“Oh, and one more thing: Try to use Skilling Securities for trades. Not all
the time, but whenever it makes sense. They’re good.”
Overall, your six-month review went pretty well. Boss seems happy; numbers are
good; and the culture—it’s so refreshing that people actually hang out with
each other here. Even if Friday mornings are kind of rough after team-drink
Thursdays. Most of all, the money’s great.
broker-dealer thing. What was that about? So you ask your new buddy, who’s also on
the equities desk but has been here for ages.
I use them about a third of the time. Don’t be weird about it, but it keeps the
boss happy. They’re good.”
months. The one-year review, weirdly not so good. It isn’t your numbers—those
have been top-tier—but your manager kept mentioning “cultural fit” and the “the
way we do things here.” Later, your friend pulls you aside. “Look, just use
Skilling sometimes. Every place has its quirks, and here… Just think of it as
the cost of doing business.”
What Do You Do?
First off, know that this situation—and myriad ones like it—happens all
Roughly one in
five people reading this article has personally witnessed illegal or unethical
activity while at work, according to the most robust industry ethics survey
conducted of late. And those are just the people willing to admit it. Nearly
one in four said transgressions are sometimes necessary in order to succeed in
financial services. More still (32%) felt compensation structures pressure them
to violate ethical and legal standards.
Art by Jonathan Bartlett
More than 1,200
industry professionals responded to the email survey, suggesting that financial
professionals do want to say something about illicit behavior. That said, 25% of the high
earners ($500,000-plus per year) have signed contracts prohibiting them from
doing so to the authorities. The survey, conducted last winter by Notre Dame
University and law firm Labaton Sucharow, attracted major coverage, including
from the New York Times, Washington Post, and NPR.
But for all the
media attention and personal experiences, experts say that few investors
actually know their options and exposures in the event they witness serious
misconduct. And figuring them out after the fact is like waiting for a
devastating market crash to determine your investment beliefs. The crossroads
of what everyone interviewed calls “one of the most important decisions of your
life” is when you most want a cool head, sound logic, and a plan. Here’s a
Option A: Suck It Up and Play Along.
You like the job and paychecks. Using some random service provider now
and again is not a big deal. Everyone on the desk does it. It’s not like you
even know why you’re sending a bit of business to Skilling, so how could you
get in trouble? Plus, you’ll start looking for a new job eventually.
You’re in good
company—or at least, lots of company. Despite what organizations say after they
get in trouble—an isolated incident, one bad apple, etc.—financial malpractice
is a team sport. For every instigator, a gang of bystanders chooses to play
along and execute the operation. The larger it gets, the more ‘normal’ such
behavior becomes, until those involved no longer have to even justify it to
public and private sectors, some types of misconduct are so deeply ingrained in
institutional or professional culture that they have legitimacy,” says attorney
Tom Devine, who has worked with more than 6,000 whistleblowers as legal
director of the Government Accountability Project (GAP). “That is despite the
fact that the behavior may technically be indefensible. Employees are much less
likely to challenge an ingrained way of life than the shenanigans of one or a
few corrupt individuals.”
“Within the public and private sectors, some types of misconduct are so deeply ingrained in institutional or professional culture that they have legitimacy.”Take SAC
Capital. When Manhattan US Attorney Preet Bharara finally busted the hedge fund
empire, he described it as “riddled with criminal conduct” amid a culture that
“fostered pervasive insider trading.” SAC didn’t get there by recruiting
insider traders, according to the Department of Justice (DoJ). It created them.
“Hiring practices heavily focused on recruiting employees with networks of
public company insiders.”
end up doing bad things. The longer you spend in this category, the more you’re
liable to forget you’re in it at all, and the riskier any of the other options
become. In other words, check yourself before you wreck yourself. Failing that,
head directly to Option D.
Option B: Quit.
For the hypothetical case, quitting is simple, clean, and pretty safe.
Even if you arrive here after a pit stop in Option A, the chances of being held
culpable if regulators did eventually find out would be slim-to-none—provided
you’re the one who told them.
participants in financial misconduct who later come forward have a “remote”
risk of liability after leaving the scene of the crime, says Jordan Thomas, a
former US Securities and Exchange Commission (SEC) assistant director who
worked on Enron, Fannie Mae, UBS, and Citigroup cases. Thomas led development
of the SEC’s whistleblower program while also helping to write the relevant
section of Dodd-Frank.
After 16 years
as a public sector attorney—SEC, DoJ, US Navy—he left in 2011 for Labaton
Sucharow, co-creator of the cited ethics survey. Thomas is to financial
whistleblowing what Johnnie Cochran was to celebrity criminal defense: If you
have the choice, he’s the guy you want on your side.
Quit now, and
you can still tell regulators down the road (See: Option E). Thomas meets with
people at this juncture, and often gives them very un-lawyerly advice: You
don’t want to pursue this. “People come to me with crazy big violations—huge
cases—but blowing the whistle isn’t consistent with their goals. Or, say, three
people on the planet truly know about it, and you’re the only one who doesn’t
work there anymore. I know about securities frauds that are going on right now
undetected, because the people I advised chose not to come forward.”