Lance Armstrong’s Collapse of Ethics (part one – NEED) – An indepth review by Chuck Gallagher ethics expert and author of the Human Side of Ethics

January 18, 2013

Illusions collapse!  The collapse under their own weight governed by the law of gravity.  If you pile too much bullsh*t on less than a solid foundation you will find yourself one day in a stinky pile of dung.  That, today, is where Lance Armstrong finds himself.  And the reality is – once you’re in it, it’s hard to dig your way out and ever get rid of the stench!

Lance ArmstrongHeralded as a true American hero, Lance Armstrong was revered as an icon – a man who beat cancer, was at the top of his athletic career and a pay-it-forward guy with his non-profit foundation Livestrong.  Today Armstrong’s past successes are dwarfed by his admission that he was a liar and bully.  But is Armstrong’s story any different that those of lesser know folks who find themselves in a Collapse of Ethics?  The patterns are the same only the names and circumstances change.

The following was reported by CNN:

Appearing tense, Armstrong told Winfrey it was a happy day for him to be there with her.

He described his years of denial as “one big lie that I repeated a lot of times.” He had races to win and a fairy tale image to keep up.

Armstrong reminisced on his storied past of being a hero who overcame cancer, winning the Tour repeatedly, having a happy marriage, children. “It’s just this mythic, perfect story, and it isn’t true,” he said.

It was impossible to live up to it, he said, and it fell apart.

What Lance stated is common – not easy – but common for those of us who build a house of cards only to watch it collapse under the weight of unethical choices that were compounded by lies and more lies.  The question is – what are the patterns that can creep into our lives that allow someone who knows better to make unethical choices?

There is a pattern – a clear pattern of behavior – that is not specific to a person, but rather specific to unethical behavior and it starts with NEED.  And, while the word – NEED – is wide open to interpretation, the emotion connected with it is rather simple.  Defined as a physiological or psychological requirement for the well-being of an organism, NEED is that elusive thing driven by an internal desire connected with an emotion that drives behavior.  To be clear…I’m no psychologist, but there is no doubt that there was an internal emotional desire that went unfulfilled that contributed to the choices that Lance Armstrong took.

Below is a partial transcript of Oprah’s interview with Lance Armstrong:

Oprah Winfrey: Did you ever take banned substances to enhance your cycling performance?

Lance Armstrong: “Yes.”

OW: Was one of those banned substances EPO?

LA: “Yes.”

OW: Did you ever blood dope or use blood transfusions to enhance your cycling performance?

LA: “Yes.”

OW: Did you ever use any other banned substances such as testosterone, cortisone or Human Growth Hormone?

LA: “Yes.”

OW: In all seven of your Tour de France victories, did you ever take banned substances or blood dope?

LA: “Yes.”

OW: Was it humanly possible to win the Tour de France without doping, seven times?

LA: “Not in my opinion. That generation. I didn’t invent the culture, but I didn’t try to stop the culture.”

Notice…while admitting guilt a key factor emerges…Lance believed that he could not win without acting unethically in his sport of choice.  In fact, he acknowledged that while he “didn’t invest the culture” he “didn’t try to stop the culture.”   In other words, Armstrong, like many others who act out unethically, took the approach that it was alright to take illegal or unethical actions (or both) as long as it was the norm!

But back to NEED.  For Armstrong to win he believed that he NEEDED to use performance enhancing drugs!  Winning was important and winning the old fashioned way didn’t seem to be an option.

There is an illusory truth that most of us miss when we are in the midst of making life changing choices…and that is – if the actions of others are common place we assume that similar actions that we might make are alright.  Rarely do we challenge the common actions around us and ask the hard questions about ethics.  Armstrong, in his answers to Oprah’s questions, demonstrates that.  See the transcript below:

OW: You said to me earlier you don’t think it was possible to win without doping?

LA: “Not in that generation, and I’m not here to talk about others in that generation. It’s been well-documented. I didn’t invent the culture, but I didn’t try to stop the culture, and that’s my mistake, and that’s what I have to be sorry for, and that’s what something and the sport is now paying the price because of that. So I am sorry for that. I didn’t have access to anything else that nobody else did.”

OW: Usada issued a 164-page report. CEO Travis Tygart said you and US Postal team pulled off the most sophisticated, professional and successful doping programme sport has ever seen. Was it?

LA: “No. It definitely was professional, and it was definitely smart, if you can call it that, but it was very conservative, very risk-averse, very aware of what mattered. One race mattered for me. But to say that that program was bigger than the East German doping program in the ’70s and ’80s? That’s not true.”

OW: What was the culture? Can you explain the culture to us?

LA: “I don’t want to accuse anybody else. I don’t want to talk about anybody else. I made my decisions. They are my mistakes, and I am sitting here today to acknowledge that and to say I’m sorry for that. The culture was what it was.”

OW: Was everybody doing it? That’s what we’ve heard. Was everybody doing it?

LA: “I didn’t know everybody. I didn’t live and train with everybody. I didn’t race with everybody. I can’t say that. There will be people that say that. There will be people that say, ‘OK, there are 200 guys on the tour, I can tell you five guys that didn’t, and those are the five heroes’, and they’re right.”

What was Lance’s NEED?  Well he says it best in one of his comment to Oprah!

“My ruthless desire to win at all costs served me well on the bike but the level it went to, for whatever reason, is a flaw. That desire, that attitude, that arrogance.”

Lance Armstrong’s Collapse of Ethics will continue…

Meanwhile – YOUR COMMENTS ARE WELCOME!

Advertisements

Lance Armstrong – A Collapse of Ethics – the transcript of Armstrong’s interview with Oprah Winfrey – the first of a four part series by Chuck Gallagher ethics expert

January 18, 2013

Armstrong InterviewBelow is a transcript of the first part of the interview with Oprah Winfrey by Lance Armstrong.

Oprah Winfrey: Did you ever take banned substances to enhance your cycling performance?

Lance Armstrong: “Yes.”

OW: Was one of those banned substances EPO?

LA: “Yes.”

OW: Did you ever blood dope or use blood transfusions to enhance your cycling performance?

LA: “Yes.”

OW: Did you ever use any other banned substances such as testosterone, cortisone or Human Growth Hormone?

LA: “Yes.”

OW: In all seven of your Tour de France victories, did you ever take banned substances or blood dope?

LA: “Yes.”

OW: Was it humanly possible to win the Tour de France without doping, seven times?

LA: “Not in my opinion. That generation. I didn’t invent the culture, but I didn’t try to stop the culture.”

OW: For 13 years you didn’t just deny it, you brazenly and defiantly denied everything you just admitted just now. So why now admit it?

LA: “That is the best question. It’s the most logical question. I don’t know that I have a great answer. I will start my answer by saying that this is too late. It’s too late for probably most people, and that’s my fault. I viewed this situation as one big lie that I repeated a lot of times, and as you said, it wasn’t as if I just said no and I moved off it.”

OW: You were defiant, you called other people liars.

LA: “I understand that. And while I lived through this process, especially the last two years, one year, six months, two, three months, I know the truth. The truth isn’t what was out there. The truth isn’t what I said, and now it’s gone – this story was so perfect for so long. And I mean that, as I try to take myself out of the situation and I look at it. You overcome the disease, you win the Tour de France seven times. You have a happy marriage, you have children. I mean, it’s just this mythic perfect story, and it wasn’t true.”

OW: Was it hard to live up to that picture that was created?

LA: “Impossible. Certainly I’m a flawed character, as I well know, and I couldn’t do that.”

OW: But didn’t you help paint that picture?

LA: “Of course, I did. And a lot of people did. All the fault and all the blame here falls on me. But behind that picture and behind that story is momentum. Whether it’s fans or whether it’s the media, it just gets going. And I lost myself in all of that. I’m sure there would be other people that couldn’t handle it, but I certainly couldn’t handle it, and I was used to controlling everything in my life. I controlled every outcome in my life.”

OW: You said to me earlier you don’t think it was possible to win without doping?

LA: “Not in that generation, and I’m not here to talk about others in that generation. It’s been well-documented. I didn’t invent the culture, but I didn’t try to stop the culture, and that’s my mistake, and that’s what I have to be sorry for, and that’s what something and the sport is now paying the price because of that. So I am sorry for that. I didn’t have access to anything else that nobody else did.”

OW: Usada issued a 164-page report. CEO Travis Tygart said you and US Postal team pulled off the most sophisticated, professional and successful doping programme sport has ever seen. Was it?

LA: “No. It definitely was professional, and it was definitely smart, if you can call it that, but it was very conservative, very risk-averse, very aware of what mattered. One race mattered for me. But to say that that program was bigger than the East German doping program in the ’70s and ’80s? That’s not true.”

OW: What was the culture? Can you explain the culture to us?

LA: “I don’t want to accuse anybody else. I don’t want to talk about anybody else. I made my decisions. They are my mistakes, and I am sitting here today to acknowledge that and to say I’m sorry for that. The culture was what it was.”

OW: Was everybody doing it? That’s what we’ve heard. Was everybody doing it?

LA: “I didn’t know everybody. I didn’t live and train with everybody. I didn’t race with everybody. I can’t say that. There will be people that say that. There will be people that say, ‘OK, there are 200 guys on the tour, I can tell you five guys that didn’t, and those are the five heroes’, and they’re right.”

OW: How were you able to do it? Walk me through it. Pill deliveries, blood in secret refrigerators… how did it work?

LA: “I viewed it as very simple. There were things that were oxygen-supplying drugs that were beneficial for cycling. My cocktail was EPO, but not a lot, transfusions and testosterone.

“I thought, surely I’m running low [on testosterone following the cancer battle] but there’s no true justification.”

OW: Were you afraid of getting caught? In 1999 there was not even a test for EPO…

LA: “No. Testing has evolved. Back then they didn’t come to your house and there was no testing out of competition and for most of my career there wasn’t that much out-of-competition testing so you’re not going to get caught because you clean up for the races.

“It’s a question of scheduling. That sounds weird. I’m no fan of the UCI but the introduction of the biological passport [in 2008] worked.

“I’m paying the price and I deserve this. That’s okay. I deserve it.

“My ruthless desire to win at all costs served me well on the bike but the level it went to, for whatever reason, is a flaw. That desire, that attitude, that arrogance.”

OW: When you placed third in 2009, you did not dope?

LA: “The last time I crossed that line was 2005.”

OW: Does that include blood transfusions? No doping or blood transfusions in 2009… 2010?

LA: “Absolutely not.”

OW: Were you the one in charge?

LA: “I was the top rider, the leader of the team.”

OW: If someone was not doing something to your satisfaction could you get them fired?

LA: “No. I guess I could have but I never did. I was the leader of the team and the leader leads by example. There was never a direct order. That never happened. We were all grown men and made our choices. There were team-mates who didn’t dope.”

OW: One former team-mate, Christian Vande Velde, told Usada you threatened to kick him off the team if he didn’t shape up and conform to the doping programme?

LA: “That’s not true. There was a level of expectation. We expected guys to be fit to be able to compete. I’m not the most believable guy in the world right now. If I do it I’m leading by example so that’s a problem.

“I view one as a verbal directive and that didn’t exist. I take that. The leader of the team, the guy that my team-mates looked up to, I accept that 100%. I care a lot about Christian but when you go on to other teams and show the same behaviour…”

OW: Were you a bully?

LA: “Yes, I was a bully. I was a bully in the sense that I tried to control the narrative and if I didn’t like what someone said I turned on them.”

OW: Is that your nature – when someone says something you don’t like, you go on attack? Have you been like that your entire life – 10-years-old, 12-years-old and 14-years-old?

LA: “My entire life. Before my diagnosis I was a competitor but not a fierce competitor. When I was diagnosed, that turned me into a fighter. That was good. I took that ruthless win-at-all-costs attitude into cycling which was bad.”

OW: How important was winning to you and would you do anything to win at all costs?

LA: “It was win at all costs. When I was diagnosed (with cancer) I would do anything to survive. I took that attitude – win at all costs – to cycling. That’s bad. I was taking drugs before that but I wasn’t a bully.”

OW: To keep on winning it meant you had to keep taking banned substances to do it? Are you saying that’s how common it was?

LA: “Yes, and I’m not sure that this is an acceptable answer, but that’s like saying we have to have air in our tyres or we have to have water in our bottles. That was, in my view, part of the job.”

OW: When you look at that do you feel embarrassed, shame, humble, tell me what you feel?

LA: “This is the second time in my life when I can’t control the outcome. The first was the disease. The scary thing is, winning seven Tour de Frances, I knew I was going to win.”

OW: Was there happiness in winning when you knew you were taking these banned substances?

LA: “There was more happiness in the process, in the build, in the preparation. The winning was almost phoned in.”

OW: Was it a big deal to you, did it feel wrong?

LA: “No. Scary.”

OW: It did not even feel wrong?

LA: “No. Even scarier.”

OW: Did you feel bad about it?

LA: “No. The scariest.”

OW: Did you feel in any way that you were cheating? You did not feel you were cheating taking banned drugs?

LA: “At the time, no. I kept hearing I’m a drug cheat, I’m a cheat, I’m a cheater. I went in and just looked up the definition of cheat and the definition of cheat is to gain an advantage on a rival or foe that they don’t have. I didn’t view it that way. I viewed it as a level playing field.”

OW: But you knew that you were held to a higher standard. You’re Lance Armstrong.

LA: “I knew that, and of course hindsight is perfect. I know it a thousand times more now. I didn’t know what I had. Look at the fallout.”

OW: What do you mean by you ‘didn’t know’? I don’t think people will understand what you’re saying. When you and I met a week ago you didn’t think it was that big? How could you not?

LA: “I see the anger in people, betrayal, it’s all there. People who believed in me and supported me and they have every right to feel betrayed and it’s my fault and I’ll spend the rest of my life trying to earn back trust and apologise to people.”

OW: You never offered it [performance-enhancing drugs] to them [team-mates], suggested they see Dr Michele Ferrari?

LA: “There are people in this story, they are good people, we’ve all made mistakes, they are not toxic and evil. I viewed Dr Michele Ferrari as a good man and I still do.”

OW: Was he the leader and mastermind behind the team’s doping programme? How would you characterise his influence on the team?

LA: “No. I’m not comfortable talking about other people. It’s all out there.”

OW: David Walsh of the Sunday Times in London said your relationship with Ferrari immediately dialled suspicion on you. Can you see that relationship was reckless?

LA: “There were plenty of other reckless things. That would be a very good way to characterise that period of my life.”

OW: What about the story [masseuse] Emma O’Reilly tells about cortisone and you having cortisone backdated – is that true?

LA: “That was true.”

OW: What do you want to say about Emma O’Reilly? You sued her?

LA: “Emma O’Reilly is one of these people I have to apologise to. We ran over her, we bullied her.”

OW: You sued her?

LA: “To be honest, Oprah, we sued so many people I don’t even [know]. I’m sure we did.”

OW: When people were saying things – Walsh, O’Reilly, Betsy Andreu [wife of former team-mate Frankie Andreu] and many others – you would then go on the attack for them, suing and know they were telling the truth. What is that?

LA: “When I hear that there are people who will never believe me I understand that. One of the steps of this process is to say sorry. I was wrong, you were right.”

OW: Have you called Betsy Andreu? Did she take your call? Was she telling the truth about the Indiana hospital, overhearing you in 1996? Was Betsy lying?

LA: “I’m not going to take that on. I’m laying down on that one. I’m going to put that one down. She asked me, and I asked her not to talk about it.”

OW: Is it well with two of you? Have you made peace?

LA: “No, because they’ve been hurt too badly, and a 40-minute [phone] conversation isn’t enough.”

OW: [With] Emma you implied the ‘whore’ word. How do you feel about that today? Were you trying to put her down? Shut her up?

LA: “I don’t feel good. I was just on the attack. The territory was being threatened. The team was being threatened. I was on the attack.”

OW: This is the clip I just cannot reconcile [winning speech after seventh Tour de France win]… What were you trying to accomplish there?

LA: “I’ve made some mistakes in my life and that was a mistake (standing on podium after winning 2005 Tour de France and saying “believe in miracles”).

OW: Were you particularly trying to rub it in the faces of those who came out against you and say they were lying – were you addressing them? What were you saying that for?

LA: “That was the first year they gave the mic to the winner of the Tour and I was wondering what I was going to say. That just came out. Looking back at it now, it looks ridiculous.”

OW: You said dozens of times in interviews you never failed a test. Do you have a different answer today?

LA: “No I didn’t fail a test. Retroactively, I failed one. The hundreds of tests I took, I passed them. There was retroactive stuff later on.”

OW: What about the Tour de Suisse [in 2001]?

LA: “That story isn’t true. There was no positive test. No paying off of the lab. The UCI did not make that go away. I’m no fan of the UCI.

OW: You made a donation to the UCI and said that donation was about helping anti-doping efforts. Obviously it was not. Why did you make that donation?

LA: “It was not in exchange for help. They called and said they didn’t have a lot of money – I did. They asked if I would make a donation so I did.”

OW: Many people feel the real tipping point was [former team-mate] Floyd Landis’s decision to come forward and confess?

LA: “My comeback didn’t sit well with Floyd.”

OW: Do you remember where you were when you heard Floyd, a former team-mate and protege, was going to talk?

LA: “I was in a hotel room (upon hearing Landis would reveal details of Armstrong’s doping). Floyd was sending text messages about his interview. I finally said ‘do what you have to do’. He went to the Wall Street Journal with the story.”

OW: Did you rebuff him, would you say you rebuffed Floyd? Did you rebuff him after he was stripped of his Tour win, did you just blow him off?

LA: “Up to that point I supported him when he tested positive. I tried to keep him on my team because he knew what others didn’t. I didn’t shun him.”

OW: So that was the tipping point. And your comeback was also a tipping point. Do you regret coming back?

LA: “I do. We wouldn’t be sitting here if I didn’t come back.”

OW: You would have gotten away with it?

LA: “Impossible to say, there would have been better chances but I didn’t.”

OW: Did you not always think this day was coming? Did you not think you would be found out at some point, especially as so many people knew?

LA: “I just assumed the stories would continue for a long time. We’re sitting here because there was a two-year criminal federal investigation.”

OW: When the Department of Justice dropped the case, did you think ‘now finally it’s over, done, victory’? You thought you were out of the woods; the wolves had left the door?

LA: “I thought I was out of the woods. And those were some serious wolves.”

OW: What was the reaction when you learned Usada was going to pick up the case and pursue the case against you?

LA: “My reaction was to fight back. I’d do anything to go back to that day. I wouldn’t fight. I wouldn’t sue them. I’d listen. I’d say guys, granted I was treated differently to other guys. Treated differently in that I wasn’t approached at the same time as other riders.

“They gathered all of the evidence and they came to me and said what are you going to do? Going back I’d say ‘give me three days. Let me call my family, my mother, sponsors, foundation’ and I wish I could do that but I can’t.”

OW: Will you co-operate with Usada to help clear up the sport of cycling?

LA: “I love cycling and I say that knowing that people see me as someone who disrespected the sport, the colour yellow. If we can, and I stand on no moral platform here, if there was truth and reconciliation commission – and I can’t call for that – if they have it and I’m invited I’ll be first man through the door.”

OW: When you heard that [former team-mate] George Hincapie had been called to testify by Usada, did you feel that was the last card in this deck, the last straw?

LA: “My fate was sealed [by George]. If George didn’t say it then people would say ‘I’m sticking with Lance’. George is the most credible voice in all of this. We’re still great friends. I don’t fault George. George knows this story better than anybody.”


International Business Ethics Expert Chuck Gallagher featured at Medtronic meeting in Geneva, Switzerland

December 18, 2012

FOR IMMEDIATE RELEASE

Medtronic Gray and BlueChuck Gallagher, international Business Ethics expert was the featured keynote speaker at the Medtronic – Culture of Ethics and Integrity Meeting in Geneva, Switzerland on December 11th and 12th, 2012.

Medtronic, Inc. (www.medtronic.com), headquartered in Minneapolis, is the global leader in medical technology – alleviating pain, restoring health, and extending life for millions of people around the world.

Focusing attention on the “Human Side of Ethics” Rob ten Hoedt selected Chuck because of his unique background and ability to deliver a compelling ethics message – one that will be remembered long after the meeting is over.  Rob ten Hoedt is the Senior Vice-President & President, EMEA & Canada, a role he has been in since 2009 and in which he is responsible for all sales and distribution of Medtronic products and therapies across these regions. He is a member of the Company’s Executive Committee (ExCom).

“I am excited to share with the folks at Medtronic the reality of how and why we make the ethical choices we make and what we can do to stay within our ethical boundaries.  All to often we focus on the compliance and legal issues surrounding our companies, when the most important issue of understanding the human element of our choices and the consequences that follow.”

Speaking and consulting with companies worldwide, you may have seen Chuck on television, or heard him on CNN, CBS or NPR radio programs.  His business insights are sought after for his strong position on ethics and sales leadership.  Chuck Gallagher’s focus is business – but his passion is empowering others.  His unique presentations, from Expert Sales Training to Effective Business Ethics clearly demonstrate he brings something to the platform that isn’t often found in typical business speakers.  Chuck’s personal experience in building businesses and sales teams while leading companies provides a practical and powerful framework for success.

Currently COO of a National Company and former Sr. VP of Sales and Marketing for a Public Company, Chuck may have found a sales niche early on in life selling potholders door to door, or convincing folks to fund a record album of his musical performance at age 16 (and yes those were the days when an album was made of vinyl), but it was the school of hard knocks that provided a fertile training ground for Chuck’s lessons in Success.  Described as Creative, Insightful, Captivating, and a person that “Connects the Dots” between behavior, choices and success, Chuck Gallagher gives his clients what they need to turn concepts into actions and actions into results.

It has been said that with Chuck you have an industry professional sharing practical tested and time proven methods that can enhance personal and professional performance with a clear focus on Ethics.  What Chuck shares in his presentations – whether training, keynotes or consulting – are understandings of not only “How To”, but also “what motivates behavior” – behavior of individuals which create personal and professional success.

_____________________________________________

Chuck Gallagher is the founder of the Ethics Resource Group and for information about Chuck’s Ethics presentations, he can be contacted via http://chuckgallagher.com, email at chuck@chuckgallagher.com or phone 828.244.1400.

Chuck Gallagher is represented by Eclectic Media Productions a national PR firm.

http://www.mediaproductions.tv

###


Business Ethics at Work – IBE Ethics and Work Survey – Comments by Chuck Gallagher Business Ethics Expert

December 9, 2012

First I reported on the KPMG survey from India and now the Institute of Business Ethics published their “at work survey” which shows similar results.  Lack of workplace ethics is rising due to the pressures from our worldwide current economic situation.  There’s nothing like a good recession to bring out the worst in folks!  By the way the full report on the IBE’s survey is found HERE.

According to the British Guardian:

right-wrongThe IBE’s ethics at work survey, which was last carried out in 2008, asks employees about their attitudes to ethical issues in the workplace, their perceptions regarding ethical practices in their organizations and what formal assistance on ethical matters their organizations provide for them.

Encouragingly, the majority of British (84%) and mainland European (77%) employees say that honesty is practiced “always or frequently” in their organization.

Although the proportion of British full-time workers who say they have felt pressure to compromise their organization’s ethical standards remains similar to 2008 (9% and 11% respectively), as does the prevalence of an unethical culture (18%), British employees seem to be significantly more likely to experience certain types of pressure to behave unethically than in previous years. The most common of these include meeting unrealistic business objectives or targets (19%) and being asked to take short cuts (14%).

Wanting to help their organization survive was mentioned for the first time as a source of pressure (7%), an indication that the recession is taking its toll on ethical standards.

Of the fifth of British employees who have been aware of misconduct in their organization in the last year, only half of these (51%) say they have reported it. Similarly, of the quarter (28%) of mainland European employees who said they had been aware of misconduct, only half raised their concerns.

As the head of the Ethics Resource Group – an organization that provides ethics training, presentations and consulting to companies worldwide, the statement above that “meeting unrealistic business objectives” creates a significant pressure is true.  Logically when business is booming the NEED to meet an unrealistic objective is reduced.  However, especially during periods of weak economic performance, the NEED increases and pressure seems to mount from all sides.  The most significant part of this problem is if the “unrealistic business pressure” is supported from the top where the discipline for ethics must originate.

To deter unethical and potentially illegal behavior, three things must be present: (1) Delivering swift and consistent justice for unethical actions; (2) Identify the weak areas within your organization and target them for ethical training and attention; and (3) develop ways to foster ethical behavior among leaders and monitor management integrity.  This is the three legged stool from which a company creates a foundation for positive ethical behavior.

Lapses in Business ethics are not just caused by one person!

The report in the Guardian is quite telling:

In business ethics, there are no lone gunmen – the theory that integrity failures are caused by just one person behaving badly. UBS was fined £29.7m last month by the FSA for failures in its systems and controls that allowed former employee Kweku Adoboli to conduct Britain’s biggest bank fraud. Integrity crises are usually the result of a gradual erosion in behavior over time, which develop into an unethical culture, rather than one person acting on their own while everyone else stands by, powerless.

While we celebrate that the majority feel their workplace is one where honesty is practiced, this is undermined by the statistic that a third of those in managerial or supervisory roles in British organizations perceive “petty fiddling” as inevitable.

But why fret about a few biros and A4 pads missing from the stationery cupboard when there are bigger risks like bribery and corruption and health and safety to mitigate against?

Consider the broken windows theory: a building is vandalised with a few broken windows. If the windows are not repaired, the vandals break a few more; eventually the building is broken into and squatters move in. The theory is that petty crimes, if unaddressed, create a culture which leads to larger ones.

New York’s Mayor, Rudy Giuliani, put this theory to practical use in his zero-tolerance of petty crimes such as vandalism in New York. The result was turning around a city that once seemed ungovernable, particularly when it came to crime. Overall crime rates dropped by 44% to their lowest in more than a generation, and the city’s murder rate went down by 70%. Petty fiddling at work is a little like those broken windows.

New research by Dr Muel Kaptein of the Rotterdam School Of Management into why good people do bad things may give cause for concern. Kaptein cites “acceptance of small theft” as something which may indicate a culture susceptible to integrity failure. If small thefts of highlighter pens are ignored, then so are slightly larger ones, like over-claiming expenses or accepting unauthorized business gifts. It doesn’t take long for people to begin pushing those limits, and before long you have a large scale integrity failure on your hands.

A major multinational corporation unnamed states the following in their Code of Business Conduct:  “At XXXXXX assets should be used for legitimate business purposes, incidental and occasional personal use of XXXXXX assets such as computers, telephones and supplies is permitted.”  It is interesting here that Sr. Management recognizes that there is no way to completely control the petty actions by employees so they have defined those actions and made them tolerable.  Yet, there is a challenge that is found in the written policy, namely what is “incidental and occasional personal use?”

The ethics at work survey found that just under half of the UK’s full-time workforce thinks it’s acceptable to take pencils and pens (41%) and make personal phone calls (45%) from work and about a third (30%) said it was OK to post personal mail from work. A quarter think it is acceptable to use the internet in work time and a fifth of British employees feel it is acceptable to “take a sicky”. The survey also showed that there is little difference in attitudes between employees and managers.

If the tone is set by managers that these small ethical breaches are unacceptable, then perhaps the tone and culture will follow. Most people do not start out to be malicious, or to harm the organization or defraud it – they are just trying to do their job.

The challenge so aptly presented in this report is where is the line and perhaps, more importantly, should we tighten the reigns when the NEED increases or is the presentation of acceptable ethical tolerance levels best when dealing with the mundane at work?

Credit is given to: Simon Webley is research director at the Institute of Business Ethics. The Employee Views of Ethics at Work: 2012 British Survey and Employee Views of Ethics at Work: 2012 Continental Europe Survey are both available as free downloads from http://www.ibe.org.uk


KPMG India Fraud Survey – Patterns of Crime – Comments by Business Ethics and Fraud Prevention Expert Chuck Gallagher

December 9, 2012
KPMG India

White Collar Crime up?  Is that any surprise considering the vast changes in the world economy over the past four years?  With high profile cases like Bernie Madoff and a host of others, I have been asked multiple times if we reached a point where “White Collar Crime” may be on the decline.  My response is “heaven’s no!”  In fact, there are three components of an ethical lapse and the proliferation of “White Collar Crime” and NEED is at the top of the list!

When the Economy stinks NEED IS HIGH…

To my left is a graph from a KPMG India Fraud Survey – the entire report is found HERE.    In their report KPMG states that “White-collar crime in corporate India has witnessed a ‘substantial increase’ over the last two years.”

The graph shows the areas where respondents indicated that fraud had taken place.  Interestingly enough, according to the report the incidents of fraud had increased by 10% from 2010 to the same survey in 2012.

According to the KPMG Survey:

Cracking down on fraud is critical for a country that needs investment.

“India is a fast-growing economy. The problem is a level of low confidence in international investors, which stems from corruption,” Rohit Mahajan, partner and co-head, forensic services, KPMG India, said at a press briefing in New Delhi. “Besides international investors, this has also impacted entrepreneurial spirit in India.”

The infringements are of various kinds, with bribery and corruption making up 83% of cases. A large part of the frauds also relate to cyber crime (71%) and diversion of assets (65%). The sectors most affected are financial services (33%) and information and entertainment (17%), according to the survey.

Most frauds (85%) are investigated internally and very little of the money is actually recovered, the survey said. The most effective methods for detecting frauds are whistleblowers, internal audits and data analytics.

The challenge represented by this report is not limited to India.  Other data suggests that similar patterns of fraud and white collar crime exist in all developed economies especially those whose development has been spurned by rapid economic growth.  India and China for example.  The challenge becomes how to stop the proliferation of white collar crime?  Policies alone will not be the most significant deterrent. We must stem the gap between ethical policies and practical behavior.

Often misconduct either never gets reported or when reported is somehow never escalated beyond direct managers.  This silo of data prohibits effective solutions when combating white collar crime.  For purposes of this post however the primary value is to observe the patterns of white collar crime so organizations will have an intelligent methodology to target abuse and curb unethical and potentially illegal practices.

YOUR COMMENTS ARE WELCOME!

As the founder of the Ethics Resource Group, I work with Companies, Associations and Universities bring awareness of Ethical Choices and how to help Employee and Members stay within the ethical boundaries.  For more information contact me at chuck@chuckgallagher.com or visit chuckgallagher.com


Michael Van Gilder, Insurance Executive indicted for Insider Trading – Van Gilder responds with profession of Innocence.

October 30, 2012

If your buddy or close friend shares information about what’s going on with their company, visit in your head (www.zipit.com – made up website) and keep your mouth shut.  You can’t know something that someone else does not know, act on it for personal gain, and expect to remain free.  Van Gilder, a young man, now faces substantial time in federal prison – something that is life changing.

Notice how simply his alleged crime started and how it mushroomed.  There is a lesson here for others to learn!

NEWS RELEASE

Insurance executive Michael Van Gilder, age 45, of Denver, was indicted by a federal grand jury in Denver on five counts of insider trading.  The U.S. Securities and Exchange Commission, which today filed a complaint charging Van Gilder with civil insider trading violations, conducted a parallel civil investigation and substantially contributed to the criminal investigation of the case as well. The defendant allegedly traded based on inside information regarding a Denver oil and natural gas company called Delta Petroleum Corp.

According to the indictment, Van Gilder was the chief executive officer and a member of the board of directors of Van Gilder Insurance Company, an insurance business owned by the defendant’s family. Van Gilder was a close personal friend of an executive at Delta Petroleum. Delta Petroleum was a Denver-based oil and gas exploration and development company whose core area of operations was in the Gulf Coast and Rocky Mountain regions. The company’s stock was traded on NASDAQ under the ticker symbol “DPTR.” Van Gilder at times arranged for and provided insurance policies covering certain of Delta’s business operations.

From November 5, 2007 and continuing until at least January 9, 2008, Van Gilder allegedly committed securities fraud by trading in securities based on material, non-public information.

Specifically, on November 8, 2007, Delta publicly announced and filed with the U.S. Securities and Exchange Commission (SEC) a quarterly report disclosing its operational performance, revenues, earnings and other financial performance for its quarterly period which ended September 30, 2007. Three days prior to the disclosure, the financial publication Barron’s disseminated an article entitled “Day of Reckoning” focusing on Delta, expressing pessimism about the company and its stock. Following the publication of the article, the price of Delta’s common stock dropped $1.49 per share. Van Gilder was, at the time, a shareholder of Delta and held shares of its common stock and long-term call options to purchase Delta common stock in a brokerage account with Merrill Lynch and Company.

The Barron’s article was brought to Van Gilder’s attention. Based on the article, the defendant called his stockbroker and asked whether he should sell his shares of Delta. Later that day, Van Gilder spoke with a Delta executive. According to the indictment’s allegations, the executive conveyed to the defendant that Delta planned on announcing figures in its third quarter financial report that would not miss its third quarter forecasts and projections for its financial and operational performance, a first in a number of quarters that Delta would meet its projected numbers. At the time Van Gilder received this information, the financial and operational performance had not yet been publicly released and was not generally known to the investing public.

Based on this confidential material, Van Gilder decided not to sell his Delta investment but instead instructed his stockbroker to buy more Delta common stock on his behalf. As a result, the stockbroker purchased an additional 1,250 shares of Delta common stock at $15.55 per share. Several hours after he purchased the additional stock, Van Gilder emailed two friends and told them that the Barron’s article was “bogus” and that they should buy Delta stock because Delta “will hit their numbers.” In the November 8, 2007 third quarter results Delta disclosed earnings and other financial figures that were in line with or exceeding previous forecasts and predictions of its performance for the quarter.

In late November 2007, discussions also began for Delta to get a large cash infusion from a privately held investment company called Tracinda, owned by California resident Kirk Kerkorian, through a large equity investment by Tracinda in the oil and gas company. The indictment alleges that the Delta executive shared confidential information about the possible investment with defendant Van Gilder, and that, on November 26, 2007, following a series of calls and other communications, Van Gilder contacted his stockbroker and purchased an additional 1,750 shares of Delta common stock at $13.87 and $13.88 per share.

As the indictment further relates, the Delta Executive continued to share information about the confidential discussions about the contemplated Tracinda equity investment in Delta with defendant Van Gilder, as the confidential discussions progressed over the course of early December 2007. As result, according to the indictment, on December 8, 2007, Van Gilder, in turn, emailed his stockbroker to advise him that he “wanted to purchase as much Delta stock as possible” and two days later arranged through the stockbroker to purchase an additional 4,000 shares of Delta common stock at $17.64 per share. Within minutes of execution of these purchases, Van Gilder spoke by phone with a family member, who, several minutes later, instructed his own stockbroker to purchase Delta common stock.

On December 17, 2007, the Delta executive advised its board of directors of his discussions with Tracinda. The board authorized the executive to proceed with negotiations with Tracinda. That evening, the executive exchanged a series of text messages with the defendant regarding the board’s decision. Several hours later Van Gilder directed that $40,000 be wire transferred from a bank account to his Merrill Lynch brokerage account.

On December 19, 2007, a representative of Tracinda contacted the Delta Executive and made an offer for Tracinda to purchase a one-third interest in Delta through a purchase of Delta’s common stock at $17 per share. At the time, Delta’s stock was trading at approximately $14.65 per share. Tracinda’s overture remained confidential. Van Gilder, knowing about the overture, purchased 200 call options, entitling him to purchase up to 20,000 shares of Delta common stock at $20 per share. Delta continued negotiations with Tracinda, and on December 22, 2007, Tracinda agreed to increase its stock purchase to $19 per share. The indictment alleges that in a series of calls Van Gilder was informed of the progress of the confidential negotiations. Immediately following one of these conversations between Van Gilder and the Delta executive, Van Gilder sent an email to two of his family members, with the subject line entitled “Xmas present.” In the email, he advised the family members to purchase Delta stock because “something significant will happen in the next 2-4 weeks.”

On December 24, 2007, Van Gilder, through his stockbroker, purchased 3,000 more shares of Delta common stock at prices ranging between $15.63 and $15.65 per share, and 90 more call options to purchase up to 9,000 additional shares at $20 per share. On December 28, 2007, during the course of working to finalize the Tracinda stock purchase, the Delta executive exchanged a series of cell phone text messages with Van Gilder. As a result, the defendant caused $272,212 from a bank account to be wire transferred into his Merrill Lynch brokerage account. The following day Van Gilder emailed his stockbroker, requesting the broker to “get it on Delta asap.”

On December 29, 2007, Delta’s board of directors approved a finalized stock purchase agreement for Tracinda to purchase approximately 35% of Delta’s common stock for $19 per share. On Monday, December 31, 2007, before the commencement of NASDAQ’s regular trading hours, Delta and Tracinda issued a press release announcing the stock purchase agreement. Within an hour of the commencement of regular trading hours that day, Van Gilder’s stockbroker purchased an additional 4,000 shares of Delta common stock at prices ranging from $19.28 to $19.33 per share, and 114 additional call options. By the close of regular hours trading that day, Delta’s common stock price had risen $3.34 from its previous close of $15.51. Over the course of the next three trading days, Delta’s stock price continued to rise, closing at $22.82 per share by January 4, 2008. On January 9, 2008, Van Gilder sold the 290 call options that he had purchased between December 19 and December 24, 2007, realizing a profit of approximately $86,100 on the transaction.

The indictment charges Van Gilder with five counts of securities fraud, reflecting five transactions between November 6, 2007 and December 24, 2007 where Van Gilder purchased Delta common stock based on confidential insider information. If convicted on all counts, the defendant faces up to 100 years in federal prison, and up to $25 million in fines.

“Trading on inside information undercuts the fairness and transparency of our financial markets,” said U.S. Attorney John Walsh. “This case demonstrates that in the highly networked world we now live in, insider trading knows no geographic boundaries. This office, and U.S. Attorney’s Offices around the country, will continue to target insider trading wherever it may occur. Thanks to the hard work of this office, the U.S. Attorney’s Office in the Southern District of New York, the SEC, and the FBI, a Denver insurance executive has been charged for profiting using confidential information.”

WORDS FROM MICHAEL VAN GILDER:

Saturday greetings,

If you are getting this e-mail you are a family member or a friend of mine. There is a massive amount of gossip and press as a result of my having been charged yesterday in an indictment, so I feel compelled and have wanted to reach out to you so you hear directly from me.

Yesterday was nothing short of a tough and bizarre day. Emotions included anger, humiliation, depression and gratitude. The last emotion was created by the outpouring support from family, friends and truly amazing employees at Van Gilder Insurance. For this, I am extremely humbled and thank each and every one of you for your love, friendship and support.

I never in my wildest dreams imagined I would be the cause of my employees fighting for our company and reputation. For this there is no end to my agony.

For starters please recognize that for legal reasons I cannot give you details regarding the assertions made in the indictment. I simply ask that you have faith in me, you know me, my character, and my family. This will be a grind but I’m confident you will see my side unfold as I strive to be exonerated.

I’m 45 years old, I’ve spent these years striving to build a sterling personal and business reputation, wow, did it hurt seeing what is in the press. . . . 100 years in prison and a $25,000,000 fine! Apparently reported by someone who has no clue about the federal sentencing process. While I feel I won’t spend one day in jail, “if,” I were guilty of these “allegations,” then it would be months of possible confinement, not years.

As you know, I have worked very hard to become C.E.O. of Van Gilder Insurance, an amazing 107 year old company started by my great-grandfather, Hal Van Gilder. During my more than 20 years with the company, our employees have become a family to me. As a leader it’s critical to recognize when change is needed. Knowing this legal situation was heating up it was critical that I separate what is personal from what is business, therefore I stepped down this past week as C.E.O. This indictment has nothing to do with Van Gilder Insurance; it is not named in the indictment because the company had absolutely nothing to do with any of the allegations contained in that document. This is strictly personal. I feel extremely fortunate to have a deep and talented leadership team and mature group of employees. Many of you know Don Woods, there could not be a better man to take the reins of Van Gilder. Of course my father Dell Van Gilder is our Chairman and remains highly active in the operations of our business.

By the way, I’m still working for our company and will continue to work to maintain its leadership status in our industry.

So what’s an indictment? As explained to me, an indictment is purely the vehicle in which accusations are brought against an individual in federal court. An indictment is just that, it is merely an accusation. It has absolutely no evidentiary value and is not considered evidence of any charge alleged in the indictment.

An indictment is returned after a limited and selected amount of information is presented by the government attorney to a grand jury, which consists of up to 23 citizens. The grand jury meets in secret, and the government prosecutor exclusively decides who he will call as a witness in order to obtain an indictment. No judge presides over this limited presentation of evidence and no attorneys for any witness or targeted accused can be present during the grand jury proceedings. Thus, my attorney was not permitted to attend these proceedings and cross examine any witness who testified. Finally, it takes only 12 of the 23 grand jury members to agree to the returning of an indictment.

In order for me to better understand the nature and quality of evidence needed to obtain an indictment versus unanimously convicting 12 jurors at trial beyond a reasonable doubt, this is what has been explained to me. It may take the relatively low weight of a 10 – pounds of selected evidence to convince 12 out of 23 grand jurors to return an indictment, but it will require the much heavier weight of a 100 – pounds of legally admissible evidence to convince each and every one of the 12 trial jurors to render a finding of guilt.

Until the 100 – pounds of evidence convinces 12 jurors unanimously of my guilt, I am presumed innocent of each and every charge in the indictment. This constitutional presumption of innocence is one of our bedrock constitutional rights. No one in the world, except the 23 grand jurors, has even heard the 10 pounds of selected evidence presented by the government, which is why I am hopeful that no one will prejudge me on the mere basis of an indictment but instead allow the judicial processes to unfold so I can have the right to my day in court. It goes without saying that I will defend this vigorously and fully expect to be exonerated.

I’ve been dealing with my situation for months now, I’d like to share with you how I’ve made a massive mental shift in the way I look at adversity.

No great man, woman, or company has achieved greatness without going through massive adversity.

Two examples:

Nelson Mandela spent 27 years in prison before becoming president, leading the people. During that time in prison a white man taught him the white man’s language. Because of this, when he was released he was able to speak to all the people, thus allowing him the ability to be elected president. When asked don’t you wish you could have become President w/out the 27 years in prison? His response: NO! I needed every day to enable me to become president!

Steve Jobs founded Apple in his basement, later he was FIRED as C.E.O.! What did he do? He founded Pixar Entertainment. In the meantime Apple was spiraling down when he was asked to come back. You know the rest, Steve Jobs built the greatest company our planet has ever seen.

Through adversity comes growth, strength and determination!

Regardless of what happens to me, I am going to grow, get stronger, be smarter. I will become a better son, brother, father, friend, and leader.

You might think I’m going to stay home and hide, stay invisible? Wrong, I plan to be as visible as ever, I won’t let this beat me down.

Your outpouring of support has been nothing short of amazing, I am truly blessed.

Warm Regards and Love,

Michael

COMMENTS:  I have been to federal prison and served time with people who have been accused and convicted of doing less.  That said, I respect Van Gilder’s comments above and know first hand the emotional trauma that he’s experiencing (even as I write this article).

Now comes the hard part: (1) Generally the US Attorney wins their case.  Rarely do they bring an indictment that they do not win.  Their job is to win and they pride themselves on their winning percentage.  So with that said, while Van Gilder professes his innocence, all it takes is one of the allegations listed above to be found accurate and Van Gilder will be found guilty.  (2) Based on years of experience, negotiate a settlement!  If you fight for your innocence, know in advance that is a losing battle.  The statistics are not in your favor.  And, frankly, if you make the Fed’s spend money trying the case, they will work hard (very hard) to make your life a living hell and your prison time (if found guilty) substantial.

I believe in our system of justice and the fact that you are innocent till found guilty.  Likewise, I know from experience that they don’t indict unless they are fairly confident they will win.  Keep in mind, two things: (1) Martha Stewart did not go to prison for insider trading (and likely she had less info that Van Gilder had).  (2) Martha did go to prison for lying.  So now is the time to be squeaky clean.  Be careful what you say and make sure if you say it that it is the provable truth.  When the feds are out for you…they often win.  Just ask Wesley Snipes.

YOUR COMMENTS ARE WELCOME!


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

October 18, 2012

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!

Read the rest of this entry »