What have all the Ethics gone? Seems that Fraud is rampant! Business Ethics expert Chuck Gallagher comments

December 21, 2009

All too often I’m asked, especially as we review this past year on the anniversary month of the disclosure of Bernie Madoff’s fraud, whether fraud should decrease since we are more focused on ethics and ethical choices. Unfortunately, as I see it the answer is a resounding no!   Yet, the Ethics Resource Center in their new 2009 biennial National Business Ethics Survey reported a surprising conclusion:

We behave better in bad times.  “Contrary to what one might expect, misconduct declines in turbulent economic times and rises when the pressure’s off,” the report says.  When asked about specific abuses or ethical lapses – such as misusing company resources, lying to outside stakeholders or falsifying time or expenses – a smaller percentage of U.S. workers observed problems this year compared with the 2007 survey, taken before the recession began.  “Yet our research suggests that the improvements in ethical conduct will be temporary,” warned the ethics center’s CEO, Patricia Harned.

As I review ethics issues weekly I must say that I have a hard time believing in the validity of their survey.  Just look at these stories reported on here the first two weeks of this month.

Patricia Wilson, 57, of Draper, Virginia, has pleaded guilty to embezzling more than $167,000 from the Memorial Christian Church where she had served as the church bookkeeper for 9 years. Prosecutors alleged last April that Wilson diverted most of the monies from the Church’s building fund but also from it’s general fund.

Casey Jane Goebel, of Indio, California, was arrested last week for allegedly embezzling at least $250,000 from Hyde’s Air Conditioning where she had been employed as a bookkeeper. According to authorities, Goebel’s thefts ocurred between August 2007 and July 2009

Robin K. Ramey, 48, of Huntington, Ohio, pleaded guilty to charges she embezzled some $185,000 from the Huntington National Bank where she was a longtime employee, ultimately rising to the level of supervisor. Ramey caused at least 86 wire transfers in bank funds to be sent to her personal checking and saving accounts. If the plea agreement holds, Ramey will be ordered to spend two years in prison and repay the bank. She is scheduled to be sentenced on January 21, 2010.

Jessica Harmon, 32, of Lowell, Michigan, has been charged with embezzling more than $100,000 from a unnamed local law firm where she had been employed apparently in a bookkeeping position. The thefts reportedly occurred over a 3 year period. Specifically, Harmon faces charges of embezzlement of more than $20,000, uttering and publishing and using a computer to commit a crime. Harmon, who had been employed by the law firm for 10 years, allegedly made unauthorized withdrawals from firm accounts and wrote herself extra pay checks.

Capt. Michael Dung Nguyen, 28, of Beaverton, Oregon, pleaded guilty Monday to theft and money-laundering charges related to the theft of some $690,000 in cash intended for relief and reconstruction in Iraq. Nguyen was the U.S. Army battalion civil affairs officer in Muqdadiyah, Iraq and had been entrusted with cash designated for local commanders in Iraq and Afghanistan for urgent humanitarian relief and reconstruction. He was indicted last March on charges of theft of government property, structuring financial transactions and money laundering. The thefts occurred between April 2007 and February 2009, according to the indictment. He spend some of the money on luxury vehicles, among other personal items.

Three components come together when a fraud, like the ones reported above, take place.  NEED – OPPORTUNITY and RATIONALIZATION.  In the cases above – I cannot speak to the first and third component – Need and Rationalization, but in each case the fraudster exploited a weakness or put another way – found an OPPORTUNITY.

Patricia Wilson used her trusted position as church bookkeeper (9 years no less) to  exploit what was likely a weak system of internal controls for Memorial Christian Church.  Likewise, two other bookkeepers, Casey Jane Goebel and Jessica Harmon, used their positions of trust to embezzle funds from their employers.  Robin K. Ramey stated, related to her embezzlement, “Why it took so long is that (the bank) doesn’t usually check there.”  Finally, Capt. Michael Dung Nguyen had been entrusted with cash to benefit members of the US military.

What was common in each of the cases above – TRUST.  Did each of the fraudsters know better?  Sure they did!  Were they at one time ethical – I would guess so.  Yet, in each of their lives they made choices – choices that clearly reflect unethical behavior and consequences that are life changing that follow.

As a business ethics speaker, I often state to audiences – Every Choice Has A Consequence.

COMMENTS ARE ALWAYS WELCOME.  If you knew either of the individuals mentioned above – perhaps you’d be willing to share what motivated them to make the choices they made.


Lying = Prison! Detroit Mayor Kwame Kilpatrick Sentenced to Prison

October 28, 2008

Dethroned – that’s what I’d call it when you go from the top of the city’s food chain to serving time in prison.  Judgemental?  I think not.  I’ve been there and I know.  Every choice has a consequence and lying is a choice that brings nothing but pain.  I served time in federal prison for theft and lying.  Martha Stewart served time in federal prison for lying.  Now it seems that Kwame Kilpatrick will, too, serve time for his role in covering up an affair.

Calling him “arrogant and defiant,” a Wayne County Circuit Judge on Tuesday sentenced former Detroit Mayor Kwame Kilpatrick to four months in jail with no early release under the terms of a plea deal.  This reported by CNN.

From my former blog – Detroit Mayor Kwame Kilpatrick and his chief of staff, Christine Beatty five years ago were having an affair. The lies and deception that followed cost the City of Detroit more than $9 million dollars, and cost former police officers their career.

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Now the two are accused of lying under oath – Perjury, Obstruction of Justice and Misconduct in Office. If you recall, perjury is what Martha Stewart was convicted of and served time in prison for. Now these two are facing the same issue.

According to CNN –

Kilpatrick pleaded guilty last month to two felony obstruction of justice charges stemming from his efforts to cover up an extramarital affair. He also pleaded no contest to charges of assaulting a police officer attempting to serve a subpoena on a Kilpatrick friend in that case.

Kilpatrick resigned from office last month after pleading guilty to charges resulting from a sex scandal.

He was accused of blocking a criminal investigation into his office and firing a police deputy to cover up an extramarital affair and other possible illicit activities.

How did this all come about? It appears that the allegations of the affair were made public in a whistle blower trial for two former officers of the city. While “perjury” is generally used in a criminal case, this may be the first time that the Wayne County prosecutor’s office has used perjury from statements made in a civil case.

“In January, the Free Press reported that in an analysis of nearly 14,000 text messages on Beatty’s city-issued pager it found some from 2002 and 2003 that indicated she and the mayor were having an affair.”

Prompted by the judge to recount his wrongdoing last month, Kilpatrick admitted, “I lied under oath in the case of Gary Brown and Harold Nelthrope versus the city of Detroit. … I did so with the intent to mislead the court and the jury and to impede and obstruct the fair administration of justice.”

Kilpatrick had faced eight felony counts. As part of a plea agreement, six counts related to misconduct in office were dropped, and a perjury count was changed to a second obstruction of justice charge.

But, every choice has a consequence. As a business ethics speaker (www.chuckgallagher.com), I share that sentiment with audiences nation wide. You can run but you cannot hide – from the truth. It is said that you reap what you sow. Most of the people who find themselves facing consequences they did not anticipate – assume that if they are not caught or can cover up the truth – what is hidden will stay that way forever. That is further from the truth. Funny, but “truth” has a way of sneaking to the surface.

In this case the truth will either set you free or be the catalyst for a prison sentence – Kilpatrick has found the later to be the case.

YOUR COMMENTS ARE WELCOME!


Detroit Mayor’s Affair Costs City $9 Million! Choice and Consequences – Ethics Speaker Chuck Gallagher Comments

January 27, 2008

Lies and deception!

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Detroit Mayor Kwame Kilpatrick and his chief of staff, Christine Beatty five years ago were having an affair. The lies and deception that followed cost the City of Detroit more than $9 million dollars, and cost former police officers their career.

But, every choice has a consequence. As a business ethics speaker (www.chuckgallagher.com), I share that sentiment with audiences nation wide. You can run but you cannot hide – from the truth. It is said that you reap what you sow. Most of the people who find themselves facing consequences they did not anticipate – assume that if they are not caught or can cover up the truth – what is hidden will stay that way forever. That is further from the truth. Funny, but “truth” has a way of sneaking to the surface.

A story by Paul Anger of the Detroit Free Press exemplifies this as it relates to Mayor Kilpatrick’s actions (segments of the story are reprinted here):

In October, the city paid a whopping settlement to three victims — former Deputy Police Chief Gary Brown and former officers Harold Nelthrope and Walt Harris. A jury had decided that Brown and Nelthrope were punished unfairly by the mayor for doing their jobs, for what they knew or might find out about the mayor. After vowing to appeal the jury’s whistle-blower verdict, the mayor abruptly gave up and settled with all three. And the city had to scrounge up the settlement money.

Actions yield consequences: The mayors actions – lies and deceptions – designed to keep his affair secret ultimately had a price. I’m sure the officers in question, while receiving compensation for their loss, would rather have had a normal career where they would have been rewarded for doing their job, rather than living through a “hell” imposed by an out of control mayor.

Kudos to the Detroit Free Press as they report:

In the wake of that, the Free Press set out to find the truth. Why would the mayor and the city grind through years of legal battles over the officers, only to lose so badly? Why, after all those years, and his initial what he called “blown away” reaction to the verdict, did Kilpatrick finally agree to settle? Were there any documents, beyond he-said, she-said, they-said, that would answer the questions?

We knew that some Beatty text messages from 2002 and 2003 had been subpoenaed but never showed up in court. We knew the city fought to block them. So we started down two paths — we went to court to get all documents related to the settlement, and listened to what sources were telling us.

Some of the most skilled people I’ve worked with in 40-plus years in journalism went after the answers: Herschel Fink, one of the nation’s foremost First Amendment lawyers, and reporters Jim Schaefer and M.L. Elrick. They’re still chasing the truth, in court and out, and the mayor and the city are still fighting to contain the damage.

The reports of misconduct – lies and deception go deep in Detroit. Last Thursday, the Free Press revealed that Kilpatrick and his chief of staff, Christine Beatty, lied under oath at the trial that led to the payouts. The newspaper obtained text messages from Beatty’s city-issued pager, showing they gave false testimony when they denied having an affair that might have been exposed by the police probe. The two face potential perjury charges.

Every choice has a consequence! Wonder now if the Mayor feel that the affair was worth the potential ramifications of his actions? Remember Scooter Libby was convicted and sentenced to prison for perjury. (Of course in Libby’s case he did have a friend in high places). Wonder how Mayor Kilpatrick will feel about potential prison if it is determined that his lies and deceptions were criminal?

Columnist Ron Dzwonkowski wrote these comments: “You just never know, I guess, which of the hidden character defects in all of us is going to surface and mess with destiny. The very ego that made Kilpatrick so confident he could be mayor at a very young age also seems to have convinced him he could do as he pleased and get away with it. Sometimes, it’s not good to win too much; you get to feeling you can’t lose, and that’s when you’re most vulnerable.”

That, I must admit, is one of the most astute paragraphs I’ve ever read as it pertains to those whose choices cross the line and who ultimately pay the price. Which hidden character defect will surface and mess with destiny? More times than not, as I address groups on white collar crime, it comes to the surface that those who commit those crimes are not “criminals” in the sense most people perceive, but rather, that hidden character defect surfaces and reeks havoc.

The thought of believing that you could do as you please and get away with it…well that’s the key. Though I am not proud of the fact, but as a white collar criminal, I, too, had a big ego and felt that I would not get caught. I had it all figured out. But just as Dzwonkowski said, “it’s not good to win too much; you get to feeling you can’t lose, and that’s when you’re most vulnerable.” Just when you think you can lose is the very time when the consequences start to come into place. And, most of the time, we don’t like the consequences that follow.

Questions: What consequences should Kilpatrick experience as a result of his lies and deceit? Do you feel that the shame, if any, of this public exposure is consequence enough? Since Kilpatrick was elected at age 31 making him Detroit’s youngest mayor – should there be an age limit for mayoral qualification?

The details reported by freep.com are contained in the link provided. City Funds Link