Ethics Newsline®

Last week must have made the cynics squirm. They like to think that nobody cares about fairness any more. But two headline events said otherwise.

One came from Piper, Kansas, where a teacher resigned when ordered to change the failing grades she’d given students caught plagiarizing. The other came from the Olympic Winter Games, where a second Olympic gold medal was awarded to the Canadian figure-skating pair after a French judge was suspended, apparently for fixing her vote.

On their faces, these events are as different as chalk and cheese. One involves an uncelebrated suburb, the other a celebrity event. One features a teacher who never sought publicity, acting out of conscience. The other centers on a judge in a high-stakes sport, acting unconscionably. But each proves an outraged public can make a moral difference.

Christine Pelton, the biology teacher, had no reason to doubt her judgment. When she ran papers from her 118 high-school sophomores through a Web-based program designed to detect plagiarism, she scored 28 direct hits. Her classroom rules, warning students that “cheating and plagiarism will result in failure,” had been signed by students and their parents. So she flunked the 28, confident the school would back her up.

Then their angry parents began pressuring the school board. At a closed-door meeting on December 11, the board ordered Ms. Pelton to ameliorate her punishment. Instead, she resigned. Now, two months later, the case has hit the front page of the New York Times. In the context of plagiarism cases involving historians Stephen Ambrose and Doris Kearns Goodwin — and résumé fraud involving historian Joseph Ellis and Notre Dame football coach George O’Leary — the board has drawn sharp editorial criticism around the country for abetting a national trend toward academic cheating.

Perhaps because of those sensitivities — and because of the whiff of corruption still clinging to the International Olympic Committee (IOC) for awarding the Winter Games to Salt Lake City — it took only four days for the skating scandal to get sorted out. The controversy began with audible outrage in the audience as the judges’ 5-4 decision gave the gold to Russian skaters Elena Berezhnaya and Anton Sikharulidze. It continued with a tearful French judge, Marie Reine Le Gougne, being suspended several days later by the International Skating Union (ISU) for “misconduct” that apparently involved vote-swapping under pressure from French authorities or other pro-Russian judges. It ended with a second gold medal going to Canadian skaters Jamie Salé and David Pelletier.

The common lessons:

1. It seems to require personal heroes and villains — like a Kansas teacher and a French judge — to bring ethical lapses to light. How many teachers haven’t had the moral courage to resign in similar circumstances? And how many corrupted athletic judges have lacked a conscience that drove them to tears? But there’s always a larger context. The parents of Piper High plagiarists, a fuzzy-minded school board, judges who sought to trade votes, and even the head of France’s Olympic team, may all share blame.

2. Ethical collapses aren’t victimless crimes. Given the gulf between winning gold or silver, Canada and its skaters had much at stake. Without swift action by IOC president Jacques Rogge and ISU head Ottavio Cinquanta, figure skating itself could have been deeply tarnished. Similarly, public schools could be big losers: Last year’s survey by Rutgers University professor Donald McCabe, suggesting that more than half the nation’s high-school students had plagiarized from Web sites, fuels public fears of a cheating epidemic. But the big losers are students who work hard, don’t cheat, and finish second behind others who get top grades for turning in somebody else’s work.

3. In an age of transparency, public outrage works. The reaction to the Olympic judging was instant, and it was not about to go away. The IOC couldn’t ignore the media glare. Similarly, as news from Piper High spread across the nation — prompting one Florida business (according to the New York Times) to fax the school asking for names of the 28 plagiarists so they could be sure never to hire them — the authorities have had to respond. Now an investigation has been launched by the Wyandotte County district attorney.

What’s most encouraging is that the public really does have a role. Unethical activity prospers in the dark. Shine in the light, and it can’t survive. That’s where the cynics get it wrong. They assume that the public, even if it learns about unethical behavior, will shrug it off. Last week proved that in two areas where people care — their local schools, and their popular sports — fairness isn’t negotiable.

(c)2002 by the Institute for Global Ethics

“When you are the CEO and you are on the board of directors, you are supposed to know what’s going on with the rest of the company. You can’t get off the hook with me there…. He’s going to have to beat this the best way he can.”

–Betty Skilling, mother of former Enron CEO Jeffrey Skilling, in an interview with Newsweek magazine prior to testifying before Congress. (Newsweek, Feb. 18.)

WASHINGTON
Enron Corp. last week agreed to turn over tax returns dating back to 1985 to the U.S. Senate Finance Committee as part of the panel’s probe into the collapse of the firm.

Senators also want to know if Enron avoided paying taxes by use of complex partnerships and off-shore subsidiaries, according to the Washington Post.

Meanwhile, the New York Times online edition reported late last week that former Enron chairman Kenneth Lay sold $100 million worth of stock last year, much of it following a warning by whistleblower Sherron Watkins, who reportedly told Lay that deceptive accounting practices were about to sink the firm.

Watkins, who reportedly told Lay about the firm’s finances in a now-famous August 15 memo warning that Enron was about to “implode in a wave of accounting scandals,” testified before a House subcommittee last week.

She characterized Lay as a disconnected manager who may have been unaware of the scandals, and laid much of the blame at the feet of former CEO Jeffrey Skilling, according to the New York Times.

Watkins also blamed the scandal on a “culture of intimidation” at Enron, where the shaky nature of the partnerships were well-known but employees were afraid to confront Skilling.

BALTIMORE
Allied Irish Bank (AIB) last week announced that it was investigating how internal safeguards failed to catch $750 million in fraudulent trades by a rogue employee based in the United States.

John Rusnak, a U.S. currency trader with AIB subsidiary Allfirst, is suspected of hiding $750 million in trading losses by using an elaborate system of forged transactions, according to the Associated Press.

Although Rusnak has not yet been charged with any crime, he has been under investigation for weeks, the AP reported.

Last week, AIB announced a formal investigation into Rusnak’s activities, suspending him and four of his superiors while the company scrutinizes their actions.

Admitting the company’s efforts to monitor fraud had failed, AIB’s board said it was still too early to determine fault and apportion blame.

“There is no doubt that John Rusnak was involved in fraudulent activity,” AIB chief executive Michael Buckley told the AP. “Whether or not he benefited from that is still the question.”

The AIB scandal comes after extensive — but perhaps insufficient — industry efforts to control rogue trading, noted the AP report. Those efforts gained significant momentum following the collapse of Barings Bank in England, which was hollowed out by more than $1 billion in hidden losses incurred by rogue trader Nick Leeson.

PHILADELPHIA
Credit card companies that promise cards with “no annual fee” but then change the terms to assess a fee soon thereafter can be sued for fraudulent practices, a federal appeals court ruled last week.

Such “bait-and-switch” operations violate the federal Truth in Lending Act, according to a unanimous ruling by the three-judge 3rd U.S. Circuit Court of Appeals in Philadelphia, reported the Washington Post.

Last week’s decision comes in the case of Paula Rossman, who applied for a “no annual fee” card from Fleet Bank. When Fleet imposed a $35 annual fee six months later, Rossman sued.

Although she lost an earlier ruling, the federal appeals court last week upheld her complaint. Fleet denied the accusation that it planned the fee imposition all along, saying the fee was added because of an interest rate hike by the Federal Reserve.

Industry analyst Robert McKinley said last week’s ruling could challenge “all issuers who are involved in this sort of marketing — promising one thing and then changing terms shortly after the card is issued.”

“It’s a widespread practice in the industry,” he told the Post. “Fleet is not alone.”

Last week’s ruling conflicts with lower courts’ decisions, possibly portending a fight to the U.S. Supreme Court, reported the Post, with banks arguing that credit card contracts contain fine print allowing them to change the terms whenever they see fit.

Special to Newsline from Canadian correspondent Errol P. Mendes

TORONTO
Even after a holding company controlled by Michael Cowpland, the former CEO of Corel Corporation, pleaded guilty to charges of illegal insider trading and was fined nearly $629,000, the leading securities watchdog in Canada, the Ontario Securities Commission (OSC), last week rejected other settlement penalties negotiated by OSC staff.

The settlement, overturned for not being severe enough, included a $314,000 personal fine for Cowpland, who also would have been banned from acting as director of a publicly traded company for two years.

Cowpland was charged with insider trading after selling Corel stock just before a major sales shortfall warning when he was still the CEO of the company.

At the same time, Nortel Networks has also announced that its chief financial officer, Terry Hungle, will resign after it was discovered that he had engaged in insider trading.

Some commentators are asserting that companies like Nortel are acting swiftly to root out unethical conduct and that the OSC is finally using its teeth as a watchdog over the Canadian capital markets, perhaps motivated by the Enron scandal in the United States.

NEW YORK
New York State last week sued tech firm Network Associates, accusing the software maker of suppressing free speech by barring users from publishing reviews of the firm’s software without first getting permission.

New York’s suit centers on a clause in the user’s agreement for many Network Associates products, including the popular McAfee VirusScan antivirus software.

Those user agreements bar consumers from publishing any reviews or benchmark tests of Network Associates software unless the reviews have been pre-approved by the company, reported CNET News.com.

New York attorney general Eliot Spitzer blasted those stipulations as censorship, suing the company to remove the restrictions.

“Whether the subject is political debate or debate over what software to buy, we must protect free and open speech from intimidation in order to preserve the public’s right to information,” Spitzer said in a statement.

Kent Roberts, executive vice president and general counsel for Network Associates, said the clause was never intended to restrict free speech, but rather to keep users from reviewing an out-of-date product.

“Some reviewers … would grab the old version of a product and review it and compare an old version of our software with a current version of a competitor,” Roberts said.

Roberts said the company has changed the user’s agreement language in response to the suit, although the Reuters news agency last week reported that downloadable versions of VirusScan still displayed the speech-restrictive clause.

New York said it would pursue its case against Network Associates on behalf of users across the country, insisting that “there are still millions of copies of [older] software out there.”

MOSCOW
Russia’s Supreme Court last week struck down a military edict used to prosecute citizens on espionage charges, dealing a blow to the Russian military’s growing stranglehold on the flow of information.

The Supreme Court’s ruling centered on a sweeping 1996 document, known as Order No. 55, which classifies certain information as top secret, reported the Moscow Times.

The Court’s military branch ruled that Order No. 55 was unconstitutional because it was filed improperly and was unpublished, making it impossible for the public to know what information is classified and what is not.

The decision is a setback to Russia’s Defense Ministry, which has been regaining strength as former KGB officials return to power, increasingly using Order No. 55 to prosecute academicians, journalists, and others for espionage.

Last week’s ruling may prove key to the freeing of Russian military journalist Grigory Pasko, currently serving a four-year prison sentence for allegedly providing classified information to Japanese reporters, according to the Times.

Pasko, convicted for exposing the Russian navy’s illegal dumping of nuclear waste in the Pacific Ocean, has become a symbol of human rights violations and military oppression in Russia.

LONDON
A growing number of doctors may be violating ethics guidelines — and the public trust — by simply signing their names to articles that are actually written by pharmaceutical companies to endorse their products.

The process of “ghostwriting” was spotlighted last week by U.K. newspapers, which warn that the arrangement may be increasingly popular, especially among overworked and prominent physicians, who feel they lack the time to do research.

According to the reports, instead of doing time-consuming studies on new products themselves, some doctors are either using simplified data provided by the drug makers — or, in some cases, simply putting their names on articles they did not write involving research they never saw.

“Some of us believe that the present system is approaching a high-class form of professional prostitution,” Fuller Torrey, the executive director of the U.S.-based Stanley Foundation Research Programs told Britain’s Guardian.

Torrey and others note that doctors and researchers can earn from $2,000 to $10,000 by endorsing articles and presenting them at medical conferences.

“It is clear that we have a situation where … you recognize the stage where the audience is uncertain as to whether the psychiatrist really believes this or is saying it because they themselves or their department is getting some financial reward,” Robin Murray of the Institute of Psychiatry in London told the Guardian.

Ghostwriting and what critics claim are other forms of research fraud have been targeted recently by U.S. and U.K. medical groups, which warn that a tainted research process ruins public trust and can put insufficiently vetted products on store shelves, leading to legal liability for doctors who endorse drugs that turn out to be dangerous.

NEW YORK
People infected with HIV, the virus that causes AIDS, should receive the same help as uninfected people when trying to conceive a child, according to new guidelines issued last week by the American Society for Reproductive Medicine (ASRM).

Reversing its 1994 policy prohibiting such assistance, the ASRM said medical advances have greatly increased the life span of people with HIV, while decreasing the odds of passing HIV along to children.

In light of these changes, fertility specialists should engage in a dialogue with HIV+ people wishing to have a biological child, rather than turn their backs and leave the would-be parents uninformed and unassisted, the ASRM says.

“AIDS is slowly moving from a terminal illness to a chronic one,” Art Caplan, a bioethicist at the University of Pennsylvania, explained to the Associated Press. “The new facts demand new thinking. The reality is that you are not condemning a child to permanent illness or death” if the parents are HIV+.

The new guidelines note that while the odds of conceiving an HIV-free child have increased, they are not zero — placing a vital importance on the actions of fertility specialists.

“The potential for HIV+ persons to have uninfected children and not transmit the virus to their partners has been substantially enhanced, but success cannot be guaranteed,” wrote the ASRM’s ethics committee when announcing the new policy. “Healthcare providers and HIV-infected persons together share responsibility for the safety of the uninfected partner and potential offspring.”

The ASRM’s new stance reflects other realities of the AIDS crisis, noted the Reuters news agency: HIV infection is becoming increasingly widespread among heterosexual couples, and 86 percent of women and men infected with HIV are between the ages of 15 and 44.

Special to Newsline from Canadian correspondent Errol P. Mendes

OTTAWA
The Canadian print and electronic media, together with most Canadians, are asserting that one of the skating judges in the Olympic skating competition predetermined that the Canadian pairs skaters, Jamie Salé and David Pelletier, would take the silver medal instead of the gold despite skating a flawless performance in the long program.

Late last week, the Canadians were awarded a second gold medal in light of allegations that a French judge had been pressured to award the gold medal to the Russian skaters.

The Canadian media and many members of the public have claimed that the Russian pair, Elena Berezhnaya and Anton Sikharulidze, was awarded the gold medal — despite a less than perfect performance — because there was a deal tied to the outcome of the ice-dancing competition to begin later this week.

Canadian Prime Minister Jean Chrétien, who is on a trade mission to Russia, was careful not to cry foul in front of his Russian hosts. Instead he has praised the Canadian silver medallists for being good sports by not attacking the Russian gold medallists, but rather focusing on their satisfaction with their own performance.

The International Skating Union announced it will continue the investigation of the judging in the competition.

NEW YORK
Corporate America, though still dominated by white males, appears to be opening its doors to more minorities — thanks in no small part to a growing number of lawsuits accusing companies of discrimination, the Reuters news agency reported last week.

Noting a number of recent suits against iconic U.S. firms — Coca-Cola, Microsoft, and Texaco among them — observers say other companies are diversifying their workforces to avoid the possibility of similar suits.

“You see more and more large companies that have at least one or two individuals whose responsibility is overseeing the diversification of the workplace,” employment lawyer Timothy Bland told Reuters. “There’s a tremendous business case for diversity.”

More diversity can mean less liability to discrimination claims, broader appeal to the diverse U.S. marketplace, and greater insight into product markets and supplier circles, Bland and others note.

Despite the logic of diversifying, some firms — especially smaller, white-owned businesses — may persist in stonewalling minorities, fearing lawsuits should they botch the process of integrating their workforce.

With only three black CEOs leading Fortune 500 companies, there is still much room for improvement, but progress is being made, according to Ray Hood-Phillips, chief diversity officer at Advantica Restaurant Group, which has paid more than $50 million to settle a racial discrimination suit filed by black customers in the early 1990s.

Progress at Denny’s “would not have occurred without the lawsuit,” Hood-Phillips told Reuters. “Many American corporations have systems and ways of doing business that exclude and they are not aware.”

“I think Corporate America is probably on the forefront of understanding the damaging ramifications of trying to exist and operate within your own cultural and racial silos,” she added.

WASHINGTON
The U.S. Federal Trade Commission (FTC) last week said it would soon unveil an official strategy for fighting the spread of spam, warning that unsolicited junk email increasingly is irritating consumers and threatening legitimate business.

The rate of spam spiked last year, rising from 440 junk emails per user in 2000 to 571 last year. The trend is expected to continue, rising by roughly 200 messages a year and hitting 1,479 in 2006, reported the Washington Post.

Consumers, weary of sifting through emails from bogus businesses, are clicking on less of the legitimate ones, according to the Post report, leading to a lessening click-through rate and cutting into businesses’ bottom lines.

“What happens is your good message gets sandwiched between emails that say ‘Get Rich Quick’ and ‘PornoXXX’ and gets deleted by your customer,” explained Ian Oxman, vice president of an online marketing firm.

More direct costs are mounting, too, according to the Post article, which notes that ISP superpowers America Online and Earthlink are being forced to invest considerable funds in the anti-spam fight.

“We have a full-time staff handling complaints,” Les Seagraves, chief privacy officer for EarthLink, confided to the Post. “We spend $1 million a year dealing with it, and I think we do as good a job as we can. But as soon as you find a new way to filter, the spammers find a new way to get it through.”

Joining the fight, the FTC has set up an email address — uce@ftc.gov — to collect junk emails sent in by irritated consumers, tracking down and prosecuting spammers, especially operators of pyramid schemes.

“We want to send a message today: We’re going after deceptive spam and the people who send it,” vowed FTC Chairman Timothy J. Muris last week.

From the Gallup News Service:

“In the wake of the Enron controversy, momentum is building to pass new campaign finance laws…. The latest CNN/USA Today/Gallup poll shows that most Americans support Congress’s efforts at passing new laws in this area, including limits on how much individuals or groups can contribute to the national political parties. Even so, Americans are dubious as to the ultimate success of campaign finance in reducing the power of special interests in Washington.

“A recent Gallup poll showed that just 31 percent of Americans were satisfied and 50 percent were dissatisfied with the nation’s campaign finance laws. It is not surprising, then, that the vast majority of the public favors new laws — 72 percent, according to the latest CNN/USA Today/Gallup poll, conducted February 8-10. This support is slightly higher than that found in July 2001, at which time 65 percent favored and 25 percent opposed new campaign finance laws.

“Democrats (77 percent) are slightly more likely to favor new laws than are Republicans (70 percent) and independents (70 percent), but all three groups show solid support. There is a significant relationship between knowledge of the Enron controversy and support for new campaign finance legislation. Eighty percent of those who say they are closely following the Enron controversy believe that new laws are necessary, compared to just 55 percent of those who are not following the story closely.

“While the question in the current poll does not address specific proposals for campaign finance reform, a CNN/USA Today/Gallup poll conducted January 25-27 shows vast support for imposing limits on ’soft money.’ Soft money contributions are donations to one of the national political parties, and currently there are no limits on amount. (The size of donations made by an individual or group to a candidate’s campaign, also known as ‘hard money,’ is limited to $1,000 per election.)

“The poll showed that 69 percent favored limits on the amount an individual or group can contribute to the political parties, including 47 percent who favored it strongly. Only 27 percent of Americans oppose this type of law. A majority of Americans in all key subgroups support limits on soft money.

“Despite strong support for passing new campaign finance laws, most Americans do not believe such laws would successfully reduce the power of special interests in Washington. Two-thirds of Americans believe that, regardless of new laws, ’special interests will always find a way to maintain their power in Washington.’…”

“If we do not maintain justice, justice will not maintain us.”

– Francis Bacon (English philosopher, 1561-1626)