Please Note: Ethics Newsline® will not be published next week in observance of the holiday season. We will return in the new year with our next issue on Monday, January 5. We extend our warmest wishes to you and yours.

For more information, see this week’s Research Report.

by Rushworth M. Kidder

What he most remembered was the orange. Year by year, from my father’s earliest days, it was nestled into the toe of his Christmas stocking. He never said what else might have been stuffed in on top of it — eminent practicalities like a new toothbrush, perhaps, or a pocket knife, or a pair of socks. For him, the essence of Christmas was concentrated in the unadorned simplicity of that last gift — colorful, sweet, and curiously out of place in the world of his boyhood.

That world, in the first decade of the twentieth century, lay outside Redmond, Oregon. I remember, as a six-year-old, visiting the old farmstead. By then it was little more than a windswept crest of pastureland, the dirt road ending where the buildings once stood and the huge, circumambient sky pressing in on all sides. Isolated, raw, and spare, it was like nothing I’d ever seen in my New England boyhood.

It had been a good farm, but it hadn’t given his family — his schoolmaster father, his homemaker mother, and his numerous brothers and sisters — the sweetest of lives. From time to time my father would talk about walking six miles to and from school — and about how, as the youngest child at Christmas dinners, his portion would always be the turkey neck. But it was the rare and wonderful orange that most mattered. Freight-trained in from southern California, ferried by wagon to the local grocer, it found its way each December into his stocking.

And therefore into mine. Sneaking downstairs early on Christmas morning to see the stockings above the fireplace, I remember thinking how odd it was. In those days I had no particular affinity for oranges, though I found them pleasant enough if somebody else prepared them. Besides, thanks to the modern transportation networks of my youth, oranges no longer were rare. In every season, there were always a few rolling around in the bottom drawer of the refrigerator — to which place, having extracted them every Christmas morning from my stocking, I generally returned them.

I hadn’t thought much about oranges and stockings until the other day, when I fell into a conversation with my haircutter. As happens so often these days, our discussion quickly turned to the economy. She ventured that while some small-town shops here on the Maine coast were struggling, hers was doing alright — though she’d noticed that more people were settling for the basic cut without the extras.

She too was trimming her Christmas list. But even so, she had committed to shopping in the unique Main Street shops rather than in the big-box chains. It was a way, she said, to care for one another in hard times, and it took her back to her own upbringing. Like my father, she too grew up with rural simplicities, under the watchful eye of a mother who was a fiend about limiting sweets. Only at Christmas, she said, would her mother relent, putting in each child’s stocking a pop-tart — and an orange.

This Christmas, I suspect my friend will give more than pop-tarts and oranges. But she hopes her kids will learn to trim their expectations — to learn, as she said, that Christmas is about family and not about stuff. In that, I think, she speaks for so many people who have seen the commercial pageantry of the season luxuriate into uncomfortable levels in recent years. Yes, shops need our support. But the times call for moderation. Just as the recession is making us all reassess the distinction between what we want and what we need, so perhaps this Christmas is leading us to recalibrate our sense of giving and receiving.

If it fell to me, then, to fill the stocking on your mental mantle piece, here are the presents I’d want it to contain:

• An authenticity so powerful that everything you give will be genuine — and so discerning that everything you receive will be free from guile
• A sense of wonder, lighting up your environment with ideas and inspirations so rare as to be priceless, yet so commonplace as to be easily within everyone’s grasp
• A simplicity that lets you spot the underlying design in every complexity, but never lets you overlook the nuance of the ordinary
• A respect for the small traditions of moral dignity, normalcy, and order that, at the same time, stirs your endless delight in mental curiosity, innovation, and expansiveness

A sweetness of thought that leaves you desiring the limitless while limiting your desires

And down in the very toe, tucked away like ballast beneath all these gifts, I’d have started with the Christmas orange. Or maybe I’d just give you the orange itself. After all, it already contains all the qualities you need to turn this season into the best Christmas of your life.

©2008 Institute for Global Ethics

Questions or comments? Write to newsline@globalethics.org.

“One who dives into swirling waters to retrieve a drowning swimmer can be sued for incidental injury he or she causes while bringing the victim to shore, but is immune for harm he or she produces while thereafter trying to revive the victim. Here, the result is that defendant Torti has no immunity for her bravery in pulling her injured friend from a crashed vehicle, even if she reasonably believed it might be about to explode.”

– California Supreme Court justice Marvin Baxter, writing in dissent after his colleagues ruled last week that a California woman could be sued for pulling a coworker from a car wreck in 2004, possibly injuring her. A majority of the state’s Supreme Court “appeared to signal that rescue efforts are the responsibility of trained professionals. It was also thought to be the first ruling by the court that someone who intervened in an accident in good faith could be sued,” reports the Los Angeles Times. The paper is among those noting that last week’s ruling could chill so-called Good Samaritan acts, with Lisa Torti now facing possible liability for injuries sustained by her former colleague, who was rendered a paraplegic in the accident.

Source: Los Angeles Times, Dec. 19.

Among the observations: predictions the U.S. may be returning to culture of thrift; call for an “ethical bailout” instead of financial one; four lumps of coal awarded to ethics of investment bankers

VARIOUS DATELINES
The ethics of debt and the role of reckless or deceptive lending and borrowing in the implosion of the world economy were the focus of several editorials last week. Among the stories:

• The Christian Science Monitor reports that new rules slated to be enacted last week are designed to ensure that credit card contracts are honest, transparent, and grounded in what Federal Reserve chief Ben Bernanke calls “a new baseline for fairness.” Banned in the new legislation are the practices of raising rates without a good reason and increasing rates if cardholders default on unrelated bills, such as utility payments. In a related observation, the Monitor notes in its December 18 editorial: “This long recession, triggered by a crisis in mortgages that never should have been lent, may end up turning America’s debt culture back into a thrift culture. For the first time since 1952, household debt is on the decline. Personal saving is up after being at zero for a long time. And this Christmas, conspicuous consumption of expensive goods seems so un-Christmasy.”
• New York Times columnist Thomas Friedman, reflecting on what he calls the “national breakdown in financial propriety, regulations and common sense,” opines that “we don’t just need a financial bailout; we need an ethical bailout. We need to re-establish the core balance between our markets, ethics and regulations. I don’t want to kill the animal spirits that necessarily drive capitalism — but I don’t want to be eaten by them either.”
• As a “holiday season service,” USA Today’s editorial board has awarded ceremonial lumps of coal to those deemed most culpable for the financial meltdown. Receiving four lumps were investment bankers: “In the war on drugs, the top target is always the traffickers. The same principle is true with the massive implosion of credit markets and corporate ethics. In this case, the traffickers were the Wall Street firms that created bundles of subprime mortgages and other toxic financial instruments, then peddled them as low-risk, high-return investments. These securities, and enormous side bets on them, fueled the housing bubble and infected the global financial system…. Nearly all the big investment banks were culpable, though the poster child of mismanagement has to be Richard Fuld, former CEO of the former company known as Lehman Bros. Fuld, who received as much as $480 million in compensation from 2000 to this year, took risks that drove the storied investment house straight into the ground.”

Sources: Christian Science Monitor, Dec. 17 — New York Times, Dec. 16 — USA Today, Dec. 16.

For more information, see: Related Newsline Commentary, Dec. 15 — Related Newsline story, Dec. 15 — Related Newsline story, Dec. 8 — Related Newsline story, Nov. 24.

There are moral issues beyond the obvious, including whether investors should have known better

NEW YORK
The stunning revelation that Wall Street icon Bernard Madoff allegedly scammed sophisticated investors by luring them into a Ponzi-style scheme has raised ethics questions beyond the obvious issues concerning purported criminality. At issue: whether investors should have known better, and whether regulators fell down on the job.

The Boston Globe reports that some analysts maintain that the list of Madoff’s apparent victims include banks, insurance companies, and investment firms — in other words, people who should been able to smell a Ponzi scheme. According to one expert interviewed by the Globe, the fact that sophisticated investors did not challenge the source of unrealistic returns indicates that some of those investors failed to exercise due diligence.

The Los Angeles Times notes that the Madoff case is prompting renewed criticism from those who say the Securities and Exchange Commission (SEC) has a history of toothless enforcement.

“The regulatory mechanism that was effective for so much of the 20th century is not relevant to the period that we’re in today,” Arthur Levitt, who chaired the SEC from 1993 to 2001, told the Times. “You need new leadership there, and you need new leadership at every level.”

Washington Post financial columnist Sebastian Mallaby weighed in with this observation: “For sheer toe-curling embarrassment, it may be a while before Wall Street does better than the Bernard Madoff scandal. Here was a rogue who practically telegraphed his unreliability by hiring a tiny, no-name audit firm, by reporting monthly investment results that never fluctuated and by claiming a trading strategy that could not possibly have been implemented given the billions of dollars he managed. And yet, despite these warnings, the rich, the famous and the supposedly sophisticated entrusted their money to Madoff, who defrauded them with the most laughably crude of methods — an old-fashioned Ponzi scam.”

Bloomberg’s Jonathan Weil added this observation on what he considers the subtle difference between fraud and the business model that eventually fractured the economy: “Madoff’s scheme — at least in spirit, if not in its nefarious intent — wasn’t much different than the business models at some of the nation’s largest failed financial institutions.”

“Back in May, four months before it collapsed, American International Group Inc. increased its dividend at the same time it unveiled plans to raise $12.5 billion in capital. Later, when its cash ran out, AIG got a government bailout, the size of which has expanded to about $150 billion,” Weil writes.

He concludes: “Whether you call that a Ponzi scheme or something less sinister, AIG was paying old investors with money raised from new investors. The same could be said of many banks that blew through billions of dollars in freshly raised capital the past couple of years, continuing to pay large dividends even as their balance sheets quietly imploded.”

Sources: Boston Globe, Dec. 21 — Bloomberg, Dec. 21 — Los Angeles Times, Dec. 18 — Washington Post, Dec. 18.

For more information, see: Related Newsline Commentary, Dec. 15 — Related Newsline story, Dec. 15 — Related Newsline story, Dec. 8 — Related Newsline story, Nov. 3 — Related Newsline story, Oct. 27.

Meanwhile, more pollsters and statisticians weigh in on which, exactly, is the most corrupt U.S. state

CHICAGO
Scandal-besieged Illinois governor Rod Blagojevich last week defiantly vowed to stay in office and fight the corruption charges against him.

The Chicago Tribune reports that the main fusillade of the week was fired in response to impeachment-minded state legislators. Blagojevich’s lawyer, famed criminal defense attorney Ed Genson, complained about a lack of standards to determine impeachment, said he was hamstrung by his inability to subpoena witnesses such as U.S. attorney Patrick Fitzgerald, and asked that some members of a house panel be removed from the case because they had “already made up their minds.”

While the most visible charge in the case concerns allegations that the embattled governor tried to auction off Barack Obama’s Senate seat, the Associated Press reports that the most legally damaging allegations focus on misuse of power, fixed contracts, and illegal campaign fundraising.

According to the AP, Illinois fundraiser Tony Rezko, who helped bankroll the campaigns of both Blagojevich and Obama, may testify against Blagojevich. Rezko himself has been convicted of fraud and awaits sentencing. Obama was not implicated in any charge against Rezko.

The Obama transition team last week announced that after an internal review it had discovered no inappropriate dealings with the disgraced Illinois governor.

In related news, the controversy continues over which is the most corrupt U.S. state. As reported in last week’s edition of Ethics Newsline®, USA Today stirred up a hornet’s nest by using per-capita corruption convictions to proclaim North Dakota as the most corrupt state — a view vehemently denied by officials there, who said cases involving multiple defendants and a low population produced a statistical anomaly.

Last week, the New York Times weighed in with various alternative measurements. Judging by raw numbers counting convictions in all federal corruption cases, Florida wins the most-corrupt designation. But according to a survey of journalists, Rhode Island ranks as the most corrupt state, reports the Times. North Dakota, by the way, is vindicated in the journalists’ survey, tying with South Dakota as the least corrupt of all U.S. states.

Sources: AP, Dec. 21 — Chicago Tribune, Dec. 18 — New York Times, Dec. 17 — UPI, Dec. 15.

For more information, see: Related Newsline story, Dec. 15 — Related Newsline Commentary, Dec. 15 — Related Newsline story, Dec. 15 — Related Newsline story, Dec. 15 — Related Newsline story, Nov. 6.

Move may appease privacy-conscious customers and regulators, but could put the firm at a disadvantage with advertisers

SAN FRANCISCO
Internet giant Yahoo says it will purge data that can be traced back to consumers after 90 days, down from the current limit of 13 months, bowing to complaints by privacy advocates and regulators.

According to the San Francisco Chronicle, Yahoo now becomes the most privacy friendly of the major search engines.

Earlier in the week, Microsoft announced it was willing to delete information that could identify individual users after six months instead of the current 18, reports the Seattle Post-Intelligencer.

Search engines routinely keep track of what stories you read and what searches you perform, notes technology publication Wired. The reason: Stored data allows sites to serve up individually tailored ads and stories. The data also is useful for search firms seeking to refine and develop new services.

The new limits on data retention could put Yahoo at a disadvantage with advertisers, who pay a premium for access to a specific demographic. But the potential advantage for Yahoo is winning over consumers worried about their privacy, according to an analysis from the San Jose Mercury News.

Sources: San Francisco Chronicle, Dec. 18 — Seattle Post-Intelligencer, Dec. 17 — Wired, Dec. 17 — San Jose Mercury News, Dec. 17.

For more information, see: Related Newsline story, Nov. 3 — Related Newsline story, Oct. 14 — Related Newsline story, Oct. 6 — Related Newsline story, Aug. 11.

Eleventh-hour ruling by Bush administration allows health-care workers to refuse to provide treatment based on religious objections; first full-face transplant conducted in U.S. prompts moral debate; Wall Street Journal argues for liberalization of law that critics say unfairly limits supply of organs for transplant

VARIOUS DATELINES
Major issues involving the intersection of medicine and ethics made headlines last week. Among the stories:

• A last-minute rule issued by the Bush administration gives heath-care workers and medical institutions more leeway to refuse certain types of care based on the providers’ ethical objections. WebMD reports that the so-called right of conscience rules expand the ability of providers to refuse to perform abortions or sterilizations. Some critics, reports Congressional Quarterly, insist the new regulations could be interpreted to apply to all types of contraception. The measure, signed last week, comes into effect in about a month.
• Surgeons in Cleveland last week performed the first full-face transplant in the United States, touching off an ethics debate, reports Scientific American. In addition to moral questions about the propriety of transplanting a face from a dead person to a living one, the magazine notes that critics are asking whether a cosmetic procedure is worth the risk posed by such a massive operation. Doctors have defended the practice by saying that severely deformed or disfigured people endure great suffering because of their appearance.
• A well-intended law to prevent the buying and selling of organs has gone awry, leading to a shortage of organs that is causing needless patient deaths, according to an opinion piece in the Wall Street Journal. According to the Journal, a section of the 1984 law, threatens fines and jail time if “valuable consideration” is given a donor. The measure has backfired, says the Journal, because it prohibits such actions as paying for cremation and burial — a service legal if a body is donated to science but apparently illegal if parts of the body are used for a transplant. Pennsylvania Sen. Arlen Specter is attempting to convince colleagues to pass a re-write, and in the words of the Journal piece, “has gone to some lengths to assure potential critics that after his bill passes, nobody will be allowed to offer lungs on eBay. His bill not only maintains the ban on buying and selling, but increases the criminal penalties, adding a seven-year sentence for organ trafficking. We’re not sure that an organ market wouldn’t save more lives, but that’s a debate for another day. The Specter bill would simply clarify that states may provide incentives such as tax deductions to encourage donations that could save thousands of lives each year.”

Sources: WebMD, Dec. 19 — Congressional Quarterly, Dec. 18 — Scientific American, Dec. 17 — Wall Street Journal, Dec. 17.

For more information, see: Related Newsline story, Nov. 3 — Related Newsline story, Oct. 6 — Related Newsline story, Oct. 6 — Related Newsline story, June 23 — Related Newsline story, Apr. 7.

But the firm’s troubles aren’t over: Clients worldwide are preparing lawsuits claiming that they paid too much for Siemens’ projects because of graft

BERLIN
Siemens, the giant German electronics and engineering firm, last week agreed to pay a $1.4 billion fine for corruption, settling a case brought by German and U.S. authorities.

The fines will be divided among the U.S. Department of Justice, the U.S. Securities and Exchange Commission (SEC), and German regulators, reports Forbes.

Among the charges against Siemens were SEC allegations that the company paid bribes and kickbacks to various organizations between 2001 and 2007 to secure construction projects such as transit lines in Venezuela, power plants in Israel, and refineries in Mexico, CNN reports.

Siemens, a 161-year-old conglomerate, has admitted various incidents of bribery and said that an internal investigation across its division showed that the practice was widespread, reports the Agence France-Presse.

In addition to paying the fines, Siemens agreed to appoint former German Finance minister Theo Waigel to monitor the firm’s compliance with anticorruption strictures.

Berlin-based Deutsche Welle notes that while the payments will settle existing charges, a variety of civil actions continues to dog the firm. Clients worldwide are planning to bring suit against Siemens, claiming that graft inflated the cost they paid for goods and services.

Siemens itself is suing some of its former executives, claiming they failed to mandate internal controls that would have prevented the growth of a culture of bribery, reports Deutsche Welle.

Sources: AFP, Dec. 17 — CNN, Dec. 17 — Deutsche Welle, Dec. 16 — Forbes, Dec. 15.

For more information, see: Related Newsline story, Dec. 15 — Related Newsline story, Sep. 29 — Related Newsline story, Aug. 4 — Related Newsline story, Aug. 4 — Related Newsline story, June 16.

Reuters highlights link between stanching graft and increased investment and stock returns

SINGAPORE
Turning back the tide of corruption, especially throughout Asia, is imperative for sustaining long-term growth, according to an analysis from the Reuters news agency.

Daniel Kaufmann, who headed a World Bank study of anticorruption measures, notes that combating graft is essential to long-term economic growth. Nations that have visibly cracked down on corruption, such as Hong Kong and Singapore, have received real economic benefits in return, he tells Reuters.

Kaufmann also maintains that there is abundant data supporting the theory that there is a “development dividend” for countries that fight graft.

“We estimate that a country that improves its governance from a relatively low level to an average level could almost triple the income per capita of its population in the long term, and similarly reduce infant mortality and illiteracy,” Kaufmann said.

Johann Graf Lambsdorff, professor at the University of Passau in Lower Bavaria, Germany, and creator of Transparency International’s Corruption Perceptions Index, tells Reuters that there is convincing evidence that stock returns are affected by corruption, with several studies showing that stock markets performed better in countries after they reduced corruption.

Source: Reuters, Dec. 17.

For more information, see: Related Newsline story, Dec. 15 — Related Newsline story, Dec. 8 — Related Newsline story, Nov. 3 — Related Newsline story, Oct. 27 — Related Newsline story, Oct. 27.

Poll finds that those organizations perceived to have the least power inside the Beltway — are also those most trusted by the public

From Harris Interactive:

“Among all adults who are familiar with them, Consumer Reports, The American Red Cross, AARP, the Nature Conservancy and the U.S. Chamber of Commerce are the most trusted among 16 large organizations that influence politics and business in Washington. The AFL-CIO, the ACLU, the NRA and PhRMA are the least trusted. However, even these organizations are trusted ‘a great deal’ or ‘a fair amount’ by 47 percent or more of all adults.

“…This survey focused on 16 organizations that have considerable influence on public policy, business and are frequently covered by the media….

“Among those who are familiar with them, the most trusted organizations (based on those who trust them ‘a great deal’ or ‘a fair amount’) are:

• “Consumer Reports 92%
• “The American Red Cross 88%
• “AARP 82%
• “The Nature Conservancy 82%

“The least trusted organizations on the list are:

• “AFL-CIO 47%
• “The ACLU 48%
• “The NRA 56%
• “PhRMA 58%

“It is noteworthy that all four of these organizations take strong and often controversial positions on political issues.

“The organizations listed that are believed to have the most power, based on the number of people who are thought to have ‘a great deal’ or ‘a fair amount’ of power (as percentages of those who are familiar with them) are:

• “The AFL-CIO 87%
• “The ACLU 82%
• “PhRMA 82%
• “NAM 80%
• “The U.S. Chamber of Commerce 80%
• “The NRA 79%

“The organizations thought to have the least power are:

• “Consumer Reports 42%
• “The Nature Conservancy 51%
• “Sierra Club 58%
• “American Red Cross 62%

“So What?

“Within Washington D.C. groups live by one tenet — power — how to get it and how to retain it. The least powerful groups inside the Beltway are also the most trusted; these include Consumer Reports and the American Red Cross, who by their sheer size and scope of work are able to work around their lack of power.

“On the other hand, those groups who are most powerful, such as the NRA and the AFL-CIO are also the least trusted. These groups have risen to power status by the sheer fact they survive on controversy and their ability to play politics very well….”

For the full release from Harris, Dec. 11, click here.

“To be able to look back upon one’s past life with satisfaction is to live twice.”

– Martial (Latin poet, c.38 – c.102)

For more information, see this week’s Research Report.

by Rushworth M. Kidder

If there were a Guinness Book of Ethics Records, last week would surely be in it. Over a five-day period, in tragedies almost operatic in scale, three outsized personalities fell like dominos through their own scheming.

Most notable was Illinois governor Rod Blagojevich, arrested December 9 on federal charges of conspiring to solicit bribes in the filling of the U.S. Senate seat left vacant by Barack Obama’s election.

Two days earlier, a respected and high-flying New York attorney, Marc Dreier, was picked up by federal authorities for stealing $113 million — just since October — by selling worthless promissory notes appearing to come from the firms of some of his own clients.

Then, on December 12, one of Wall Street’s legendary traders, Bernard Madoff, was arrested at dawn by federal agents and accused of running what may be history’s largest Ponzi scheme, defrauding his clients of perhaps $50 billion.

Fraud, sadly enough, is a daily affair, so three cases in a week isn’t unusual. What distinguished last week was the gall and scope of the perpetrations. Gov. Blagojevich wasn’t just selling drivers’ licenses, as his (now imprisoned) predecessor, Gov. George Ryan, had done. He allegedly was marketing one of the nation’s highest offices to the highest bidder.

Nor was Mr. Dreier just scamming a few innocents. He reportedly was deceiving sophisticated investors, in part by tricking receptionists into letting him bring his potential customers into the conference rooms of the very firms whose letterhead he used to create the phony loan documents.

And Mr. Madoff wasn’t guilty of making just a few bad trades. At $50 billion, he is accused of collecting and losing half again as much as the entire Detroit auto industry requested earlier this month from a government bailout.

The grim symbolism here is that this trio of miscreants represents the three institutions — politics, business, and the law — that lie at the heart of our nation’s current financial crisis. Given democracy’s checks and balances, we typically can survive corruption in one institution if the others are sound: Bad politicians are done in by good laws and honest financing, and corporate corruption can’t endure government oversight rooted in legal integrity. What was so jarring was the triple whammy — the sense that all three sectors are now vulnerable. Is there no place where the standard of ethics remains inviolable? Is there no safe moral haven left?

No, not unless we build it. There’s no infallible metric we can use to measure self-aggrandizement, hypocrisy, and deception. Our only security lies in creating an ethical culture — not just better individual politicians and bankers and lawyers, but a climate that makes it easier and more natural for governors to act responsibly, financiers to take pride in honesty, and lawyers to love fairness.

Is that hopelessly idealistic? Not if you look back over the lifetime of Western democracy. In two centuries, we’ve managed to create an astonishing standard: a broadly shared expectation that most people will do the right thing. In part that’s because we’ve evolved one of the fairest and most inclusive judicial systems in history. But it’s also because, as democracy and free enterprise developed in the nineteenth and twentieth centuries, it was always understood that they required a moral basis, a set of shared principles to guide each participant. For some people, those principles grew out of religion or a spiritual sense. For others, they flowed from a sense of honor, community, pride, and self-respect.

What last week tested so forcefully may be the core question of our time: Can democracy and free enterprise survive without deliberate, conscious attention to their moral compasses? If those principles decay — or, worse still, go untaught and undefended — must these institutions collapse? What happens to our legal profession when people graced with the finest educations — a Marc Dreier, say, with degrees from Harvard and Yale — apparently feel no moral tether? What becomes of the political culture when elected officials have no ethical filter to separate what they can do from what they ought to do? What transpires in finance when a forty-year reputation for probity turns out to have been based on fraud and deception?

Thirty years ago, America’s public schools were locked into so-called values-neutral education, where teaching ethics was discouraged. Last week reminds us how well our institutions reflect our teaching: When you cultivate values-neutral mindsets, you get values-neutral leaders. We don’t have to wait thirty years to undo the oxymoron of values-neutral democracy, free enterprise, and law; it appears they will undo themselves. But we can’t wait a moment longer to begin creating the cultures of integrity that may prevent last week’s opera from being serialized.

©2008 Institute for Global Ethics

Questions or comments? Write to newsline@globalethics.org.

“Once a detainee has been officially diagnosed as dangerously mentally ill, they’re immediately taken out of the criminal justice system and they lose all legal rights.”

– Robin Munro, research director of Hong Kong-based rights organization China Labor Bulletin, discussing a new report detailing how Chinese authorities are suppressing protestors and whistle-blowers by forcibly detaining them in psychiatric hospitals. The New York Times notes that “officials do not see any shame in the tactic, and they boasted that hospitalizing people they characterized as troublemakers saved money that would have been spent chasing them to Beijing. There is another reason to stop petitioners who seek redress from higher levels of government: they can prove embarrassing to local officials, especially if they make it to Beijing.” The story — surprisingly, notes the Times — has been picked up widely by state-run media, prompting public outrage.

Source: New York Times, Dec. 8.

Jaw-dropping corruption charges against Illinois governor, who refuses to resign, spark calls for inventive ways to oust him; indicted congressman loses election to virtual unknown; House Ethics Committee expands investigation into New York senator; controversial study says Illinois is nowhere near the top of list of corrupt states

WASHINGTON and CHICAGO
Corruption allegations figured prominently in the week’s news. Among the top stories:

• The arrest of Illinois governor Rod Blagojevich on charges that he tried to auction off president-elect Barack Obama’s Senate seat has fueled a debate over whether he should be removed from office or if his appointment power should be rescinded. Bloomberg reports that the Illinois House of Representatives is scheduled to consider a plan to strip the governor of his power to fill a vacant Senate seat. Also on the table, according to the Chicago Tribune, are plans to begin impeachment proceedings or, to circumvent the lengthy timetable involved in impeachment, ask the state’s highest court to declare Blagojevich unfit to govern and temporarily remove him from office. Blagojevich has continued to deny wrongdoing and reject calls for his resignation.
• A virtual unknown who defeated indicted Democratic Rep. William Jefferson says he will uphold high ethical standards in Louisiana’s heavily Democratic second district in and around New Orleans, reports Congressional Quarterly. Republican lawyer Anh Cao unseated Jefferson in a December 6 election. Jefferson is awaiting trial on federal corruption charges in a highly visible case in which the FBI charged the congressman with hiding $90,000 in unmarked bills in his freezer. The New York Times reports that Jefferson’s loss, in concert with the stunning corruption allegations against Democrat Rod Blagojevich, have energized Republicans, who have been on the ethics defensive in recent years.
• The House Ethics Committee last week announced that it is expanding its investigation of Democratic Rep. Charles Rangel of New York. CNN reports that the panel is focusing on whether contributions from Nabors Industries, a company that donated money to a college building named after Rangel, had any bearing on Rangel’s support of tax breaks for the company. Rangel repeatedly has denied wrongdoing and told CNN that he does not intend to step down from his chairmanship of the powerful Ways and Means Committee.
• Illinois is not even close to being the most corrupt state in the country, reports USA Today. North Dakota bears that unwelcome distinction, ranking first in the per-capita number of public corruption convictions the federal government has won from 1998 through 2007, according to an analysis of law enforcement statistics conducted by the paper. Using that ranking system, Illinois ranks No. 18. But observers note that North Dakota’s high ranking may be a result of North Dakotans being better at rooting out corruption when it occurs. And North Dakota attorney general Wayne Stenehjem told the Grand Forks Herald that the ranking is “patently ridiculous” because it statistically magnified a small number of federal cases, many involving school officials and multiple defendants when factoring them into a small population. South Dakota and Colorado tied for least corrupt states in USA Today’s rankings.

Sources: Bloomberg, Dec. 13 — Chicago Tribune, Dec. 13 — Grand Forks Herald, Dec. 12 — New York Times, Dec. 11 — USA Today, Dec. 11 — Congressional Quarterly, Dec. 11 — CNN, Dec. 9.

For more information, see: Related Newsline story, Nov. 17 — Related Newsline story, Sep. 29 — Related Newsline story, June 23 — Related Newsline story, Sep. 10, 2007 — Related Newsline story, Nov. 6, 2006.

Transparency International also puts India, Mexico, and China near the bottom of ‘Bribe Index’; Belgium, Canada, and the Netherlands ranked as cleanest

LONDON
A survey of senior business executives has found that Russian companies are the most likely to pay bribes to win business in other countries. India, Mexico, and China also scored poorly in the survey, reports the Moscow News.

The survey of major exporting powers, released last week by watchdog group Transparency International (TI), finds that companies based in emerging markets are the most likely to resort to bribery when doing business abroad, reports the Associated Press.

In India, bribes often are paid to low-level officials to “speed things up,” according to an analysis of the report by the Times of India. This is in contrast to other strategies assessed by TI, including bribing high-ranking officials or improperly using friends and family to gain contracts.

Belgium, Canada, the Netherlands, and Switzerland were identified as the nations least likely to be involved in bribery, reports Radio Switzerland.

TI’s Bribe Payers Index ranks 22 of the world’s wealthiest and economically dominant countries by the likelihood of their firms to bribe abroad, according to the group’s website.

It is based on the observations of 2,742 senior business executives from companies in 26 developed and developing countries, selected on the size of their imports and inflows of foreign direct investment.

TI chair Haguette Labelle said the index “provides evidence that a number of companies from major exporting countries still use bribery to win business abroad, despite awareness of its damaging impact on corporate reputations and ordinary communities.”

Sources: AP, Dec. 12 — Moscow News, Dec. 11 — Times of India, Dec. 11 — Radio Switzerland, Dec. 9.

For more information, see: Related Newsline story, Oct. 27 — Related Newsline story, Oct. 20 — Related Newsline story, Sep. 29 — Related Newsline Commentary, Aug. 4 — Related Newsline story, Aug. 4 — Transparency International website with link to survey.

Bernard Madoff’s clients expected and received double-digit returns; but SEC says it was all a giant Ponzi scheme

NEW YORK
A legendary New York financial adviser has been charged with running what investigators say may be one of the biggest financial scams in history.

Bernard Madoff, the founder of Bernard Madoff Investment Securities and the former chairman of the NASDAQ stock market, faces criminal charges an a case that could involve endangered assets of as much as $50 billion, according to the Financial Times.

Forbes reports that the U.S. Securities and Exchange Commission characterizes the case as a “multibillion dollar Ponzi scheme” of “epic proportions.”

A Ponzi scheme is a fraud in which funds from new investors are used to pay off existing investors, convincing existing investors that their high returns are a result of the investment, rather than a siphoning of money from new victims.

According to ABC News, Madoff routinely provided double-digit returns to investors for years. His services were in such demand that as recently as two months ago he was turning away new business, ABC reports.

Bloomberg notes that Madoff was turned in by his sons reportedly after confessing to them the nature of his scheme.

A lawyer for Madoff declined to comment specifically on the allegations, according to the Wall Street Journal, but did insist that Madoff is a “person of integrity” who intends to “fight to get through this unfortunate event.”

Sources: Wall Street Journal, Dec. 13 — Financial Times, Dec. 12 — Bloomberg, Dec. 12 — Forbes, Dec. 11 — ABC News, Dec. 11.

For more information, see: Related Newsline story, Dec. 8 — Related Newsline Commentary, Nov. 24 — Related Newsline story, Nov. 24 — Related Newsline story, Nov. 17.

Critics wonder if using medications normally prescribed for attention deficit disorder will put people under pressure to enhance or increase risks from side effects

NEW YORK
It is ethically justifiable for otherwise healthy people to take pills that will boost their mental abilities, a group of scientists suggested last week.

In a piece published by the influential journal Nature, the authors argued for permitting the use of medications normally prescribed for those with attention deficit disorder or memory impairment.

The seven co-authors admitted that thorny ethical and medical questions must be addressed, according to a summary of the report in the San Francisco Chronicle.

“We call for a presumption that mentally competent adults should be able to engage in cognitive enhancement using drugs,” said the writers, who include Stanford law professor Henry Greely and neuropsychology professor Barbara Sahakian of Britain’s University of Cambridge. “From assembly line workers to surgeons, many different kinds of employee may benefit from enhancement and want access to it, yet they may also need protection from the pressure to enhance.”

The Chronicle quotes Dr. Russell Reiff, a San Francisco pediatrician critical of the proposal: “‘These medications can have very significant side effects,’ Reiff said. Healthy college students, rather than ‘pathologizing’ their weariness over a grueling class schedule, could build in some time to shoot hoops between lectures, Reiff said.”

Use of drugs such as Ritalin for brain enhancement already is seen among college students and scientists, according to Nature and a series of articles in Wired magazine.

According to U.S. News & World Report, some proponents of brain enhancing say wider availability of such medicines could help adults who unknowingly have attention deficit disorder identify and cope with the problem.

Sources: Wired, Dec. 10 — Nature, Dec. 10 — San Francisco Chronicle, Dec. 8 — U.S. News & World Report, Dec. 8 — Wired, Apr. 9, 2007.

For more information, see: Related Newsline story, Sep. 22 — Related Newsline story, May 5 — Related Newsline Commentary, Apr. 28 — Related Newsline story, Nov. 13, 2007 — Related Newsline story, Sep. 18, 2000.