contract with a service provider and they establish an award as punishment, compensation, or justice for the failure that they found existed, is it ethical to use the legal system to avoid the consequence?

“Robert and [wife] Kim are not paying out of personal assets. We have a few million dollars in this company, but not 16 or 20. I can’t do anything about a $20 million judgment . . . We got hit for what we think is a completely outlandish figure.”

Reportedly work some $80 million, it would seem that Kiyosaki’s ethical limit is defined by money.  But is that right?  Certainly many would argue that the legal system is designed to protect one from unfair or unjust circumstances much like what I suspect Kiyosaki feels he received.  Yet, others would argue that justice was served at the hand of the jury and that Kiyosaki has an ethical moral obligation to honor the award and pay up.

But what if we take this to a higher plain.  Is it possible that short of paying up based on the idea that it is moral, ethical and founded in integrity, that failure to do so will create the desired outcome anyway?  Is it possible that when one violates, what to some is simple ethics, that reality is karma takes over and delivers the outcome or consequence anyway?

It is not up to me to judge – rather I am interested in the ethical questions and what you think.  YOUR COMMENTS ARE WELCOME!

Bottom Line or Business Ethics – Which is more Important? Judith Samuelson’s article discusses – Chuck Gallagher Business Ethics Speaker comments…

There have been a flurry of articles lately about what and how business schools teach business ethics.  The most recent, an article written by Judith Samuelson on the HUFF Post Business section states the following:  “Research conducted by the Aspen Institute suggests that ethics IS taught in business schools, and, increasingly, with an eye to making it stick by embedding it in orientation programs, “learning journeys,” core course work and hands-on experience.”

It is in the first part of her article that I take exception.  As a business ethics speaker and author I see first hand what seems to be the norm for business ethics offerings in b-schools and it’s pathetic – at least that’s my opinion.  Samuelson goes on to say, “Business ethics goes by many names and the vast majority of schools in the Institute’s ranking of business schools require ethics or something that goes by the name of “social responsibility,” “social enterprise,” “social impact” or “leadership and values.””

REALLY?  Social responsibility?  Social enterprise?  Leadership and values?  Come on…you can call it what you want, but if you don’t teach beyond the theory of what is socially acceptable or how leadership intersects moral norms, you effectively have little more than just fluff!  Theoretical fluff…I would call it and that has little impact in the real world when faced with split second decisions that have an impact far beyond the moment.

One clue comes from the inside. Luigi Zingales, a titan of the academy of finance who teaches at the University of Chicago, argues that business education across the disciplines needs to move from a stance of “values neutrality” to one where students are exposed to the moral decisions that permeate the core of business. Zingales suggests we deliver “ethics” in accounting and finance rather than a course labeled Ethics, which is bound to turn off motivated students looking to get ahead.

Interesting paragraph by Samuelson.  Intriguing that Zingales wants to hide ethics in some other course because it turns off motivated students who want to get ahead.  I have an alternate suggestion…  Educate students with the course – “How to avoid an orange jumpsuit and handcuffs” – in other words make ethics real and alive.  What do the professors know about the real world of federal prison, how one turns to the dark side and what happens when that happens.  Pardon the bluntness, but perhaps students should be scared sh*tless and know the real world implications of their (sometimes misguided) desire to get ahead.

Samuelson shares: To the contrary — research also suggests that the big take away from b-school is the same one that permeates board rooms. Ethics are important, but earnings-per-share is the guiding principle. Remember the ethics handbook distributed to each employee at Enron? The more compelling and well compensated message went something like this: We exist to make money. “Profits,” aka “shareholder value,” is the most important metric. We all benefit when the stock price goes up — and employees who make it happen will receive the most. Damn the torpedoes; full speed ahead. EPS is the main meal. “Ethics” is desert.

Samuelson’s article approaches the education of business ethics in a focuses thought provoking way.  Nice article.  I, on the other hand, would love to share a good dose of reality into the minds of the students helping them connect the dots between choices and consequences.  Perhaps a semester of real world example where the students choose among a set of choices giving them an opportunity to see which one’s result in career destruction and arrest would have far more impact.  Maybe we should call it:  Career Destruction and Prison – the Ethics Course YOU Won’t Forget!

What do you think Judith?

Photo by Clay Bennett – see claybennett.com

Business Ethics education – moving beyond what’s illegal…how about focusing on choices and consequences!

For the past several days I’ve been noticing a series of articles about Business Ethics education and what should be taught.  Today I see Felix Salmon’s article: Business ethics need to move beyond what’s illegal where he says we should be more worried about unethical behavior in general rather than just teaching how to avoid criminal behavior.  I agree.  However, I would challenge Salmon in his belief that Business Ethics education even teaches about unethical criminal behavior.  From my experience speaking to a number of business schools as a business ethics speaker, I have found in polling students that the level of education related to business ethics centers around ethical theories rather than practical real life application – whether criminal or not.

Salmon shares the following: There are interesting ethical debates to be had as to where to draw the line: for instance, all those “free offers” which require you to hand over your credit-card details and then bill you regularly unless you cancel. They prey on cognitive limitations, I’d say, and are less ethical than companies which don’t do that. Should business-school professors tell their students that they should avoid implementing such schemes? I don’t know. But I do think that acting ethically, even if such actions are legal and don’t maximize profits, is something that many more business-school students should be encouraged to consider.

I find it interesting that Salmon’s example implies a certain judgment regarding the rightness or wrongness of certain actions.  For example, if I ask a group of people is it ethical to kill someone, the majority would say a resounding NO.  But, if your child were being attacked and in imminent life threatening danger, would it then be ethical to kill the perpetrator – I find the answer becomes a resounding YES.  So…ethics are based on the rightness or wrongness is certain situations.  Back to Salmon’s example.  Is it ethical to offer your free credit report with hidden language that you’ll be updated monthly automatically with a charge to your credit card?  Salmon seems to judge NO.  I say it is a function of the business you’re in.  If that is your business model and that of your competitor, then it would be challenging to find a lack of ethics in a model that works.  Sure…there are those who think such a model should be banned, but until it is…it is legal and ethical.  No different than selling spirits or cigarettes.  Both are bad for you and thereby potentially unethical to sell, but unethical – NO!

However, at the risk of getting off track from Salmon’s fine article…it would seem that the point of teaching more than just legal and illegal makes sense.  The question for me is – are we teaching legal and illegal and exposing the choices made have consequences that follow?  I don’t think so…at least not nearly enough.  Theories are fine, but practical application teaching is far more effective in my opinion.  For example, I was consulting with a fellow just a week ago who was convicted of conspiracy.  Here’s the simple truth, if a company (or people within the company) conduct unethical illegal acts and you don’t report it then you may be found guilty of conspiracy.  Seems to me to be more of a deterrent to unethical behavior if folks know the dire consequences that follow unethical and illegal behavior.

What are your thoughts?

BUSINESS ETHICS: From a Corporate Secretary’s perspective! An interesting new book by Nan DeMars

FEATURED IN CANADIAN BUSINESS – NEW BOOK NEWS RELEASE reprinted from CANADIAN BUSINESS

One December day in 2008, Eleanor Squillari’s boss was arrested for securities fraud. The next day, the secretary arrived at her office to find it a scene of utter chaos: phones ringing, faxes spewing paper, FBI agents strutting around and a couple of dozen red-faced investors in the lobby demanding blood, or at least an explanation.

Squillari didn’t know what to tell the clients of the man for whom she’d worked for 25 years. She also didn’t know if she’d been unintentionally complicit. Even if she’d never once felt that something might have been amiss, in clients’ eyes she was at least guilty by association. So the following year, when the secretary decided to go public in a Vanity Fair article with her account of a quarter-century spent working for Bernie Madoff, it was hard to begrudge her a voice. As one G-man told her, “You need to take care of yourself, because nobody else will.”

No doubt Nan DeMars feels some empathy for Squillari. DeMars spent 20 years as a corporate secretary in Minnesota, and through her leadership role with the International Association of Administrative Professionals, she was responsible for authoring her profession’s first ever code of ethics. Now president of her own consulting firm, DeMars has become a popular media expert on the subject of ethics in the workplace. In You’ve Got to Be Kidding: How to Keep Your Job without Losing Your Integrity (Wiley), DeMars offers a comprehensive guide to navigating the ethical traps found in every workplace.

Of course, the subject of business ethics now sees much more attention than it once did (not least from Saint Mary’s prof Chris MacDonald, whose thoughtful blog on business ethics is published on canadianbusiness.com). DeMars observes that in the U.S. alone more than 300 colleges and universities now offer ethics curricula, whereas a decade ago it was fewer than 10. She recognizes that, unlike her first book on this topic in 1998, this one arrives in “a ‘we get it’ climate.” But however widely businesses have adopted codes of ethics to govern behaviour in the workplace, the ideal “ethical office” that DeMars describes isn’t attainable through the enforcement of rules. Not only is it impossible to anticipate in such a code every possible variable or potential dilemma, but always “it is possible to satisfy the letter of the law while still committing an act that most reasonable people would consider unethical or immoral.” Even if accepting a gift from a potential client isn’t explicitly proscribed, does that make it right?

Before this starts to sound like the annual lecture from management—perhaps you’re one of those corporate employees forced to sleepwalk through an intranet quiz once in a while to prove to your higher-ups that you’re familiar with the company’s code of conduct—consider DeMars’s argument for the value of the ethical office from a personal standpoint: “In order to live happily and at peace with ourselves, we have to live in ways that are congruent with our morals,” she argues. (Morals, as DeMars defines them, are the principles of a person’s character, while ethics is a system of moral values, the set of rules or expectations publicly accepted by a group.) “For us to work happily and productively, we need to share common ethical standards with our coworkers,” she writes. If the ethics in your office are at odds with your personal values, it invariably makes you unhappy. “And the larger the gap, the greater your level of stress.” That’s why the onus for ethical behaviour lies so firmly with each employee. A code of conduct is just ink on paper; it’s how the group brings it to life that ultimately matters.

So what to do about it? The bulk of You’ve Got to Be Kidding is a subject-by-subject manual for dealing with the most common office dilemmas. There are chapters on workplace gossip, on the vagaries of loyalty, on expense accounts, whistleblowing, vendor relationships and even pornography. But as DeMars says, a written set of rules will never anticipate every situation—and not every ethical quandary will offer choices in black and white. So the most valuable tool DeMars provides is what she calls an “Ethical Priority Compass.”

The tool’s goal is to provide “a hierarchical approach to resolving ethical dilemmas,” and it’s an incredibly simple one: First, take care of yourself. In every situation that arises, DeMars writes, “you must protect your professional reputation and your financial security—and do so in a way that is aligned with your personal morals and values.” Second, take care of your company and its customers. Worry about your supervisors last.

It’s the relationship with our supervisors that often leads us onto the most treacherous terrain, and DeMars devotes plenty of words to the subject. By her reckoning, your boss is the first person you should go to if confronted with an ethical dilemma—even if your boss is the source of the problem. You should be careful not to “immediately leap to the conclusion that he or she is the enemy.” It’s always worth making the effort to preserve that relationship, even if you’re uncomfortable with some of the person’s behaviour. Despite its unequal power dynamic, the relationship, DeMars argues, can be more elastic than is apparent, and she offers a 20-step method to ethically manage up. “You have more power than you think you do to affect your boss’s ethical (or unethical) decisions,” she says.

Those decisions may draw you in actively—“Do me a favour and shred everything in that cabinet, would you?”—or passively, in the expectation that you’ll turn a blind eye if you see something amiss. DeMars’s ethical priority compass will help you audit your decisions about how to respond to situations that seem ethically questionable, whether with a co-worker or a manager. If your boss is a Madoff—or just misguided—no code of conduct will steer you right except your own.

Featured New Book, “Accounting Ethics… and the Near Collapse of the World’s Financial System,” – a Business Ethics book that is worth a read!

This new book manifests the importance of accounting ethics by looking at the role that some ethical failures played in recent scandals, particularly AIG’s role in bringing the world’s financial system to the brink of collapse. After establishing the vital importance of ethical accounting, the book goes on to give a thorough analysis of what ethical behavior means for accountants and shows them what can be done to embody that ideal.

Pakaluk and Cheffers… have tackled every major ethics issue currently facing the accounting profession.

Sutton, Mass. (PRWEB) August 17, 2011

The fruit of a collaboration between a Harvard PhD and ethics specialist (Pakaluk) and a Harvard MBA and forensic accountant (Cheffers), “Accounting Ethics” is an entirely new treatment of the subject that reads like a detective story while imparting a deep understanding of professional ethics for accountants.

The book’s treatment of the role of accounting ethics failures in the financial crisis connects the dots between AIG’s first massive accounting ethics failures, dating back over 20 years, and AIG’s more recent accounting irregularities that—as Ben Bernanke and Timothy Geithner have stated—nearly brought the world’s financial system to its knees.

Pakaluk and Cheffers also examine accounting ethics issues associated with Enron, Worldcom, Lehman Brothers and more, paying particular attention to clashes between rules and principles, conflicting interests and the challenges facing corporate accountants, Big Four auditors (Ernst & Young, KPMG, PWC and Deloitte), the FASB, AICPA, and related regulatory bodies.

While not a “gotcha” book designed to point fingers, Pakaluk and Cheffers, in their third book on accounting ethics, have tackled every major ethics issue currently facing the accounting profession, including well established traditions such as independence, codifications of conduct, professional foundations and whether or not accounting ethics can be taught. The authors support their insistence on the importance of accounting ethics using historical, philosophical, and sociological research.

This book’s attractive presentation of deep philosophical thought– that will enlighten even the most experienced accountant—using a fast moving who-dun-it style, will keep practicing professionals and students alike glued to the pages.

“If you never could have imagined a textbook in accounting that through large sections reads like a detective novel, well, one has been created, courtesy of the once unimaginable professional and ethical breakdowns in a slew of major companies: Enron, AIG, and others. … The clear expositions and well-argued principles set forth in this suspenseful book give intellectual grounding to a profession that utterly relies on courageous honesty and integrity, as exemplified in this book’s opening pages. That is what accounting brings to the market, and without it the practice is empty of value.”

—Michael Novak, Ambassador, Templeton Prize winner and author of The Spirit of Democratic Capitalism

“If you are familiar with Understanding Accounting Ethics, either the second edition or the original, also written by Pakaluk and Cheffers, you will immediately see the same passion for ethics evident in their latest book. Smart accountants will make it an essential part of their personal ‘business bookshelf,’ while the smartest accountants will actually take it off the shelf and read its chapters periodically.”

—Jonathan Hamilton, Accounting News Report

About the Authors:

Michael Pakaluk, Ph.D., is a professor of philosophy and currently is the Chairman of the philosophy department at Ave Maria University in Naples, Florida. He has written extensively on ancient ethics and morality. Dr. Pakaluk’s expertise in accounting ethics, in conjunction with his position as Senior Research Analyst and Public Policy Consultant with the Ives Group, Inc., led to an invitation to present a seminar on accounting professionalism and IFRS convergence for the Financial Accounting Standards Board (FASB) in 2009.

Mark Cheffers, C.P.A., A.B.V., is the Founder and CEO of Ives Group, Inc., an independent research provider focused on developing web based due diligence and market intelligence tools. Its subscribers include many of the most prestigious professional service firms, educational institutions and regulatory bodies in the world. A former PWC auditor, forensic accountant and ligation consultant, Cheffers has delivered numerous seminars and written extensively on accounting malpractice, ethics, and financial reporting matters.

Product Information:

Accounting Ethics…And the Near Collapse of the World’s Financial System
By: Michael Pakaluk and Mark Cheffers
ISBN: 9780976528036, 424 pages, $75.00

Order Through the Allen David Press Website:

On Amazon:

Or contact sales representative, Mr. Thomas Hardy:
Tom(dot)Hardy(at)AllenDavidPress(dot)com

All things Business Ethics – Bidhan “Bobby” Parmar wins Best Dissertation Award 2011! Congratulations!

University of Virginia Darden School of Business Professor Bidhan “Bobby” Parmar has been selected as the winner of the Society for Business Ethics Best Dissertation Award 2011. His dissertation is entitled, “The Role of Ethics, Sensemaking and Discourse in Enacting Authority Relationships.”

According to the Society’s website, the purpose of the award is to recognize the dissertation that most clearly demonstrates the potential to contribute to substantial advances in business ethics research and practice.

Parmar’s dissertation, unlike traditional work in business ethics, examines ambiguity, language and social relationships as critical aspects of moral decision-making in organizations. His work demonstrates how an individual’s organizational role can shape his or her perception of and subsequent handling of ethical issues. Because organizations have a division of labor to produce goods and services, it can be very difficult to place responsibility for ethics failures. One key practical implication is to improve the kind of ethics training that managers and leaders receive. Instead of relying only on improving individual decision frameworks, Parmar’s work suggests that companies need to treat ethics failures like other system failures and create mechanisms to prevent those failures – by making clear how internal and external stakeholders will attribute responsibility for ethics failures.

Parmar will receive a plaque and a cash prize at the Society’s awards luncheon on 13 August in San Antonio, Texas, during the organization’s annual meeting.

Parmar is an Assistant Professor in Business Administration, having recently finished his MBA/PhD at Darden. His research interests focus on how managers make decisions and collaborate in uncertain and ambiguous environments to create value for stakeholders. His recent research examines the impact of authority on moral decision making in organizations. Parmar’s work has been published in Organization Science and the Journal of Business Ethics.

He teaches courses in Darden’s MBA programs, including First Year “Ethics,” “Leading Organizations” and a second year elective called “Collaboration.” Parmar is a fellow of the Business Roundtable Institute for Corporate Ethics, an organization housed at Darden, which brings together leaders from business and academia to fulfill its mission of embedding ethics into the everyday business decision-making and practice of organizations. He is also a fellow of Darden’s ethics research center, the Olsson Center for Applied Ethics at Darden. Prior to teaching at Darden, Parmar taught at the University of Virginia’s McIntire School of Commerce.

Business Ethics Question: Should Company’s track employees Social Media activity?

BUSINESS ETHICS 101 – Should an employer attempt to protect his/her company’s assets and/or reputation by monitoring their employees social networking practices?

With so much riding on corporate ethics, should an entrepreneur try to protect his or her company’s reputation from employees’ loose, careless and sometimes dangerous social networking practices?

The following news release from Kansas State University asks some challenging questions:

Monday, Aug. 1, 2011

GAME CHANGER: BUSINESS ETHICS EXPERT WEIGHS IN ON MONITORING ONLINE IDENTITY OF PROSPECTIVE, CURRENT EMPLOYEES

MANHATTAN — Should businesses monitor the social media activities of their employees? A Kansas State University business ethics expert says the practice can be a double-edge sword.

Such monitoring is available through companies like Social Intelligence, which provides businesses with archived data from social media sites for use in preventing online damage to their reputations. But the data also can be used to screen potential employees and to monitor the social media activities of current employees.

“I understand the need of a business to protect its reputation,” said Diane Swanson, professor of management and chair of a business ethics education initiative. “But in terms of employees’ rights, the practice coexists uneasily with the expectation of personal privacy.”

Use of Social Intelligence could create considerable changes in employee communication, Swanson said. Potentially, the practice could create a climate of fear and distrust. These effects could be detrimental to morale and hurt productivity.

To prevent such a situation, Swanson recommends that companies craft policies and provide expectations of employee’s online conduct. This would shift the emphasis from monitoring to creating shared understanding between employers and employees. Further steps would also be necessary.

“A company should provide full disclosure of its monitoring practices and the consequences employees would face if they violated stated policy and hurt the business’ reputation,” Swanson said.

Without such full disclosure, an individual employee would be operating without the benefit of knowing important rules of conduct. This could be construed as unfair, especially given the relative power of large organizations compared to that of lone individuals, Swanson said.

The approach is also necessary because of the lack of laws regarding companies like Social Intelligence. Data collected by Social Intelligence follows the Fair Credit Reporting Act. It also does not include basic demographic information. But the monitoring and screening can provide any message or tweet deemed worthy of mention. The approach could prove negative for businesses if valued employees are ousted or alienated in the process, Swanson said.

“If a business is worried about this, the best way to handle it proactively is for the expectations to be laid down when employees are hired,” Swanson said. “This should be followed by training sessions and discussions related to performance evaluations. That way, management can strive to head off problems and be part of the solution instead of being viewed as heavy-handed.”

Swanson suggests the loss of personal privacy in social media activities is emblematic of larger societal trends.

“We are getting used to what could be considered violations of our privacy from what has been happening with government practices and now on the corporate side,” Swanson said. “Such practices cause tension in a society where citizens traditionally value individualism and look to the law to protect the expectation of privacy.”

Because online surveillance appears to be proliferating, Swanson believes that ultimately public policy and the courts will establish more definitive guidelines.

“The problem is that technology outpaces the ability of the law and public policy to keep up,” she said.

Meanwhile caution should be exercised.

“The more people are aware of this practice, the more they will be empowered to make smart decisions,” Swanson said.

SO WHAT DO YOU THINK?  Monitor Social Media activity is ethical or unethical?

YOUR COMMENTS ARE WELCOME!

Fraud – Donald Lapre – the Greatest Vitamin in the World – really, who would fall for that?

NEWS RELEASE

Indicted infomercial pitchman Donald Lapre, of Phoenix, who previously failed to appear at his arraignment on 41 counts for Conspiracy, Mail Fraud, Wire Fraud, Promotional Money Laundering and Transactional Money Laundering, will remain in custody pending trial. At a hearing in Phoenix today, U.S. Magistrate Judge Lawrence O. Anderson ordered that Lapre be detained as a flight risk.

In the course of the hearing, the prosecution noted that Lapre had received notice of his scheduled arraignment and failed to appear, and that while he had recently been residing in Maricopa County, the investigating agencies were unable to locate any record of his current address through checks related to a residence, motor vehicle, driver’s license, telephone, or private post office box. The indictment alleges that the 47-year-old Lapre oversaw and promoted a nationwide scheme to sell essentially worthless Internet-based businesses to over 220,000 victims through his company “The Greatest Vitamin in the World.”

According to the indictment, from April 2003 through October 2007, Lapre allegedly conspired with others to defraud thousands of victims all across the country by encouraging them to invest in an Internet-based business. The “business” primarily consisted of selling the Greatest Vitamin in the World (GVW) over the Internet and the opportunity to sell the opportunity to do the same thing to others. At the height of the scheme, Lapre had enlisted approximately 226,794 people to sell a limited number of products via individual websites. Along with selling tens of thousands of Internet-based businesses which were essentially worthless, Lapre fraudulently provided his investor/victims, known as “Independent Advertisers” (IAs), with false vitamin sales records. These records encouraged IAs to purchase additional advertising and services in the hope of obtaining commissions including $1,000 checks. Lapre also fraudulently sold bulk Internet traffic to IAs while claiming that it was targeted to individuals who were seeking to either buy vitamins or invest in similar businesses. GVW sales representatives regularly signed up victims as IAs even if they did not own a computer. During the course of the scheme, at least 220,000 victim/IAs were defrauded of approximately $51.8 million. During this same period, approximately $6.3 million in commissions were paid to approximately 5,000 victim/IAs.

Trial is currently set for October 4, 2011, before U.S. District Court Judge Susan R. Bolton in Phoenix. Convictions in this case for Conspiracy carry a maximum penalty of five years, a $250,000 fine or both; Mail Fraud and Wire Fraud carry a maximum penalty of 25 years, a $250,000 fine or both; Promotional Money Laundering carry a maximum penalty of 20 years, a $500,000 fine or both; and Transactional Money Laundering carry a maximum penalty of 10 years, a $250,000 fine or both. In determining an actual sentence, Judge Bolton will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

Potential victims of this scheme may submit a victim statement via the following website operated by the Postal Inspection Service: www.postalinspectorsurvey.com/vitamins. Potential victims of this scheme may also keep track the progress of the case by visiting the following link located on the U.S. Attorney for the District of Arizona’s website: http://www.justice.gov/usao/az/us_v_donald_lapre_gvw.html

HERE’S a cool article related to Donald Lapre:  http://www.quackwatch.org/11Ind/lapre.html

YOUR COMMENTS ARE WELCOME!

Jerry Holmes and R. Scott Pace face the Consequences of their Unethical and Illegal Actions. Prison, Probation and Restitution…

Every choice has a consequence.  What started out as a legitimate business turned into an opportunity to meet a need that coupled with individual rationalization became the fertilizer for fraud.  As a business ethics and fraud prevention speaker, I see this frequently…intelligent and well meaning businessmen (or women) meeting a perceived need illegally and likely rationalizing that “they’ll pay it back” thus justifying their soon to be discovered illegal actions and then being forced to face the very real consequences of them.

Here’s the US Attorney’s news release…

DEPARTMENT OF JUSTICE

United States Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
WEDNESDAY, JUNE 8, 2011

CONTACT: Lia Bantavani
704.338.3140
FAX NUMBER: 704.227.0264

OWNERS OF SETTLEMENT COMPANY SENTENCED TO 33 MONTHS IN PRISON FOR EMBEZZLEMENT AND TAX EVASION CHARLOTTE, N.C. – The United States Attorney’s Office for the Western District of North Carolina announced that the owners of the Settlement Source, LLC, were each sentenced to prison terms for their role in embezzling money from the escrow account at the Settlement Source and for tax evasion.

U.S. District Judge Max O. Cogburn, Jr. sentenced Settlement Source owner and former chief executive, Jerry Holmes, 64, of Matthews, N.C., to serve 33 months in federal prison, to be followed by two years of supervised release. The defendant was also ordered to pay restitution in the amount of $1.9 million. Judge Cogburn also sentenced Settlement Source owner R. Scott Pace, 38, of Charlotte, to 33 months in federal prison, two years of supervised release, and ordered to pay restitution in the amount of $1.9 million.

The United States Attorney’s Office is joined in making today’s announcement by Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service (IRS) – Criminal Investigation Division (CID). Holmes and Pace pled guilty to the charges in a criminal bill of information filed on May 19, 2010. According to the bill of information, in or about November 2005 Holmes and Pace discovered that they could embezzle client funds from the escrow account – at least initially – without any customer discovering the embezzlement and without any noticeable effect on operations. Over time, Holmes and Pace, assisted by another defendant not yet sentenced, embezzled substantial amounts of money for, among other things, real estate investments, a box suite for Carolina Panthers football games, personal loans, and a loan for Holmes’ daughter and son-in-law to purchase a house. When the scheme collapsed in or about July 2008, it caused losses to clients and insurers of approximately $2.4 million.

In pronouncing the sentences, Judge Cogburn stressed that the sentences were only as low as they were because the defendants self-reported the fraud, believing it was unknown to the government. Holmes and Pace will be allowed to self report to begin service of their prison terms once the Federal Bureau of Prisons has designated the facilities at which they will serve their respective sentences. All federal prison sentences are served without the possibility of parole.

The investigation was led by the FBI and IRS-CID. The prosecution for the government was handled by Assistant U.S. Attorney Kurt W. Meyers of the U.S. Attorney’s Office in Charlotte.

If you have information that might be helpful in this case in identifying the motives behind the actions taken by Holmes or Pace…please share.

YOUR COMMENTS ARE WELCOME!

John Wiley Price – Innocent till proven Guilty or a Crook whose been nabbed by the FBI? Is there a Sprint to Judgment by the Media?

So far no one has been accused of any crimes!  You couldn’t tell it however from the media hype which most certainly will have racial overtones in this Dallas story.  So…some may ask why deal with it here – is this an ethics issue?  Good question and yes, but not perhaps for the reasons you might think.  The question I have relate to the ethics of sensationalism when no one has been accused of anything…at least not yet.

Not one to shy away from controversy…John Wiley Price will take on a fight and tell it like he sees it.  Example…in the following video Price says, “All of you are white; go to hell.”  Guess there’s a bit of a discriminatory feeling on his part.

But Mr. Price’s ethnic inclinations and hateful words are not what is driving the media today.  According to a report by Brett Shipp, “…at least six federal agents made their way inside the Millenium 2000 Gallery, where they stayed most of the day searching for records, taking photographs and looking for evidence of a crime.”  Shipp’s entire report can be seen here.

His report goes on to say:

Over the past four years, Price has used his campaign funds to purchase $46,000 in gifts and services from Manning.

Among the gifts was a $2,150 Kwanzaa gift for indicted former Constable Jaime Cortes, a $1,200 gift for mega-church pastor Ricky Rush and $2,525 in gifts for an unnamed constituents.

Among the services were campaign vehicle repairs, one of which was for $300 and another for $700 and $1,800 for vehicle wrap art.

The FBI won’t say exactly what they are looking for in Manning’s store and there is no indication that such gifts were improper.

WHAT’S ALL THE FUSS ABOUT?

With all that said and no charges filed…what’s all the fuss about?  I mean from my vantage point it seems much ado about nothing.  But, the buzz of FBI officers looking is enough to create attention…just ask Patrick Williams the author of another story on Mr. Price.

Entitled: John Wiley Price: Give the Devil His Due – Williams states:

Expect a lot of quote-trolling, thumbsucking and rumor-mongering in the weeks ahead, as hungry reporters scramble for crumbs of hard information. Nature abhors vacuums, and the 24-hour blogosphere hates them too. And since FBI agents aren’t the chattiest bunch—the local field office has a Tumblr called “We’re Not Saying Shit”—it’s going to be speculation city for a while. Did Price’s collection of questionably attained vintage cars stir the feds? Was it KwanzaaFest, Price’s charity event? What about the inland port, that transport hub Price attempted to jack? WFAA reported that Price has bought a lot of real estate lately. Ah-ha! What sort of person buys cheap real estate in a down market?

QUESTION:  Is there a Sprint to Judgment by the media in this case much like the in the Strauss-Kahn case or is there truly a smoking gun behind the actions of the FBI?

YOUR COMMENTS ARE WELCOME!