If you don’t read the newspaper, you are uninformed; if you do read the newspaper, you are misinformed. ~Mark Twain
Every day I try to scan the news on my iPad or laptop in order to keep up on world events and happenings in the business world. More often than not it’s a quick scan and then back to more positive and uplifting activities.
This morning an article caught my eye and prompted this blog.
The title of the news article reads: KPMG Insider Trading Caused by ‘Lapse of Judgement’. Okay, two things piqued my interest to read on: Insider Trading and ‘Lapse of Judgement’. Not certain these two issues go together so I was determined to learn more.
It seems that a senior accounting partner (in the company for 29 years) in the KPMG Los Angeles office was passing insider information to a golfing buddy so that he could profit on the stock market. Information about Herbalife, Sketchers (trendy shoe company) and other companies were passed by the senior accountant. When the FBI learned about the scam, they set up a sting and caught the illegal activities on tape and film. The senior partner was fired, citing a ‘lapse of judgement’ for his actions.
I am all for treating people with respect and dignity, when they deserve it. But this is not a ‘lapse of judgement’, this is criminal greed and a blatant disrespect for the accounting profession and professional ethics. We can expect a ‘lapse of judgement’ in a young professional with little experience, but in a 29-year veteran, calling it a lapse of judgement is a blatant appeal for sympathy. We can expect a lapse of judgement once or twice, but over the course of several years! Give me a break. This was premeditated criminal activity over a long period of time; enough to earn the golfing buddy $1M in stock trading profits.
I believe it is time to start telling it like it is! If we continue to soft-shuffle bad behaviour, inside companies or outside, we will continue to create a culture of weak values where people lack the resolve and courage to stand up against illegal activities. When parents defend the “bully” by saying “he was just having a little fun” we wind up with a culture where bad behaviour is tolerated.
Every man must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness. ― Martin Luther King Jr.
Let’s tell it straight. This was no ‘lapse of judgement’, this was blatant criminal behaviour! My next question is, will these criminals go to trial? And if found guilty will they get the type of sentence that signals to others that criminal behaviour among the professions will not be tolerated? Or will we give them a break, since after all, it was just a ‘lapse of judgement’.
As you can tell, I am also very much in support of Senator Bernie Sanders’ approach on prosecuting illegal behaviour at the top of the big banks. In a recent attack on the unaccountable big banks, Senator Sanders remarks about “Too Big to Fail is not Too Big to Jail”, he calls for more diligent investigation into the actions of top executives in the big banks.
The recent example is British global banking giant HSBC’s agreement to pay a record $1.9 billion (only about six weeks’ worth of the bank’s profits) to settle money-laundering charges with U.S. prosecutors. The deal ends a three-year probe into accusations of a widespread, multi-year string of illegal transactions violating sanctions against Iran and Latin American drug lords. Tell if I’m wrong. I thought money-laundering was a criminal activity!
It seems to me that multimillion dollar fines for illegal bank activities is not really a deterrent. Especially when the bank makes billions in profits. These are not punitive fines and they certainly don’t deter future criminal or unprofessional activities. And besides, those who lead the banks aren’t paying the fines, it’s investor and depositor money they use to pay the fines.
Without a real deterrent, why would anyone change their behaviour? The resolution? Besides the fine, HSBC negotiated a five-year deferred prosecution agreement with the government, under which charges will be dropped if it prevents future violations. I wonder if a criminal gang in Los Angeles or Columbian drug lords could negotiate such an easy solution?
“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes.” ~HSBC Chief Executive Stuart Gulliver.
“Deterring future crimes can’t be accomplished simply through fines or negotiated financial settlements — which many banks regard as the cost of doing business,” Phil Angelides, who chaired the government commission that investigated the financial crisis, wrote in a September op-ed in Politico. “Senior executives need to know that if they violate the law, there will be real consequences.”
But then, what’s the fuss? After all, it was just a ‘lapse of judgement’. Sorry about the global meltdown and millions of lost jobs!
Tight Lines . . .
John R Childress