Category: White Collar Crime

Anectdotal Evidence Or Life In The Skycastle!

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime4 Comments

You wake up in the morning hoping and praying that some justice will be meted out to the giant foreclosure industry for the crimes they have committed. In that hope is mixed the great sorrow for all the people who have suffered the loss of their homes and their cruel treatment.

But don’t worry, it’s all overblown. Oh, excuse me, it “has become a bit overblown in some tellings.“ You see, “there’s little evidence that this has resulted in improper foreclosures..” I feel better all ready! Must not have been that big a deal?! You see, “Anectdotally, these things do seem to have happened…” You see we’ve only heard the occasional, once in a while, sort of, story about some poor schmuck losing his property but in the larger scheme of things, what’s the big deal?

This is from the Atlantic Monthly, an article called – The Real Scandal of the Foreclosure Mess – by Megan McCardle –

The story on the foreclosure mess has become a bit overblown in some tellings. It’s clear that banks have been taking some shortcuts in preparing their foreclosure documents. The banks are obviously overwhelmed with the volume of foreclosures, and the (apparently) many instances in which sloppy securitization has resulted in lost paper trails, obscuring who, exactly has a right to foreclose. Rather than seeking legislative or judicial clarification, they’ve resorted to dubious practices that seem (to my non-legally-trained eye) illegal.

That is bad. But as Arnold Kling points out, there’s little evidence that this has resulted in improper foreclosures: evicting people who’ve paid, or who never had a mortgage with your company. Anectdotally, these things do seem to have happened, but there’s no evidence that they’re frequent, or that they are connected to the procedural irregularities that we’re now discovering with foreclosure documents.

Arnold says that the real scandal is our antiquated title system:

The real scandal is that the process of recording property title is so antiquated, and there are so many interest groups that resist modernizing it. The MERS mortgage database shows what a modern system could look like. But all of the counties that charge fees for title recording, the title “insurance” companies that shake down home buyers to buy “protection” from getting sued to prove that they own their property–these interest groups want to keep the title recording system as expensive and unreliable as possible.

. . . and that it’s taking so long to get people out of homes they can’t afford.

These are my comments on the Atlantic web site –

What!? You don’t see much but “anectdotal” evidence? What were you going to see? No one knew to look until now. You can’t have statistical evidence until you know there is a problem and can look at the numbers.
Anecdotal evidence is the beginning of discovery. Sometimes it turns out that the stories lead nowhere. This time they scored big. And now, and only now, can we find out how big the problem is.
“Only anecdotal evidence” Oh, PLEASE!

And then, about five minutes later, when I got even more angry –

The saddest thing about this article is that in two years after this disaster, this legal catastrophe, when the facts and the numbers are available, no one is going to pull this article out of their Windows’ recycle bin, and wonder what in the hell possessed the author to write it.

According to the article, the “real” scandal of the mortgage crisis is 1) our antiquated title system and 2) “. . . and that it’s taking so long to get people out of homes they can’t afford.” Now, Ms. McArdle is all in agreement with Arnold Kling on the title system being the real scandal but on the second statement (getting the people out of homes…) she disagrees. I give her full credit for disagreeing with the second statement and therefore my scorn for her writing is only for the first statement.

What?!, the antiquated title system is the real scandal? I cannot generate enough invective for this statement. The world is too short of obscenities for me to throw at it. Sorry! Let’s just go to the next one.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Let me tell you a story… About ten years ago, housing prices began to go up but strangely the ease of buying them multiplied. Banks began to demand less and less evidence of credit history and salary down to the point where they eventually just filled in the blanks. This lack of oversight was because the great financial institutions of this nation were packaging mortgages as securities and using them as chips in the great game of casino capitalism. It was a strange time, in which the Internet was utterly blanketed by ads calling upon you to refinance your credit card debts – mortgage your home or to refinance your home for a lower rate. By about 2005, that something was terribly wrong was becoming clear. But the the regulatory agencies, the Congress, the Presidency, the financial press or the “Fed” did nothing about it. The selling if anything became more frenzied. Banks hired celebrities to participate in sales meetings in the black communities. Phone banks and mailings to those who rented and those who owned their own homes or even to those who were about to finish paying their mortgages proliferated. The messages was always the same, re-mortgage for lower rates, re-mortgage to pay off debts and the best one, buying a home is cheaper than rent. Many of the ads were carefully aimed at first time home buyers counting on their lack of financial sophistication to smooth the process. In 2006, the boom was pretty much exhausted, but the great financial institutions nursed it along for the next year by trading securities based on mortgages to the foolish as good investments and to each other simply to keep the market going. And then it all fell down.

“… and that it’s taking so long to get people out of homes they can’t afford.”

Simple statement. Factually correct.

They signed the contract, didn’t they. They’re adults. They got in too deep. They have to pay the price.

That is what it looks like if you live in a skycastle. Skycastles, that’s where people live so high and so far above the common herd, that they and only they can see what’s real. Where the air is clear and the thoughts razor sharp.

From there they watch the little people like bacteria on a petri dish and wonder why God made so many, unless their cold hard intellects have freed them from religious delusions.

I’m down here with the other “bacteria.” I say that these people were victimized and deserve mercy. These people did what the government, the media, and the financial industry told them was the intelligent, the correct and the best decision. These people were generally misled, lied to directly and were often the victims of fraud.

Getting them out of their homes should not be the first priority. Helping them to refinance and punishing those who committed crimes during this disgraceful episode should be the priorities.

But I don’t live in a skycastle.

James Pilant

Inside Job (Film)

On By southwerkIn business ethics, Capitalism, Government Failure, Philosophy of Business, White Collar Crime2 Comments

I want you to look at the trailer. I will be discussing this film more at it reaches more people. What I have heard about it is impressive. I know its conclusions mirror my own.

James Pilant

Competitor Sites!

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime2 Comments

I don’t have any. Anyone who fights for business ethics is my friend and ally, not my competitor. If you are out there and I can help you with my web site, you let me know. If you are more famous, more read, more educated, more experienced, more moneyed, more anything, – so much the better. Our chances for making a difference in a society where a philosophy of relativism and amorality have become the rule of business are improved by your success.

For it is written –

From the Bible – Luke 10:2 Therefore said he to them, The harvest truly is great, but the laborers are few: pray you therefore the Lord of the harvest, that he would send forth laborers into his harvest.

From the Koran – And from among you there should be a party who invite to good and enjoin what is right and forbid the wrong, and these it is that shall be successful. {Qur’an: Chapter 3 (Aale-Imraan – Family of Imraan): Verse 104}

Whoever joins himself (to another) in a good cause shall have a share of it, and whoever joins himself (to another) in an evil cause shall have the responsibility of it, and Allah controls all things. {Qur’an: Chapter 4 (An-Nisa – The Women) : Verse 85}

I want more laborers, more warriors, more friends, more allies, more people with guts and talent, to fight and to make a difference. I call you to work in this field – to make your voice heard. I call upon you to do the impossible, to fight a hopeless battle against unimaginable odds – and I call upon you to win that battle. All successful struggles begin with one thought and one person eventually joined by one and then another. Slowly surely, the impossible becomes implausible, hopeless, ridiculous, unlikely, controversial, maybe, probably, inevitably, and finally: what is normal, expected and the law of the land.

Let us make a good start. Let’s make some racket. Let us be heard.

James Pilant

Do Case Studies In Business Ethics Increase Ethical Behavior?

On By southwerkIn business ethics, Capitalism, ethics, Teaching, White Collar Crime

Only if the examples are of a particular type and taught in a particular way. Back in 2006, a group of professors from a variety of business disciplines got together to teach a class using the examples of Enron, Worldcom, Tyco and Shell.

From the article at SmartPros –

At the end of the semester, the number of students in a simulated trading room who were caught in misconduct or misusing information for insider trading was significantly higher than at the beginning. The students said, “You taught us how to do it,” Buono recalled.

“For those of us who’ve spent our careers teaching this, it’s been a disappointing time,” said Buono, who has taught at the Waltham, Mass., college for 27 years. “Some of the most renowned names in the corporate world are now jokes at cocktail parties. And they were led by graduates of our business programs.

Obviously, the teaching of unfortunate case studies is not the best route to ethical behavior. The professors decided to try a new tack and taught examples from a perspective of moral heroism.

Their initial studies indicated some success.

What’s my take? I loath case studies. My favorite example is a case in which the employee is put crossways with his boss over a fairly minor issue that would however, result in the loss of his job. The study goes on to explain that his wife is in the hospital and his children are in an expensive private school. The case study is loaded for one side. It is obvious students will do the correct and moral thing on a test but take away from the class, the real lesson, the lesson of getting along.

In other words, this kind of ethics teaching is negative ethics teaching. This example clearly indicated that a moral life is expensive and damaging to a career, and that it really doesn’t matter anyway. After all, management will get someone to do the immoral act anyway. Just Great! We desperately need a generation of ethically sound business leaders and our business schools can’t even get ethics case studies right.

How much change in the case study movement do you think has happened since 2006? Why do we have case studies anyway? Simple, it is good class discussion and easy to teach. So we wind up with generations of moral phonies, because business ethics teachers are unwilling to do their job because it’s hard.

My contempt for standard textbooks and standard business ethics teaching is hard to put into words. I write my own class material emphasizing individual moral development. Each individual student charts out an ethical course for their life path. As the semester progresses the students are asked what changes occur because of their exposure to Catholic Social Doctrine, etc. An individual with a thought out moral system is much more likely to make the right decision when confronted with an ethical problem. You prepare a student to be a good human being. That’s the heart of teaching. You don’t teach him silly examples that he will quickly discard as not being part of the real world, you teach that a life lived nobly and honestly is better than the other choices.

James Pilant

Jon Stewart’s Take On The Mortgage Foreclosure Crisis – WARNING, Strong Language

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Philosophy of Business, White Collar Crime1 Comment

Jon Stewart sums up the crisis brilliantly in a little more than seven minutes.

I am submitting to you the link. This is to an article talking about the Jon Stewart show. I cannot show a clip from Comedy Central and expect it to be up on my site for more than thirty seconds. You have to scroll down to the Stewart video in You Tube format.

This is the link.

Have fun and see how pointed humor can be.

James Pilant

Obama Refuses To Sign Mortgage Bill

On By southwerkIn business ethics, Capitalism, ethics, Philosophy of Business, White Collar Crime1 Comment

The President (against all my expectations) declined to sign a bill that would have provided those financial institutions protection from their use of robo signers and their violations of the law.

I am grateful to the President and surprised that I have an opportunity to be grateful to the President.

Now, lawsuits filed by Attorney Generals across the nation can continue. I predict 25 states will file lawsuits by the end of the year. Why? Because the kind of fines you can get from giant financial institutions for lying to the court system hundreds of thousands of times make it a big revenue raiser for the state and an upward leap in status for the state’s Attorney General who then can think about Congress or maybe a Governorship.

There is also this strange idea, that these companies, that these individuals in charge of these companies, no matter who they are, should face justice. I am as surprised to see this happen as you are. I am used to disappointment in the government and in private industry. Very used to it.

But today was different. Praise God! Today was different. I’ll treasure it.

James Pilant

(Please forgive my occasional bursts of religiosity. I know how offensive this stuff can sound since you usually here it in the context of pushing some strange social agenda. But I am a practicing Christian and on rare occasions I will refer to in this in my writing.)

Banks Foreclosures In August The Highest Monthly Total EVER!

On By southwerkIn business ethics, Capitalism, Government Failure, Philosophy of Business, White Collar Crime2 Comments

From an article by William Alden –

August saw more Americans lose their homes to foreclosure than any other month on record, RealtyTrac reported today. Banks repossessed a total of 95,364 properties in August, a 25 percent increase from the same period in 2009 and a 2 percent increase over this May’s previous record. Foreclosure filings of all types, including default notices, scheduled auctions and bank repossessions (the three major stages of the foreclosure process), increased to 338,836 in the month, a 4 percent jump from July.

Can there be any better evidence of robo – signing (the practice of mortgage companies simply have attorneys sign off on mortgages as if they had examined the paperwork for accuracy and legality [like whether or not the bank actually owned the property]) than these enormous numbers of foreclosures?

Foreclosing on people’s homes without doing the most minimal required legal work is “highly unethical.” (I don’t really want to use that phrase, but children might be reading my blog.)

Robo signing is profitable. You can see from the numbers just how streamlined the process can be if you avoid following the law.

But isn’t that the current philosophy in the “real” world? Isn’t the money the only thing that matters? And who are these homeowners anyway, just a bunch of dead beats. Why should they have any rights? They signed the note, didn’t they?

Yeah, do you know what note they signed? The actual amount of what they owed? Whether or not the home was actually the property of the foreclosing bank? Whether or not they were even in default?

I guess I’m just a strange person. I think you shouldn’t take people’s home casually. I think it is a very serious matter. Perhaps I don’t live in the real world. Maybe I’m one of those utopian thinkers who have expectations all out of accord with reality.

Or maybe, just maybe, justice is still important in this nation.

James Pilant

Ohio Attorney General Sues GMAC Mortgage Division – Texas Attorney General Halts Foreclosures!

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, ethics, Government Failure, Philosophy of Business, White Collar Crime1 Comment

It has begun, there will be lawsuits filed across the country to punish the foreclosure industry for their violations of state laws. Can they stop these crimes? What is the Attorney General in our state going to do?

The Ohio Attorney General is filing suit and the Massachusetts Attorney General is considering doing the same.

From Huffington Post –

Attorney General Richard Cordray said Wednesday the alleged fraud could involve hundreds of foreclosures in the state. The lawsuit claims the company’s employees signed and filed false affidavits to mislead courts. Cordray called the alleged fraud the “tip of an iceberg of industrywide abuse of the foreclosure process.

The Texas Attorney General’s Office is halting foreclosures across the state – From CBS7 – West Texas –

The Texas Attorney General has called for a halt on all home foreclosures, this includes all sales of property that were previously foreclosed upon and all evictions of people living in previously foreclosed properties.

State Attorney General, Greg Abbott, has sent a letter to thirty loan service companies freezing foreclosures in the state as they begin an investigation into foreclosure practices in the state.

“Evicting someone out of their home is very serious, and it needs to be done in the proper manner,” said Western National Bank Financial Advisor Mickey Cargile.

Will there be any justice?

Stay with my blog, I’m not letting this subject go until we get to the end of it.

James Pilant

Homeowners Betrayed

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, Economic measurement, ethics, Government Failure, Philosophy of Business, White Collar Crime2 Comments

I have been accused of being shrill. Today is the day, I should tear the wallpaper off the walls in hot raging anger. The Senate passed a bill on the last day of the session by unanimous consent that essentially solves the banks’ mortgage foreclosure problems.

Have a read – (from Reuters)

The bill, passed without public debate in a way that even surprised its main sponsor, Republican Representative Robert Aderholt, requires courts to accept as valid document notarizations made out of state, making it harder to challenge the authenticity of foreclosure and other legal documents.

The timing raised eyebrows, coming during a rising furor over improper affidavits and other filings in foreclosure actions by large mortgage processors such as GMAC, JPMorgan and Bank of America.

Questions about improper notarizations have figured prominently in challenges to the validity of these court documents, and led to widespread halts of foreclosure proceedings.

The legislation could protect bank and mortgage processors from liability for false or improperly prepared documents.

Do we live in a nation where citizens matter? Hundreds of thousands of mortgages have been done without actual knowledge of the facts. This is not legal. But here comes Congress just when the crisis is beginning to develop. And Congress like the cavalry rides not to rescue the homeowners but to make it difficult or impossible for them to challenge inaccurate or false documents. It will also make it difficult or impossible to sue for redress by these simple Americans who lived their lives believing falsely they had a government that was concerned in some way about their rights.

It’s not law yet. It awaits that “stalwart defender” of the public, Barack Obama, to sign or veto. What do you bet?

This is incredible. The mortgage companies are caught committing essentially fraud on a massive scale at the very least lying to the court system not once but hundreds of thousands of times(probably several million times) and the government acts to legalize their acts just as the scandal is revealed.

I don’t know what to say. I am well aware that besides this frail web site, I have no influence. I want to go outside and scream. Doesn’t someone, anyone care about the homeowners who have been abused hundreds of thousands of times?

What do these huge accumulations of money have to do to get in trouble? Apparently there is nothing they can’t do. Apparently there is no line they can cross, that will cause our government to act against them.

Will there be any action taken? Will there be any outrage? Will there be any investigations and will they lead to any actual action?

Stay tuned. I’m not finished with this yet.

James Pilant

The Real Costs Of Business Crime

On By southwerkIn business ethics, Capitalism, Corporate Social Responsibility, Economic measurement, ethics, Philosophy of Business, White Collar Crime

Business crime is sometimes known as white collar crime. This is a term developed by the criminal justice theorist, Edwin Sutherland. I strongly disagree with it. While I can see its theoretical strength in terms of analysis, I think it allows people to put business crime in a different box with different rules. Business crime, white collar crime, is crime. A businessman that takes a life is no different than a murderer on the street who kills for a wallet. A businessman who steals from the government is no different from a bank robber. A businessman who behaves unethically has no right to think of himself as any better than all other poor sinners who have failed the moral test.

Who are the victims of “white collar” crime? Who are the ones damaged by corporate crime? It is simple and accurate to say that those that have lost money such as investors. We could add institutional losers like pension funds, even endowment funds at universities and colleges have been victimized. But that would be too short a list. What if we added those whose careers had been blighted by having worked at a firm like Enron that simply ceased to exist? Their losses would include losing their job, having damage to their professional reputation by having worked at such a place and we could add the loss of pension funds and stock sharing arrangements.

What if we stop thinking about it in terms of direct losses? This isn’t a bank robbery which might net as much as $6,000 dollars. In the case of Enron we are discussing stock losses in the range of $50 billion dollars(This is just the stock losses not all those other pesky losses, just the stock losses). Let’s put this in perspective. The operating budget of Arkansas, a state of 2,855,290 citizens, is 21.3 billion dollars (2008). Enron’s stock losses alone could have paid for more than two years of all Arkansas state expenditures.

Now that we have an idea about the amount of money, let’s discuss the ramifications of that amount of money. Let us assume a particular citizen makes $30K a year. That citizen loses his job. His lack of income is a loss to the community, his state, and nation. He does not produce value and because he earns no money he cannot make purchases or invest. His unemployment damages the country although in a small way.

Let’s take a giant multinational corporation earning billions of dollars a year (at least on paper) and take it out of circulation. Does this affect the corporation’s community, state and nation? Yes. However, when you remove such a large economic unit you have somewhat wider effects. Not only is the corporation destroyed but it usually takes out a number of its suppliers and customers, thus destroying a number of other companies. Its workers join the ranks of the unemployed. Its bill will not be payed causing serious economic problems for scores of individuals and companies.

This is a much larger effect than the individual worker we discussed earlier. But there is more. Such a huge economic loss has long term effects as well. Investment in that part of the country is damaged. That means less money for business startups, business expansion, innovation or opportunity. Many workers become unemployed. This means they take jobs that would have been available to others and while unemployed cost the state resources that could have been used for many other things. For those that lose their pensions and investments, it can mean a total change in expectation and life style. For the country at large, it causes a growth of cynicism and a lack of trust. It damages the ties that bind society together.

And there is more. How will you feel the pain? You might say that you owned no shares, you did not work for the company, and they didn’t owe you any money as a supplier or anything else. Therefore, you did not suffer.

But you would be wrong.

You lose opportunity. The jobs that you could have gotten, the money that you could have made, the places you could have traveled to, the highways and grants and educational benefits you could have gotten, they are not there. And because you don’t know what opportunities disappeared when the corporation closed down, you are under the erroneous idea that you were not damaged.

You were.

The billions and trillions of dollars taken out of this country by corporate collapses like Enron and Worldcom, by the use of derivatives and sub-prime lending are real money. When that money, that value disappears, so do many of the possibilities of what you could have been, what you could have done, and what kind of future your community, your state and your country could have had.

That’s the reality of white collar crime. All the regular crime, you can figure out the effects, the dead people, the economic costs, the lost opportunities. You can count the bodies.  But corporate crime, white collar crime, it destroys the connecting fabric between individuals and simply eradicates possibilities making the world a smaller and more hostile place.