The Costs Of Corporate Crime

On December 30, 2010December 30, 2010 By southwerkIn business ethics, Capitalism

Steven Mintz, the Ethics Sage, has a post on a subject dear to my heart, “How much damage does corporate crime do to the United States?” Each year in my ethics class I ask my students to estimate the damage and comment on it. He has filled out that damage estimate with some new information. I am very appreciative and next Fall my students are going to be reading this post.

Professor Mintz’s post is entitled, Business Fraud. Most of the first paragraph is below but I want you to go to his site and read the whole thing. This subject is a critical factor in whether or not we should do more about business ethics or not. If his figures (or mine) are in anyway correct, our nation is being crippled.

In my last blog I wrote about the ever-increasing cost to society of criminal fraud that targets investors. Fraud in business organizations also seems to be on the rise despite all efforts to reduce it following well-publicized accounting frauds at Enron and WorldCom. According to research conducted by the Association of Certified Fraud Examiners (ACFE) in 2008, U.S. organizations lose an estimated 7 percent of annual revenues to fraud. Based on the projected U.S. Gross Domestic Product this percentage indicates a staggering estimate of losses around $994 billion among organizations, despite increased emphasis on anti-fraud controls and recent legislation to combat fraud. Also, the median dollar loss caused by fraud schemes was $175,000. More than one-quarter of the frauds involved losses of at least $1 million. …

The costs may be 994 billion dollars, 7 percent of annual revenues, lost to corporate fraud. That doesn’t include corporate crime like dumping pollutants, evading taxes, killing or maiming workers by evading safety regulations, etc.

Is that enough reason to put business ethics as a primary legal and economic concern in every governing body from the cities to the federal government?

James Pilant

U.S. Urges Requirement To Keep Mortgage Records (via Chink In The Armor)

On December 29, 2010 By southwerkIn business ethics, Capitalism

From Reuters through the blog, Chink In The Armor –

The U.S. Justice Department urged Congress on Wednesday to require mortgage companies to retain records for 10 years to make it easier to prosecute fraud.

Rita Glavin, acting head of the department’s criminal division, told a hearing of the House of Representatives Judiciary Committee that mortgage settlement statements and other loan documents are critical to investigating or prosecuting fraud.

But they can be hard to get from lenders, brokers and title companies that provide loan services. “All too often, such entities go out of business, and their records are either abandoned or destroyed,” Glavin said in testimony submitted to the committee.

She said half of the top 10 U.S. subprime mortgage originators in the second half of 2006 had either gone out of business or been sold a year later.

Let The Age Of False Information Begin!

On December 28, 2010December 28, 2010 By southwerkIn business ethics, Capitalism

Our Internet privacy is disappearing. Probably the government is looking at our posts down to the last comma and thirty to forty companies have embedded cookies to follow our visits and there enough tracking software on us to tell if we spent nano seconds at one place or another.

So, they are playing games with us and manipulating us.

Let’s manipulate back.

On your social networking sites, move a lot. If you always wanted to live in Hawaii, get a map and find a nice place and declare it your home. Move every couple of months. You can live in fictional places from Francis Bacon’s New Atlantis to John Foster Caine’s Xanadu (a double header – fictional character and fictional place). What about birthdays? These are excellent ways for people to track down medical and financial information about you. Well, have you ever wanted to have two birthdays in a year? Why be a piker, have three or four. Change them every few weeks.

Political beliefs? Give up being a boring Democrat or strict Republican. Vote with the crew of the Enterprise, join the “wild” party, declare yourself at one with the hopes and aspirations of the Pirates of the Carribean.

How about being tracked on the internet and having your every move sold to spammers and marketers determined to exploit this knowledge? At the end or beginning of your web surfing, go wild. Visit this web site and discover how to build your own coffin. Go to the World Wildlife Fund and discover how to adopt a beaver! Fill your your web trackers with useless and incorrect information. Make their tracking as useless as time permits.

Ah, the tough one, how do we write e-mails to annoy the Department of Homeland Security? It’s easy. Now, you’ve heard people say to put words in like terrorist or bomb. Don’t do that. Write e-mails in praise of the Department of Homeland Security or the FBI or the DEA and alway include the latest plot these agencies have foiled. The computer will probably have to cough up all these e-mails to an actual person to discern the seriousness of the message. What will they find? – that you like the government! What could be more harmless?

Now, there are a few of you saying, “James, you shouldn’t be messing with the American government’s ability to catch terrorists?” To which I reply, “They have never said or alleged at any time that they are reading our e-mails. So, obviously, there is no surveillance and you are doing no harm at all. You can’t interfere with non-existant privacy violations, can you?”

“If they were monitoring our e-mail, that would be a clear violation of the Fourth Amendment, so you see they can’t be doing that. What’s more I love the Deparment of Homeland Security. What a bunch of great guys! I sleep better at night knowing that they are looking out for me!”

What about you? Have you ever become tired of that same old face in the mirror? It’s time to live a little! Get yourself a new e-mail. Become a movie star, a little old lady, an heiress or a Wall Street executive. Creat a dozen new e-mail addresses, every single one with a new version of yourself. Didn’t Walt Whitman say, “I am multitudes!” Be a multitude. Leave a few blog comments in your new identity. Try out some interesting points of view.

If all these turkeys want to collect information on you, help them out. Give them tons of information. Be cooperative. Don’t just show them the data from one person but dozens.

And do log on and post from different computers. Use programs that disguise or block identity searches, so our friends can grow and develop as human beings (whatever doesn’t kill us, makes us stronger!!).

These people are kind enough to take an interest in us. We should take an interest in them and help them out with a much data as possible.

James Pilant

China Following Old American Policies?

On December 27, 2010 By southwerkIn business ethics, Capitalism

The policies of Alexander Hamilton and Abraham Lincoln are guides to the Chinese Communists and their economic policies.

Irony?

James Pilant

American Policy Not Fair To The Middle Class

On December 27, 2010December 27, 2010 By southwerkIn business ethics, Capitalism

RT is really laying it on the line. I sometimes disagree with their take on things, but I agree with this one.

James Pilant

Bailed Out Banks In Trouble Again?

On December 27, 2010December 27, 2010 By southwerkIn business ethics, Capitalism

From the Huffington Post –

Nearly 100 banks previously rescued by the federal government are again poised to fail, despite billions of dollars of support from the American Treasury.

The number of banks on the brink of collapse rose from 86 to 98 during the summer months, according to analysis of federal data from the Wall Street Journal. The banks in question have received $4.2 billion dollars in aid through the Troubled Asset Relief Program (TARP). Most of the troubled institutions are relatively small.

The latest sign of distress in the financial system suggests the bailout may have simply been a stopgap solution for a sector still contending with the aftershocks of the greatest banking crisis in 80 years.

If you own a business in the United States and you lose money instead of making it you go out of business. If you are a bank, the government runs to you with large bags of money and gets you back on your feet.

But twice? It’s only been two years. Is the government going to save these banks and, if so, do it again in two years.

What’s the ethics here?

Those who have committed crimes should be punished? Okay, have the banks been investigated for fraud?

The incompetent should not be rewarded for botched work or destroying their business. Has the government in the previous bailout or in the one likely to happen now, asking about competence and cleaning house in these institutions? Shouldn’t those who have ruined the banks by poor management find jobs elsewhere?

Ethically, is it wise to encourage the kind of behavior you get when you bail out failing institutions? Doesn’t that encourage immoral activity like risk taking? Doesn’t that give bank officials the impression that risky behavior is to be encouraged? If you win, you win big. If you lose, your dear Uncle Sam will find money for you?

What do you as a citizen want to happen? Maybe the government should’ve asked that question, “What results are we looking for in this bailout?” two years ago?

James Pilant

National Problem Fixable By Making Insignificant Changes In Business School

On December 27, 2010 By southwerkIn business ethics, Capitalism, Teaching

From Business Week –

Have business schools contributed to creating overconfident and self-focused leaders? I suspect many of you will nod your head in agreement. You might even declare that, by extension, business schools share blame for the economic crisis. As a business school dean, I take these perceptions seriously; there is enough in them to warrant careful reflection.

An antidote to overconfidence and self-focus in business leaders may lie in building more focused cultures in our business schools. Culture is the set of values and norms in an organization that shape behavior. It acts as an internal gyroscope for everybody in the organization to keep them in balance, acting ethically and in line with the larger interests. It is what people do “when the manager is not looking.”

Yes, all we have to do to fix our bizarre cultural worship of pirate CEO’s is to tinker with business school attitudes. The root of all evil is based in schooling probably in those ethics classes.

I get tired of hearing this nonsense. It is important to have good business schools. It is important that they communicate ethics, attitude, business knowledge and considerable training. But that’s it.

A business school is not like wading into a pool blessed by an angel and getting healed.

Overconfident attitudes and overly proud, ridiculously vain attitudes are not based in business school curriculum but in larger society.

If we want to change that, we give stockholders a say in how the company runs, put rigorous controls on executive salaries and change bonuses to consider long term contributions and actual contributions.

James Pilant

Taxing The Wall Street Casino

On December 27, 2010 By southwerkIn Capitalism

This is from the summary of a Paper called: Taxing the Wall Street Casino. It can be found on this web page which belongs to The Institute for Policy Studies.

The report indicates that such a tax would produce would have the potential to generate $177 billion per year.

Financial speculation taxes could’ve made a real difference if they’d been in place before recent financial fiascos:

• Flash Crash: If a financial speculation tax of 0.25 percent on securities trades had
been in place for just the 20 minutes of wildest trading on May 6, 2010, the day of
the stock market “flash crash,” it could have generated $142 million in revenue. That’s
more than $7 million per minute. Big-time investors might have thought twice before
placing their bets, instead of relying on computer-driven high-frequency trading.

• AIG Collapse: A financial speculation tax on the insurance giant’s $440 billion worth
of exceptionally risky credit default swaps would’ve amounted to as much as $1.1 billion,
enough to cover the annual salaries of 20,696 elementary school teachers.

• Greek Tragedy: When Greece cut a derivatives deal with Goldman Sachs designed to
conceal their dangerously oversized debts, a financial speculation tax would have raised
the cost of the shady maneuver significantly. A levy of 0.25 percent on the $10 billion
deal would’ve amounted to $25 million. In the United States and many countries around
the world, there is growing momentum behind proposals to place a very small tax on trades of stock, currency,
derivatives, and other financial assets. Such “financial speculation taxes” would have dual benefits: 1) greater
market stability by curbing short-term speculation that can lead to dangerous bubbles and 2) massive revenues
that could be used for urgent needs, like jobs, health, and climate programs.

Stabilizing Markets and Curbing Excessive Speculation•

Global Precedents: Financial speculation taxes in the UK and many other countries
have had little impact on productive economic growth or investment. Other G-20
countries are pressing the United States to institute such a tax.

• Tax Would Target Reckless Behavior, Not Small Investors: Proposals to institute
a financial speculation tax pending in Congress would exempt retirement funds
and the first $100,000 in trades made by an individual each year. The tax would be
paid almost entirely by wealthy investors engaged in high-risk activity.

Lecture On Plato

On December 25, 2010December 25, 2010 By southwerkIn business ethics, Capitalism, ethics3 Comments

Plato falls between Socrates and Aristotle. These three philosophers lived during the Athenian decline. This caused a great deal of turmoil in their lives and deeply influenced their philosophical views. Here is a lecture on Plato I found very enjoyable.