Ethics Newsline®

In a national survey of workplace fraud, the median dollar amount lost per incident:

by Rushworth Kidder

When Boston Globe columnist Mike Barnicle resigned this summer in a blizzard of plagiarism charges, he may never have compared himself to President Clinton.

And when Clinton admitted to seven months of dogged mendacity, no doubt he never thought of Mike Barnicle.

But both were caught up in a problem as old as ethics itself. It was simply put by Pilate, who asked Jesus, “What is truth?” How do we know what’s true? What are the evidentiary structures whereby we can be assured that Fact A comports with reality while Fact B does not? What, after all, is reality?

Those are tough enough questions in any age. But as we move into the 21st century, they’re being ratcheted to levels of intensity that neither Clinton nor Barnicle grasped. These two probably thought they were involved in isolated incidents. In fact, they were part of a much larger and more sobering picture. An example helps explain why.

Several years ago, a new venture sprang up here in Camden, Maine. Called the Center for Creative Imaging, it was a training school in state-of-the-art computer imaging techniques. A joint venture by Kodak and Apple Computer, it taught hundreds of photographers from around the world how to manipulate their pictures, pixel by pixel, to produce whatever image they wanted. Want a shot of Mike Barnicle sharing a drink and a laugh with Afghanistan-based terrorist Osama bin Laden on a golf course in Martha’s Vineyard? Not hard to do–and with such seamless clarity that even the pros couldn’t tell, from the photograph itself, whether it was taken or created.

That’s not all. Want an audiotape of President Clinton singing bin Laden’s praises and chatting about how much he’d contributed to the reelection campaign? Not hard to do–through a technique called digital audio sampling. Just take some of the millions of recorded words spoken by the president, break them down into vowels and consonants at different pitches and volumes, and start repackaging them. Result: You’ll hear him say whatever you’ve made him say.

Mere sci-fi speculation? Not at all. When the Kodak-Apple venture came to Camden, it published a book of snapshots taken by fifth-graders around town–including one of two children playing with a dog on a lawn which (the editors explained) had been smoothly manipulated to remove some ugly features in the background. And when I visited the World Copyright Office in Europe a decade ago, they were already talking about making audiotapes of Louis Armstrong singing songs not written until after his death. This isn’t Dick Tracy’s wrist radio. This is now.

The point? We’re in an age when we can no longer trust physical evidence to verify or disprove assertions of truth. The important question, these days, is no longer, “What does the photo show and the tape say?” It is, “Who gave me the photo and the tape?” What matters is not content but provenance: It’s not what you see and hear, but whether you trust the source. Internet users already know this. When a virus warning erupts, they keep seeing messages saying, “Don’t download anything unless you know and trust the sender!”

Which gets us back to Barnicle and Clinton. For newspaper commentary to work, we’ve got to trust the commentator. The danger of plagiarism, or fabrication, or shaded half-truths, is not that a paper will lose readers or that the columns will go flat. Quite the reverse: Fiction is often more compelling than fact. The danger is that the lines between fact and fiction will become impossibly blurred. And the public, having no way to check on the veracity of each column, risks being drawn into a kind of artful con game where the delight of the read takes precedence over the reliability of the reporting. When that happens, the virus of half-truth has already been downloaded.

And so it is with the president. He can never share with us the top-secret evidence for why the United States felt compelled to bomb Afghanistan and Sudan. All he can say is, “We had overwhelming proof. Trust me.” If that statement comes in the context of an admission that he has spent months covering up a series of lies, what are we to make of it?

These are not new problems. Politicians have long lied, and journalists have long invented. What’s new is the importance of this issue. The public is increasingly learning to ask not “What are the facts telling us?” but “Who says these are the facts?” More than ever, then, the individuals at the top of the commentary ladder–not only journalists and elected officials, but CEOs and corporate spokespersons as well–need to go out of their way to prove that they can be trusted. When the public says, “I don’t care about your evidence–I want to know about you!” you can’t fall back on lawyers, or scientists, or specialists. The only thing left is ethics–built over the long haul, sustained by consistent action, and convincing as only the truth can be.

Resolving disputes is a central function of ethics and the law, and isundoubtedly one of the most difficult aspects of doing business.

Should a dispute be ended just for the sake of ending it? Will a short-termsolution be the better option, or should the situation be allowed to sortitself out? And whose interests should be protected most heavily in theprocess–the participating parties’ interests or those of the innocents directly affected?

Those questions dominate several stories in this week’s edition of BusinessEthics Newsline.

As our issue went to press, events were still unfolding in the strike by pilotsagainst Northwest Airlines, a job action that threatens to snarl travel plansfor thousands in the busy week before Labor Day. The strike was theculmination of a long-simmering dispute, and President Clinton declined toorder a cooling-off period, apparently hoping that negotiators could settlekey disputes over wages and job security without prodding from the federalgovernment.

A strike in South Korea was apparently resolved, at least for the time being.A potentially violent action against Hyundai Motors appears to have endedafter the automaker agreed to scale back planned layoffs and firings. But aswe report, some analysts wonder if the short-term resolution is really pavingthe way for more serious confrontation down the road.

And another job action about which we report illustrates the difficulties oftrying to serve the interests of several parties: Striking technicians atphone company U.S. West have agreed to install service at certain highpriority venues, such as schools, but demand for the emergency service isoutstripping supply.

In other news from the world of ethics, we report on an FDA physician who tookhis ethical concerns public; Indian families who don’t want to sell theirancestral lands and are holding up construction of an enormous power projectin Chile; a dispute over the ethics of a clothing company that included anarticle about drinking games in its catalog; an FTC action against a creditbureau on charges of violating customers’ privacy; an SEC action against abrokerage house for allegedly failing to supervise a broker who cheatedcustomers; a settlement in a case brought against a sweepstakes company thatallegedly misled entrants; and a British town that booted its computer (outthe door) because town officials say they can do the job more effectively theold-fashioned way, and save taxpayer money in the process.

London correspondent E.B. Mills files two analyses this week of storiesdealing with the worlds of ethics, commerce, and business. In one, he reportson a continuing controversy over the sale of so-called gray-market designersportswear. And he concludes our wrap of the week’s news in ethics with astory about how the environmentally friendly “green” government of England hasbeen caught red faced: It seems the seat of government is resting on furnituremade from endangered species of trees.

MINNEAPOLIS
As the busy Labor Day vacation period approaches, a strike by NorthwestAirlines pilots threatened to snarl travel across the nation’s midsection,where Northwest controls many airline routes.

Pilots for the nation’s sixth-largest airline went on strike late Friday overpay and job security issues. The airline says about 672,000 customers will beleft without alternative air service in the first ten days of the strike.

President Clinton declined to intervene and order a “cooling off” period as hedid in last year’s American Airlines strike, the Associated Press reported.

While both sides said they are open to continued negotiation, there was noimmediate word on when talks might resume.

COLUMBUS, Ohio
Although it received a barrage of criticism for its newcatalog featuring an article detailing drinking games and alcoholic drinkrecipes, trendy clothing company Abercrombie & Fitch scored an apparentmarketing coup–recouping record profits and creating a buzz of industryhype.

Abercrombie & Fitch agreed to pull “Drinking 101″ from its remaining catalogsand admits the article was “ill advised,” but also says that the controversyhas stimulated market interest, helping the company to enjoy booming profitsquintuple the same quarter in 1997.

Robert Kahn, publisher of the trade journal Retailing Today, told theAssociated Press the campaign was “morally wrong” because the company’scatalog is targeted at college-age consumers, most of whom are under the legal age todrink alcohol.

ULSAN, South Korea
A tense strike and a month-long occupation of SouthKorea’s largest auto plant ended peacefully last week after Hyundai Motorsagreed to fire fewer employees in exchange for union acceptance of more than1,200 temporary unpaid layoffs and cooperation with an employee retrainingprogram.

But some analysts view the company’s capitulation to the militant union as aharbinger of tough labor relations ahead nationwide, according to the Reutersnews agency.

South Korea’s difficult path to economic recovery, guided by demands from theInternational Monetary Fund, has strained employer-employee relations,jeopardizing the powerful role of unions and the traditional system of lifelong employment for South Korean workers, the BBC reported.

WASHINGTON, D.C.
The Securities and Exchange Commission (SEC) last week filed acomplaint against Dean Witter Morgan Stanley & Co., seeking unspecified civildamages on charges that the company and two Dean Witter managers failed toadequately supervise a Dean Witter employee accused of defrauding elderlyinvestors of $320,000.

The SEC charged that broker Michael J. Oberholzer placed elderly investors inunsuitably risky investments, and engaged in the practice of “churning”–engineering unnecessary sales and purchases in order to boost commissions.SEC enforcement director Richard Walker told the Associated Press that thoseactions should have caught the attention of Oberholzer’s superiors.

Dean Witter plans to fight the SEC action, claiming the firm did its best toright the wrongs done by the broker, including firing Oberholzer in 1995,making restitution to his elderly clients, and cooperating with the SEC’sinvestigation, the AP reported.

SANTIAGO, Chile
A $463-million Chilean power project has been stalled byeight families of Pehuenche Indians who are refusing to sell their ancestrallands to Chile’s largest power company, Endesa Chile, which plans to build ahydroelectric power plant in a remote southern valley.

The eight Pehuenche families rejected Endesa’s offer of land, modern houses,and new farm tools in exchange for their land. A similar offer was acceptedby 83 other Pehuenche families, the Reuters news agency reported.

Chilean, U.S., and church negotiators have all failed to mediate an end tothe standoff.

WASHINGTON, D.C.
An administrative judge for the Federal Trade Commission hasordered credit bureau Trans Union Corp. to stop selling financial informationabout its consumers–including details of income, home mortgages, and autoloans–to third parties.

In a ruling disclosed last week, Judge James Timony upheld a 1992 complaintfiled by the Federal Trade Commission against Trans Union, finding that thecompany “invades consumers’ privacy when it sells consumers’ credit historiesto third-party marketers without consumers’ knowledge or consent.”

Trans Union had argued that it gives customers the chance to opt out of havingtheir information sold to third parties. But Timony said the opt-out policywas neither clear to consumers nor demonstrably effective.

Trans Union plans to appeal the ruling.

Special to Newsline from London Correspondent E.B. Mills

The sporting goodsgiant Nike is battling the retail Goliath J. Sainsbury over the sale ofalleged forgeries of Nike products. Nike claims Sainsbury’s discount chain,Savacentre, is selling phony Nike polo shirts, possibly made in thePhilippines and imported into Britain.

The issue was headed to court, but late in the week Sainsbury’s agreed to pullthe Nike-labeled goods out of its stores, and cooperate with Nike in an effortto find out where the 5,000 Nike polo shirts originated. Sainsbury’s says itmay have been victimized by counterfeiters, but admits the shirts came from a”gray market” supplier.

Brand-name clothing producers such as Nike have been refusing to allowdiscount chains to sell their goods, on grounds that the discounters won’tstock a comprehensive range of items or provide adequate customer service. Butthe discounters have been importing the brand-name products from the so-called”gray market” and selling them at much lower prices than the authorizedretailers, much to the satisfaction of British consumers.

Regardless of whether Sainsbury’s Nike goods came from the gray market–legitimate branded goods sold outside normal distribution channels–or fromthe black market–which serves up poorly made counterfeits–the retailermay be flouting the law. A recent European Court ruling gave brand-nameproducers such as Nike and Ralph Lauren the legal power to decide who sellstheir brands and who doesn’t.

Nike is also blaming lax enforcement for making it easier for the discountersto obtain brand-name goods. Nike’s U.K. general manager Jim Tucker says, “Thecounterfeiting cartels have learned that the U.K. is a profitable place toshift fake products.”

A Food and Drug Administration (FDA) employee last week departedfrom business as usual and almost lost his job after publishing an unusuallycandid letter in the Washington Post charging that the FDA’s approval processfor new drugs is ethically unsound.

FDA medical reviewer Robert Misbin warned that the FDA’s approval processrelies too heavily on resources from drug companies, and in some cases mayendanger the health of test subjects who are required to forego their standardmedicines while testing placebo pills and new, unapproved pharmaceuticals, theAssociated Press reported.

Misbin’s criticism sparked an immediate call for his resignation by his FDAsuperior–a demand that was later retracted after the incident wasreported in the press.

LONDON
An English town council has decided to scrap its computerizedaccounting system in favor of a return to handwritten bookkeeping, saying thatthe old-fashioned method is faster, simpler, and a more responsible way ofspending taxpayers’ money.

The Thirsk town council insists that the move is not a Luddite knee-jerkreaction against the new computer system, installed two years ago in the hopesof making the office more efficient.

“We hope we are being seen as sensible people who are not wasting anybody’stime,” deputy mayor Freda Roberts told the BBC.

Roberts and her two co-workers will continue to use the computers for word processing, but say that “enormous problems” with using computerizedaccounting have taught them a better way.

“Our clerk is quite capable when a bill comes in of picking up a pen andwriting it down in a book,” Roberts noted.

The Labourgovernment of Tony Blair promised to be “green,” that is, environmentallyfriendly. But one of Blair’s top aides, Dr. Jack Cunningham, has orderedL15,000 ($25,000) worth of furniture made from endangered South Americanmahogany as part of a refurbishment of the Cabinet Office. The Britishgovernment’s ban on Amazon mahogany predates the Blair government–since1990, it has been the policy of the Department of Environment to purchasehardwoods only from certifiably sustainable sources. No hardwoods harvestedfrom the Amazon Basin meet the criteria. The Cabinet Office issued a statementsaying “every effort has been made to ensure the wood has come fromsustainable and legal sources.” But the firm that imported the Brazilian wooddenies ever making such guarantees. A spokesperson for Friends of the Earthcalled Cunningham’s mahogany purchase “astounding” and said it “makes amockery of the government’s sustainable timber policy.”

In the marketplace, buying endangered woods has the same effect as purchasingthe fur of endangered animals. Every Brazilian mahogany purchase is, ineffect, placing an order to cut more trees, just as every purchase of aleopard coat is an order to kill more leopards. The Blair government thuswould appear to be setting a poor example by supporting the ruinous loggingpractices of Brazil’s Amazon Basin.

NEW YORK
American Family Publishers (AFP) last week agreed to an $800,000settlement with New Yorkers who claim that the sweepstakes companymisled them into believing that buying magazine subscriptions would increasetheir chances of winning the sweepstakes.

The new agreement, promising a $60 restitution to each eligible customer, is thefirst time AFP has agreed to reimburse subscribers directly.

In March, AFP reached a $1.25-million settlement with 32 states and theDistrict of Columbia, in which AFP agreed to pay $50,000 to each stategovernment and reform its advertising practices.

In both settlements, AFP, partly owned by Time Warner, denied any wrongdoing.

DENVER
The labor dispute between phone giant U.S. West and the CommunicationWorkers of America (CWA) continued last week, leaving more than 35,000technicians walking picket lines and some of the company’s 25 millionconsumers without service.

The strike centers on issues that include forced overtime, health benefits, and a proposed link between performance and pay.

To supplement U.S. West’s automated phone system, nonstriking employees have increased their working hours since the strike began on August 15, covering911 and other essential phone services in 13 states affected by the CWAstrike.

CWA technicians have offered to install phone service for certain high-priority customers if U.S. West sends a truck to the site. But the number ofsuch customers–including schools, day-care centers, fire stations, andpregnant women–has outpaced supply, leaving them to wait nervously for thetwo sides to settle the strike, National Public Radio reported.

“While most industrialized nations and a handful of developing countries are seeing the spread of HIV level off or even decline, thanks to strong prevention programmes, infection rates are reaching alarming new highs in much of the developing world. This prevention gap is highlighted in a new report that provides the first-ever country-by-country analysis of the global HIV/AIDS epidemic….

“Alongside the widening prevention gap, the report reveals a looming divide between countries where rates of new AIDS cases and AIDS deaths are falling and countries where they are rising as people infected with HIV fall sick and die in greater numbers than ever. The major reason for the gap is uneven access to combination therapy with antiretrovirals, drugs that combat the human immunodeficiency virus in the body and forestall the development of AIDS-related infections and cancers. Combination antiretrovirals have come into widespread use in the developed world over the past two years, yet because they are costly and difficult to administer they remain inaccessible to most people living with HIV in the developing world and in countries whose economies are in transition.”

“A character standard is far more important than even a gold standard. The success of all economic systems is still dependent upon both righteous leaders and righteous people. In the last analysis, our national future depends upon our national character–that is, whether it is spiritually or materially minded.”

–Roger W. Babson (1875-1967)

“In 1997, approximately 111 million persons age 12 and over were current alcohol users, which was about 51 percent of the total population age 12 and older. About 31.9 million persons (15.3 percent) engaged in binge drinking, and about 11.2 million Americans (5.4 percent of the population) were heavy drinkers.

“The level of alcohol use was strongly associated with illicit drug use in 1997, as in prior years. Of the 11.2 million heavy drinkers, 30 percent (3.3 million people) were current illicit drug users.”

by Rushworth Kidder

The saddest part of the Clinton debacle is the waste. Never mind the thousands of hours and millions of White House dollars expended in a futile effort to prop up a lie. The real waste is of a very bright mind, a man with finely calibrated political instincts, a president who really wanted greatness. Sad, too, is the dragon that brought him down. This was no cosmic battle over ideals, no fierce defense of principle. This was a groping, graceless encounter with lust.

Shakespeare put it best. He defined lust as “th’expense of spirit in a waste of shame.” And so it is: a huge outlay of the resources of soul and spirit, all leading to a desert of guilt, remorse, and humiliation.

Shakespeare is not out of place here. Central to this debacle, after all, is a dramatic soliloquy, delivered by the president in the Map Room of the White House following his August 17 testimony before the grand jury. It is a literary artifact so rife with complexity that, like the Bard’s work, it cries out for analysis.

Comprising only 36 sentences, it begins solidly enough by introducing what should be his main point: his taking “complete responsibility” for “all my actions, both public and private.” Good, we say: He’s about to explain himself and apologize.

But by Sentence 6 the questions begin to arise. He tells us his answers under oath in the January 17 Paula Jones deposition were “legally accurate.” But didn’t the January transcript record him saying, “I have never had sexual relations with Monica Lewinsky”after a wincingly explicit definition of “sexual relations” had been explained to him? So what, we naturally ask, was the relationship with Ms. Lewinsky?

His answer: an “inappropriate” and “wrong” one, that constituted a “lapse of judgment” and a “personal failure on my part.” So this was not a sexual relationship? If not, what was it? And why bother hiding it for seven months? Another worry surfaces: Is he really going to explain, or is he using language to obfuscate and cloud the issue?

But we’re only at Sentence 10, so we give him the benefit of the doubt. Yet what comes next is a qualifier, almost Nixonesque in its defiance (”I say to you now that at no time”) and asserting that he never asked anyone to do anything illegal. By now there’s a strange overtone in the air. We’ve heard that defiance before, when he insisted publicly he was telling the truth about what we now know were lies. What’s more, this speech is veering dangerously toward self-justification rather than apology.

He hauls it back by admitting he gave a “false impression” and “misled people, including even my wife.” That last point is something of a shocker. For sheer emotion, it might have been his high point. Yet there’s that overtone again: Even when he says, “I deeply regret that,” there’s no visible pain on his face. Surely, we think, he can’t be saying merely that he regrets the fact that this mess has become so public. Maybe he’ll say more about “regret.”

And indeed, he turns next to his motivations for misleading us. He makes a good start by listing “the embarrassment of his own conduct” and “protecting my family.” But the latter point dissolves almost instantly into a barb at January’s “politically motivated lawsuit” against him. It happens so fast that we almost miss a huge lapse in his list: his desire to protect Ms. Lewinsky. Presumably he felt some attachment to her. But she’s not mentioned. Was he simply using her, then, for his own satisfaction, and is he now casting her aside? Does she not deserve an apology, too? That overtone again.

Suddenly, without warning, the barb grows into a four-sentence, blame-shifting blast at independent counsel Kenneth Starr. But hold it, we say: Wasn’t this supposed to be an apology for lying? Wasn’t it Starr’s investigation that compelled him to tell the truth? So what exactly is he regrettingthat he lied, or that he got caught?

As the blast dies away, he launches a seven-sentence discourse on the “private” nature of this issue, noting that “it’s nobody’s business.” By now the dissonance is jarring pretty hard: Didn’t he say, up in Sentence 4, that he was going to take responsibility for “all my actions, both public and private”? Is he now saying the latter are out of bounds, not a proper topic for conversation with the public? Is he saying he doesn’t need to apologize to us, since this is not our business either?

But he’s still got seven sentences. So we hang on eagerly, almost imploringly, as he concludes. Will he use the word “apology”? Will he say, “I was wrong” (not simply “It was wrong”)? Crucially, will he ask our forgiveness?

But no, the tone slips awaynot into defiance so much as high rhetoric. “Our country has been distracted,” we’ve got “important work to do,” let’s “turn away from the spectacle of the last seven months.”

As abruptly as it began, it stops.

And in the silence that follows, what remains is not the logic. It’s the overtone. It’s the recognition that this really was a big issuelying under oath, deceiving his own family, and using tax-payer dollars to keep us in the dark. What we wanted to hear was not the legal hairsplitting of a well-lawyered speech. We longed for the moral authority of a leader apologizing for unethical behavior, convincing us he had learned his lesson, and seeking our forgiveness.

So, 36 sentences later, we’re left with three questions:

• Did he set out to clarify the issues, or further muddle them?
• Has be earned the right to ask us to “turn away” and “move on”?
• Is he ready for forgiveness, and should we forgive?

Will Rogers once noted that it’s not what we don’t know that hurts, it’s whatwe know that ain’t so.

Rogers lived in simpler times, and the information age has considerablymagnified this aspect of information ethics, a theme running through severalstories in this week’s Business Ethics Newsline.

Our lead story involves the resignation of Boston Globe columnist MikeBarnicle after a wave of allegations that he fabricated a story andplagiarized material in his columns. And the story assumed additionalsignificance throughout realm of ethics, media, and business when the Globefound itself facing charges of a double standard — after earlier dismissing ablack columnist charged with fabricating stories, but only suspending Barnicleinitially.

A story that impacted two Asian governments illustrates the power of theinternet to combat what some viewed as a conspiracy to misinform the publicby suppressing news reports of violence against ethnic Chinese in Indonesia.As we report, internet users mounted a campaign to publicize their claims ofviolence against Chinese during May riots in Indonesia.

A report from Connecticut deals with a software maker’s claim that what itdoesn’t know does hurt it — literally. What the firm does not know isMicrosoft’s source code for Windows, and it is suing under anti-trustprovisions to get it.

In other news in our weekly wrap-up from the world of ethics, we cover asurvey released last week that claims the cooling of Asian economies isheating up the illicit sex trade; a proposal from the International OlympicCommittee to more closely monitor athletes for the use of performance-enhancing drugs; a court victory for an unlikely pair (Meineke Muffler andKenneth Starr); and a blood lab agreeing to a settlement in a civil casecharging that it conspired with dialysis providers to force kidney patients toundergo needless blood tests for which the U.S. government was billed.

London correspondent E.B. Mills files two analyses this week, both dealingwith ethics and the underlying realities of events: a television productioncompany charged with staging scenes in a documentary, and a newspaper facingcriticism for doctoring a photo.