Ethics Newsline®

Several days after the second wave of bombings in London last week, my wife and I were a few miles off the Maine coast, wending our boat through a small chain of sparsely populated islands. That’s when they came into view. She was sitting in the stern. He was rowing steadily through the brilliance of a summer evening. The sun, radiating painterly shafts of light as it sank behind a cloud, sharpened every detail of the fir trees along the granite shoreline behind them. They must live out here, I remember thinking, and must have come out to enjoy this glorious evening, just as we have — and what a portrait they make!

My wife was more alert. “Do you think they need help?” she asked, noting that most people don’t row for pleasure with an outboard tipped up on their transom.

Feeling sheepish that my romanticism had overtaken my observation, I shut down our engine and hailed them, asking if they were okay.

“Motor broke down,” he called back cheerfully, betraying his Maine roots in the accent and brevity of his three words.

“Do you need a tow?”

“We’re not far from home,” he replied. After a slight pause he added, “But I wouldn’t mind!”

Using a line from his bow, we cleated off their skiff to our stern. And while we could have left them in their boat as we towed them back, it seemed right to invite them aboard. So in they climbed, amid an outpouring of thanks for the timely rescue and apologies for the muddy boots.

He was tall and grizzled, with a vivacious grin and blue eyes that stared right at you as he talked. He told me he’d retired from a job in an inland mill town where she still worked. That afternoon, they’d been digging clams on the tidal mudflat north of their island when their outboard caught some weeds and sheared its pin. They’d summered there for decades and knew the waters, so he guided us back to a weathered lobster shack perched on a gangly pier. But he wouldn’t let us leave until he’d filled our picnic cooler with as many clams as we could carry.

As we pulled away from the float, I thought about the grand balance of the universal flywheel, bringing us round full circle. Three weeks earlier, our motor had died on the water, and a nearby family spent the balance of an afternoon towing our boat to a mooring and ferrying us home. They were nearly out of gas, but I had several jerry cans in the shed for the mower, which I gave them. In these parts, paying for a rescue would be unseemly. But a fitting gift — clams, gas, whatever — is all part of the adventure.

What makes us willing to rescue others? In a word, trust. If we can’t be sure the people needing aid are trustworthy, we pull back. In the peaceable waters of Maine, trust comes naturally. But what about in London, Baghdad, Kabul, Egypt’s Sharm el-Sheikh resort, and other spots where terrorists have struck and rescuers have deployed? Is trust the first casualty of terrorism? Must we learn to distrust every fellow passenger and parked car? Communities can’t survive if suspicion drives out trustfulness, but neither can they survive a naïve trust that fails to defend itself. The Russian adage doveryay, no proveryay, less poetically rendered in English as trust but verify, reminds us of these things.

But how do we verify? Out in the islands that evening, verification came not only in words but in appearances, gestures, accents, surroundings — a host of fine details that all added up. The mud-spattered aluminum skiff, the inelegant oars, the rough-cut jackets, the wire basket of clams on the floorboards beside the rakes and shovels, the simple logic of their story — these people were what they seemed. They had a kind of authenticity — hard to describe, perfectly recognizable, and computed at lightning speed as we decided to invite them aboard.

It’s often said that you defend against terrorism through good intelligence. But you also defend through intuition, and that involves a sense of authenticity. In the end, trust gets verified through our intuitions about the differences between the genuine and the phony, the natural and the peculiar, the benign and the malicious. It requires putting aside romantic conceptions and sizing up the real situation, as my wife did. It requires a nose for the furtive, the duplicitous, the suspicious. It may require even breaking the city dwellers’ long-standing habit of not looking strangers in the face.

Why? Because we need all of the signals we can get. In a world on edge, we need to practice habits of verification and instincts for authenticity. Spotting a boat in need or a rucksack under a bus seat, sizing up a Mainer or a militant — we’re all part of each others’ security. In the end, we’re all rescuers.

©2005 Institute for Global Ethics

“It’s like a honey pot. It truly is. That is what they use it for.”

– John Meekins, a former senior Medicaid fraud prosecutor in Albany, speaking to the New York Times in a report describing widespread “fraud, waste, and profiteering” in the New York State Medicaid program. The piece chronicles the Times’ yearlong investigation of abuses of the $44.5 billion program. One dentist who billed the government for allegedly performing 991 procedures in a single day now has been indicted for stealing more than $1 million from Medicaid. (“New York Medicaid Fraud May Reach Into Billions,” New York Times, July 18)

SAN FRANCISCO
Office romances got a legal cold shower last week in a decision by the California Supreme Court, which ruled that workers who watch their colleagues climb the ladder by sleeping with the boss have a right to sue under sexual harassment laws.

The ruling expands the understanding of who is victimized by sexual harassment, finding that overt pressure to sleep with a supervisor is only the most obvious abuse. Being sidelined while office paramours win promotions and perks also constitutes harassment, the court unanimously ruled.

Last week’s decision came in a case launched by two female prison workers who filed suit after watching other women win advancement while sleeping with their boss, reported the San Francisco Chronicle.

The two women said that their married boss carried on concurrent affairs between 1991 and 1998 with at least three employees who received advantageous treatment and bullied the plaintiffs into keeping quiet.

Lower courts had rejected the women’s suit, saying they faced no more discrimination than did their male colleagues who were not sleeping with the womanizing warden, Lewis Kuykendall.

But the state’s Supreme Court rejected that line of reasoning, reinstating the plaintiffs’ suit.

While an isolated instance of favoritism may not be evidence of sexual harassment, pervasive preferential treatment is another story, Chief Justice Ronald George wrote for the court.

“Widespread favoritism based upon consensual sexual affairs may imbue the workplace with an atmosphere that is demeaning to women because a message is conveyed that managers view women as ’sexual playthings’ … [and] that the way required to secure advancement is to engage in sexual conduct with managers,” he wrote.

The ruling should make employers take a much harder look at in-office romances, employment law expert William Quackenbush told the Los Angeles Times.

“It is a very strong opinion in favor of protecting women who are not directly harassed but indeed are disadvantaged by the fact there is favoritism in the office,” he said.

SAN FRANCISCO
BALCO founder Victor Conte last week pleaded guilty to distributing steroids to top athletes in a deal that likely means many of those superstars will not be required to testify under oath about using performing-enhancing drugs.

Conte agreed to plead guilty to charges of distributing steroids and money laundering in exchange for a sentence of four months in a minimum-security prison and four months of house arrest.

The charges, which centered on distributing performing-enhancing drugs to more than 30 athletes, could have incurred a maximum penalty of 25 years in prison, reported the Associated Press.

The deal short-circuits a planned September trial that could have called for sworn testimony from prominent athletes like baseball player Barry Bonds and track and field star Marion Jones.

World Anti-Doping Agency chairman Dick Pound last week criticized the deal, reported the AP.

“Somebody who systematically tried to destroy the whole basis of sport by helping athletes and coaches to cheat gets to walk away with a four-month sentence,” Pound said. “An athlete who got caught for doing the same sort of thing gets two years. There’s certainly a mixed message.”

“It’s particularly frustrating that some of the evidence may not be available and very frustrating that part of the plea bargain did not include helping to clarify which athletes have been involved,” Pound said.

In related plea deals, Barry Bonds’ trainer Greg Anderson will serve up to six months after copping to the same charges as Conte. BALCO vice president James Valente pleaded guilty to one count of distributing steroids and likely will receive two years’ probation, reported USA Today.

Conte is expected to begin serving his sentence after the plea is officially entered before a judge in October.

SEATTLE
Two Internet giants last week lashed out at each other in a fight over intellectual property and executive talent that began with the decision of a Microsoft vice president to defect to the payroll of rival Google.

Google trumpeted the hiring of former Microsoft vice president Kai-Fu Lee in a press release, announcing his appointment as president of a new Google research facility in China scheduled to open later this year.

Microsoft, apparently caught off-guard by the rapid defection, filed suit against both Google and Lee, accusing them of conspiring to violate a non-compete agreement signed by Lee in 2000, reported the Associated Press.

“In his work at Microsoft, Dr. Lee has direct knowledge of key trade secrets about our search technology, our search strategies, and our business plans in China,” said company lawyer Tom Burt.

“What makes this a particularly egregious violation is that he’s been hired to work in a position that’s absolutely in direct competition with the work he was doing at Microsoft,” Burt added, accusing Google of encouraging and “intentionally assisting Lee.”

The lawsuit, filed under Washington State law, was challenged by California-based Google, which said it will counter-sue under a California law that protects workers’ right to change jobs, noted the AP.

Microsoft’s non-compete demand is “clearly an illegal restraint of trade,” Google asserted last week.

Noting that Lee is scheduled to be stationed in China, Microsoft dismissed Google’s counter-suit as a “poorly disguised effort to evade Washington law and renege on the agreement” Lee made.

SAN FRANCISCO
Some of the nation’s largest retailers last week yanked the best-selling video game “Grand Theft Auto: San Andreas” from store shelves after the game’s rating was changed to “Adults Only” due to hidden sexual content.

The violent “San Andreas,” which has sold nearly six million copies since its release last October, contains sex scenes that can be unlocked by a third-party Internet download known as a “mod.”

While game makers usually welcome mods — which extend the shelf life and revenue of game titles — the makers of “San Andreas” got stuck in the hot seat with “Hot Coffee,” a mod that exposed the sex scenes buried in the game’s code.

Take-Two Interactive, the company behind “San Andreas,” initially blamed the explicit content on the mod creators. Last week, the company conceded that the game was built with the scenes buried in the company’s own content.

Take-Two Interactive said the hidden scenes were left over from earlier drafts of the game and never intended for public viewing.

The industry’s voluntary ratings agency, the Entertainment Software Rating Board (ESRB), last week changed the rating for “San Andreas” from M (for “Mature” users 17 years old and above) to “Adults Only.”

ESRB head Patricia Vance said Take-Two’s release of the explicit “San Andreas” without disclosing all content had “seriously undermined” the credibility of the ESRB’s ratings system.

“What was clear to us is the fact that fully rendered content existed on the disk that was not disclosed,” Vance said. “The publisher took the risk that a hacker could find it and it clearly put the rating at risk.”

Wal-Mart, Target, and Best Buy announced they would pull the product from shelves, while Take-Two said it would release a sanitized version to replace the Hot Coffee copies, reported the Associated Press.

Sen. Hilary Rodham Clinton (D-NY) has asked the Federal Trade Commission to investigate, according to the AP.

LONDON
Dealing a blow to the British government’s war on hooliganism, a High Court judge last week ruled that police have no right to force youngsters to obey curfews and vacate public spaces under the country’s 2003 Anti-Social Behavior Act.

As part of Prime Minister Tony Blair’s campaign to reduce public rudeness and violence, police have created about 400 “dispersal zones” where they impose a 9 P.M. curfew on children age 16 and younger.

One youth — a “model student” referred to only as “W” in court proceedings — challenged the police actions, saying they stigmatized an entire sector of the population without sufficient cause and in contravention of human rights statutes.

Last week, the High Court’s Lord Justice Brooke agreed, saying the forcible escort and removal of children from the no-go zones was illegal, reported the Guardian.

“All of us have the right to walk the streets without interference from police … unless they possess common law or statutory powers to stop us,” Brooke ruled. “If parliament considered that such a power was needed, it should have said so, and identified the circumstances in which it intended the power to be exercised.”

The U.K. government tried to have the case thrown out, arguing that W — who had not been arrested or removed by police for violating curfew — lacked the standing to sue, reported the Guardian.

High Court Lord Justice Brooke rejected that line of reasoning, saying W’s complaint raised “issues of general importance about the powers of police and community support officers in relation to children and young persons.”

Alex Gask, a legal officer for a civil rights group called Liberty, which represented W, welcomed the ruling as a “victory for the presumption of innocence and the right of everyone, no matter what their age, not to be subjected to coercive powers without good cause.”

The government’s Home Office said it would appeal the High Court decision.

CHICAGO
Chicago last week continued to weather a growing patronage scandal, with two of the city’s top officials getting sacked for allegedly biasing the hiring process to help politically connected individuals.

For the past year and a half, federal investigators have been probing corruption at City Hall, charging 30 people, 20 of whom have been convicted and agreed to cooperate, reported the New York Times.

Last week, two more officials — Patrick Slattery and Robert Sorich — were fired for alleged involvement in the scandal, which centers on jobs doled out to powerful and political friends of Chicago officials.

The men allegedly made hiring choices based on personal requests from politicians and others, falsifying documents and covering up their actions, reported the Chicago Sun-Times.

“The hiring system was rigged,” U.S. Attorney Patrick Fitzgerald told a news conference, saying Sorich and Slattery were “part of a scheme involving massive fraud in the hiring process going back more than a decade.”

Fitzgerald also is serving as special prosecutor investigating whether national reporters or Bush administration officials criminally leaked the name of a covert CIA agent.

Mayor Richard M. Daley, who has been contemplating running for a sixth term to become Chicago’s longest-serving mayor, denied any involvement in the corruption, saying he plays no role in hiring.

“I … feel for the men named [Monday] and their families at this difficult time. I know them. I know their families to be good people who are outstanding in the community. The allegations against them … do not fit what I know about them,” he said last week.

Slattery recently married one of Mayor Daley’s personal secretaries. Sorich was a personal driver and political secretary for Daley’s brother, and his father was the official photographer for Daley’s father, a former mayor of Chicago.

With a long reputation of political patronage, Chicago was ordered to clean up its act decades ago with a court order known as the Shakman Decree, which bars city officials from hiring employees for political reasons. The mandate applies to all but 1,000 of the city’s 38,000 workers, reported the Associated Press.

Mayor Daley, who two months ago suspended all non-safety hiring by the city, last week said he would work to break the patronage cycle by forming an independent Public Service Commission to test, interview, and hire applicants, noted the AP.

LONDON
British industry last week won praise from the government for making significant cuts to carbon dioxide emissions over the past year — an effort aimed at reducing the release of gases that fuel global warming.

U.K. firms reduced carbon dioxide emissions by 14.4 million tons in 2004 — more than double the target set by the government, which is offering deep tax cuts for firms that meet the goals, reported the BBC.

The steel, aluminum, cement, and chemical industries led the way on cutting carbon dioxide emissions. The same industries joined with paper, food, and drink companies to make the biggest improvements in energy efficiency.

Elliot Morley, Minister for Climate Change and Environment, last week praised the companies for proving that “they are prepared to play a big part in combating climate change.”

Firms that meet the government’s goals as outlined in 10-year deals known as Climate Change Agreements receive an 80-percent reduction in environmental taxes, according to the BBC.

In other news, the new head of the U.S. National Academy of Sciences — an independent organization created by Congress to provide accurate scientific information to lawmakers — last week warned about the impending threat of global warming.

Testifying before a Senate Commerce subcommittee on global climate change, Ralph Cicerone noted that “carbon dioxide in the atmosphere is now at its highest level in 400,000 years and it continues to rise.”

“Nearly all climate scientists today believe that much of Earth’s current warming has been caused by increases in the amount of greenhouse gases in the atmosphere, mostly from the burning of fuels,” he added.

Only three senators attended the hearing, noted the Associated Press.

From America Online and Salary.com:

“For many American workers today, time’s a wastin’ — literally. According to a new survey by America Online and Salary.com, the average worker admits to frittering away 2.09 hours per 8-hour workday, not including lunch and scheduled break-time. As a matter of practice, companies assume a certain amount of wasted time when determining employee pay. However, the America Online / Salary.com survey indicates that employees are wasting about twice as much time as their employers expect. Salary.com calculated that employers spend $759 billion per year on salaries for which real work was expected, but not actually performed.

“The biggest distraction for respondents? Personal Internet use. 44.7 percent of the more than 10,000 people polled cited web surfing as their #1 distraction at work. Socializing with co-workers came in second at 23.4 percent. Conducting personal business, ’spacing out,’ running errands, and making personal phone calls were the other popular time-wasting activities in the workplace.

“Employees say they’re not always to blame for this wasted time, however. 33.2 percent of respondents cited lack of work as their biggest reason for wasting time. 23.4 percent said they wasted time at work because they feel as if they are underpaid….

“Are workers really expected to work 8 hours per day, non-stop? According to a Salary.com follow-up survey of Human Resource managers, companies assume that employees will waste 0.94 hours per day. They take this into account when they do their compensation planning. However, those managers privately suspect that employees waste 1.6 hours per day. In fact, employees admit to wasting 2.09 hours per day.

“‘To some bosses, that’s a startling figure,’ says Salary.com’s Senior Vice President Bill Coleman. ‘Others, though, will view this extra wasted time as so-called ‘creative waste’ — wasted time that may well have a positive impact on the company’s culture, work environment, and even business results.’…”

Special to Ethics Newsline from IGE fellow Dr. Jonathan Ingbar

Here in the summer of 2005, now several years down the road from Enron, we remain awash in news of corporate wrongdoing. Courtrooms — not boardrooms — are the stage for much of our business news. Bernard Ebbers of Worldcom has been sentenced to prison for securities fraud, conspiracy, and falsifying regulatory filings. Dennis Kozlowski of Tyco International is on trial for purloining $150 million from his former company. American International Group, once admired for its stature and vision, sinks in disrepute as its alleged accounting improprieties and the reported misdeeds of former CEO Maurice Greenberg come to light.

While each of these men was undoubtedly powerful, we cannot help but ask where were the countervailing forces that should have held them in check: Where was the board of directors? Where were the auditors? Where was corporate counsel? Where were other senior executives willing to stand up for their company? Where were the shareholders? Where were the regulators? Where was the investigative business press?

To address these questions, the venerable American Academy of Arts and Sciences launched a project on corporate responsibility. Restoring Trust in American Business is its initial statement of where things stand and of what must be done to begin to right the course of business behavior.

The Academy brought together esteemed individuals from academia, law, Wall Street, and journalism to comment on the state of corporate America. In fifteen papers and commentaries, the contributors spell out how each party — management itself, boards, lawyers, auditors, regulators, shareholders, and journalists — participated in creating the present state of affairs.

Of these analyses, a few stand out. The opening chapter by Mark J. Roe, professor of corporate law at Harvard Law School, succinctly argues that “the core fissue in American corporate governance is the separation of ownership from control … a separation that creates both great efficiencies and recurring breakdowns” (page 9). The diffusion of ownership across millions of stockholders, coupled with the concentration of money, power, and influence in the hands of management has, in Roe’s view, been the dynamic fueling every corporate crisis over the past fifty years, and he makes a cogent case for it. He writes, “With our porous system of regulation, the core regulated group — the managers — can induce regulators to weaken the direct oversight that they face, can influence Congress to deny the regulators enough funding to be effective, can deter good regulation, and can thereby render some gatekeepers ineffectual in checking managers” (page 11).

Among those ineffectual gatekeepers are corporate lawyers, say William T. Allen and Geoffrey Miller of New York University. They limn the gradual erosion of independence of lawyers — whether within or outside the corporation — from the exigencies of purely business concerns. Lawyers who formerly held to “the discernible spirit animating the law” (page 118) now are instruments in service to management.

Geneva Overholser of the University of Missouri holds the feet of business journalists and their media bosses to the fire as well. “In the go-go climate of 1999-2000,” she writes, “journalists were as irrationally exuberant as anyone. No longer critics, they became players — even cheerleaders” (page 149). Much as other employees of large corporations, journalists became indoctrinated with a market mentality that blinded them to the excesses all around.

The book concludes with a report from the Academy’s Corporate Responsibility Steering Committee which, while practical, clear, and concise, provides recommendations that will seem familiar to anyone with a passing interest in the topic: Emphasize the oversight role of boards with respect to business practices and to ethics, compliance, and compensation; strengthen the roles and independence of regulators, such as the U.S. Securities and Exchange Commission; move toward stronger professional standards and more independence for auditors, lawyers, investment bankers, and journalists.

This is useful stuff, to be sure, but lacking a detailed examination of why and how we, individually and collectively, undermine our ethical intentions, it remains incomplete at its core. One contributor, Margaret M. Blair, begins to get at this, but does not go far enough.

If ethics is, to paraphrase Lord Moulton of Bank, obedience to the unenforceable, then we can’t enforce our way to ethics. Surely, the networks of boards, auditors, lawyers, managers, regulators, and the press are essential. But the question of just how we go about creating organizations that manifest the ethical values we hold so central remains largely unasked and unanswered in this work.

“To be trusted is a greater compliment than to be loved.”

– George Macdonald (Scottish novelist and poet, 1824-1905)

Dinner was over, and we’d settled into a circle of living-room chairs that warm summer evening to hear some real-life ethical dilemmas. The participants in our professional workshop had been asked to share the gist of their stories but to hold the endings for later. Most of them focused on work. But one speaker began with an apology. His toughest dilemma, he told us, had nothing to do with his profession. It arose from his own backyard, and it concerned the Eastern bluebirds that for years had nested there.

As we settled back to hear a light-hearted tale, he explained with good-humored bias that bluebirds are among “the most noble of birds.” This nesting pair — small, pert, and friendly — returned each year to the birdhouse on the edge of his lawn. Whenever one of them would perch on the rail of the deck, other birds would land alongside — “just because,” he insisted, “they liked being near a bluebird.”

But one year a wren appropriated the birdhouse. Wrens, he explained, are like that: When they find a place they want, they simply take it over. With what he disdainfully described as their beady eyes and thin, sharp beaks, wrens take charge. Bluebirds, though larger, give them deference. He and his wife could see the bluebirds hopping about within the trees with some agitation, unsure how to deal with this intrusion.

So he went outside, tore out the wren’s nest, and threw it away. Shortly afterward the wren reappeared, single-mindedly rebuilding. He tore out that nest, too. The wren, undaunted, persisted. He said he could understand the wren’s impulses — it was, he realized, “just being a wren.” Still, he felt, his bluebirds were not only aesthetically superior but had prior claim to the property.

So he now faced the birdwatcher’s ultimate moral dilemma: to remove forcibly one species in order to favor a more desirable one, or to acknowledge that nature was taking its course and to allow wren-like aggression to drive out the bluebirds’ gentler nobility. When we asked him to explain forcibly, he hinted that it might even include lethal action.

For all the levity of the evening, we could see his challenge. It included a loyalty-versus-truth claim — pitting his long-held allegiance to the bluebirds against the fact on the ground (or five feet above it) of a wren doing what it knew no better than to do. It even embraced an individual-versus-community debate concerning the desires of a couple of humans as opposed to the natural habits of an entire species. We also could see some important analogies. Would he shy away from trapping mice or spraying hornets if they invaded his property? No. Then why should he worry about removing a wren? Was he making a mountain out of a molehill — which if he found in his yard he would also destroy? Should he, with John Stuart Mill, opt for the greatest good for the greatest (or most threatened) number, and rid himself of the wren to promote the bluebirds? Or should he, with Emanuel Kant, adopt as a universal principle the maxim that says, “Let nature take its course”? Or, adhering to the Golden Rule, should he do what (were he the bluebird) he would want to have done to him — admitting that, were he the wren, the answer would be markedly different?

Working through these various frameworks, we weighed the arguments for these two competing actions and came to our conclusions. When we’d finished, we asked him how he’d resolved it.

“There’s a wren now living in that birdhouse,” he said.

In the context of humanity’s great struggles, his was a small tale. Yet it seemed to carry within it some of the same deep drama of a morality play. So I asked him whether he could apply this example to his professional life, where he worked closely with teams of colleagues on issues that required exacting analysis. I’ll never forget his response.

“Sometimes,” he said, “your team has a real bluebird on it.” Then comes a transition: The bluebird retires or gets transferred or promoted. Everyone on the team longs to find another bluebird as a replacement. And instead you get a wren — a sharp-eyed, tough-minded, take-charge kind of person, invasive and even belligerent, but a team player nonetheless who gets the work done. He or she can’t help having those wren-like qualities — after all, that’s just who they are. But everyone else on the team knows that you’ve no longer got that truly noble bluebird.

“So what are you going to do?” mused our friend. “Kill ‘em?”

His question was so jarring that we burst out in uncomfortable laughter. But he’d put his finger on one of the toughest of human dilemmas: how to live and let live, while at the same time demanding high standards. In the workplace and in the world, some are bluebirds and some are wrens. Is one better than the other? Should some be allowed to drive out the others? If there’s a place for both, does that mean that every place is a proper place for either? If one is in the wrong place, how can we make corrections? What do we mean by tolerance? How does distaste descend into genocide? What really does it mean to love our neighbor?

And he thought his little tale had nothing to do with his profession….

©2005 Institute for Global Ethics

“It is to the shame of the international community that this evil took place under our noses and we did nothing like enough. I bitterly regret this and I am deeply sorry for it.”

– British Foreign Secretary Jack Straw, speaking last week at a ceremony marking the tenth anniversary of the massacres of Srebrenica, a Bosnian town guarded by UN troops during the 1992-1995 war. Serbian forces invaded the town, overpowering an inadequate UN contingent and slaughtering an estimated 8,000 Muslim men and boys. (“Srebrenica Buries Its Dead, but Not Its Pain 10 Years After,” AFP, July 11)

NEW YORK
Former WorldCom CEO Bernard Ebbers was sentenced to 25 years in prison last week by a judge who said the severity of his crime — overseeing the largest corporate fraud in U.S. history — warranted the stiff punishment.

Ebbers, a Canada-born former milkman who built telecom giant WorldCom from scratch, was found guilty of masterminding the $11 billion accounting fraud that forced the firm into bankruptcy in 2002, wiping out the jobs of nearly 17,000 workers and billions of investors’ dollars.

U.S. District Judge Barbara Jones last week knocked five years off Ebbers’ prison sentence due to his history of philanthropy, but said she would not shave off any more time due to the nature of his actions.

The 63-year-old Ebbers must serve 85 percent of his prison sentence — more than 21 years — before becoming eligible for parole, reported the Washington Post.

“Although I recognize … this is likely to be a life sentence for Mr. Ebbers, I find anything else would not reflect the seriousness of the crime,” Jones said. “It seems quite clear to me that Mr. Ebbers was really a leader of criminal activity in this case.”

Ebbers already has agreed to forfeit roughly $45 million in cash, property, and other assets to repay investors. His wife will be allowed to keep a smaller Mississippi house, $50,000 in cash, and a retirement account.

Ebbers must report to prison, pending appeal, by October 12.

Ebbers is the first of six former WorldCom employees to face sentencing this summer, noted the Associated Press. The other five all pleaded guilty and agreed to help federal prosecutors build a case against Ebbers.

NEW YORK
Two former advertising executives from the firm Ogilvy & Mather were sentenced last week to prison terms for their roles in conspiring to overbill the federal government for work on anti-drug campaigns.

Shona Seifert, a former senior partner and executive group director at Ogilvy & Mather, and Thomas Early, a former senior partner and finance director, were convicted on 10 counts of conspiracy and false claims in February.

Last week, a federal judge sentenced Siefert to 18 months in jail and a $125,000 fine. Early was ordered to spend 14 months in jail and pay a $10,000 fine, reported the Reuters news agency.

The two former Ogilvy execs were found guilty of instructing employees to falsify timesheets and inflate hours billable to the U.S. government for a national anti-drug campaign. The ruse was designed to cover a $3 million revenue shortfall on the account, according to AdWeek.

Thomas Early last week said he accepted some responsibility for what happened, but denied intentionally trying to defraud the government.

“Looking back, I can see where all the problems started,” Early said in a statement to the court, alluding to the complexity of government contracts and a “culture of carelessness” at Ogilvy regarding timesheets.

Judge Richard Berman said the prison sentences were necessary in this case, declaring, “White-collar crime is no less serious or invidious than street crime.”

Ogilvy & Mather paid $1.8 million in 2002 to settle civil charges related to the scandal.

NEW YORK
Questions about excessive pay took center stage last week at financial services firm Morgan Stanley with the $32 million exit of a recently promoted executive, raising questions about the company’s board.

Morgan Stanley co-president Stephen Crawford last week left the firm after three months at the post, taking with him a lucrative $32 million pay-out and prompting questions about board bias, reported the New York Times.

Crawford was appointed to the post by now-ousted chairman and chief executive Philip Purcell, whose $113 million pay package also has drawn criticism.

All but one of the members of Morgan Stanley’s board of directors were appointed by Purcell, raising questions about their loyalties among some observers, noted the Times.

“CEOs get hired and fired every day, but their lieutenants don’t get multimillion-dollar packages to walk away,” one compensation expert told the Times. “You have to scratch your head and ask, what was the board doing?”

The company’s lead director, Miles Marsh, last week defended Crawford’s cash-out, saying his pay jumped according to his responsibilities.

In other news, the five-member board of directors at the practically defunct Enron Corp. last week announced that they had voted for pay raises for themselves, with chairman John Ray III enjoying a $1 million jump.

Ray’s pay will rise from $200,000 to $1.2 million. Three other directors will have their pay doubled to $300,000, while another will have his pay nearly triple from $150,000 to $420,000.

The board said the pay raises were warranted because they had underestimated the amount of work required to settle the company’s affairs after the 2001 collapse, reported the Associated Press.

WASHINGTON
Military interrogators at Guantánamo Bay, Cuba, used abusive and degrading techniques to extract information from tough cases, but stopped short of torture, investigators told Congress last week.

The findings stem from a three-month probe that began after FBI agents said they witnessed disturbing techniques at the Guantánamo detention facility, reported the Associated Press.

While investigators found a wide range of degrading tactics, they said the actions were approved by Defense Secretary Donald Rumsfeld. The probe concluded that interrogators crossed the line only three times amid thousands of interrogations.

Those violations included wrapping duct tape around the mouth of a prisoner chanting verses from the Koran, short-shackling detainees to the floor, and threatening to murder the family of one detainee.

Despite clearing the military of torture, chief investigator Air Force Lt. Gen. Randall Schmidt faulted the abusive tactics used in the interrogation of a Saudi man believed to be the “20th hijacker” from the 9/11 attacks.

Schmidt’s team found that interrogators went too far in the case, subjecting the prisoner to unnecessary strip searches, threatening him with dogs, forcing him to expose himself publicly, and putting him on a leash.

The tactics were used while Army Maj. Gen. Geoffrey Miller was overseeing the Guantánamo facility in 2002. After Miller was transferred to Iraq’s Abu Ghraib prison, the same tactics surfaced in photographs, prompting international scandal and outrage.

Schmidt’s investigative team recommended that Miller be reprimanded for failing to properly oversee the interrogation of the Saudi prisoner, which “resulted in degrading and abusive treatment.”

Army Gen. Bantz Craddock, head of Southern Command, last week rejected such a step.

Because investigators found no actual violation of U.S. law, “there’s nothing for which to hold him accountable,” Craddock said, but added that he would forward the matter to the Army’s inspector general.

In comments to the Washington Post, Pentagon spokesman Bryan Whitman claimed that it is inappropriate to link the behaviors evidenced at Guantánamo and then Abu Ghraib under Miller’s leadership.