Transcripts For CSPAN2 After Words 20161211

Episode are the women a fox news who dont have a primetime show, who at great risk to themselves because no one thought he was going to get fired, found the nerve to walk into paulweiss when murdoch started that investigation and told their story, believing that he would continue being there boss. And those women want their and an i would never out them, but those are the courageous ones. Its much harder than it sounds. We can just carry on gabbing. Settle for more, everyone knows youre in the process and that in a contract year new britain a book that is the number one New York Times the best seller, congratulations. Thank you. [applause] what does megan kelley want more of . For me its pretty clear, im doing a job i love, but theres something i love more. Three Little People in a big person named doug. Doug and i are good, we see each other because hes a writer, he writes he writes books for a living, he actually is a writer. Then he is a Flexible Work schedule and we can see each other. And a pretty open about this, i am missing too much of my childrens childhood. When i first started this job they were just barely four and basically three, two, newborn. And i had the whole day with them and that i would go to work at 330 or 44 and get home at midnight. And now their aging, their seven, five, three. So are we. [laughter] and now to out of my three go to school at 8 15 a. M. And dont get home until 330 when im walking out the door. Honestly, thats not acceptable to me. Thats not more. They mean to much to me. I refuse to miss their childhood. Just so i can do a job that i love. So im not breaking news here, ive set all of this to my employers, they know this too, and that is my challenge now decided what im going to do. Can i find a way to work with my schedule at fox and continue to do the kelley file and see my children and if the answer to that is no then i will have to make a different decision, because they are most important. Settle for more as the book, thinking very much. Thank you. Think you also much. [applause] thank you for coming. [applause] cspan, where history unfolds daily, in 1979, cspan was created as a Public Service by americas Cable Television companies. This brought to. This brought to today by your cable or satellite provider. Afterwards is next on book tv, covered Business School professor eugene is the author of why they do it, and examination of whitecollar crime. To write his book he spoke with nearly 50 former Business Executives involved with corporate crime. Good morning. It is a pleasure to have this opportunity to speak to about your book, why they do it, let me start with asking you, how is it that you came upon deciding to write a book about the perspectives and the backgrounds and thinking of what color criminal . , financial economist by training, this book begin when i was a graduate student working on large Empirical Data set which most guys are doing at three in the morning and i came across a show called msnbc lockup. Cross between a Reality Tv Show in a documentary. On the show they had a crew going to various prisons and they were interviewing convicted felons much were convicted for violent offenses. I was watching the show and i started think about the kinds of people that i wonder think about, the people who are in the industry, who donate generously and wonder what happened to these guys with these people that i like many people really respected in their convicted for offenses and then they disappear. And so this project began as a personal interest that i saw the headlines, this is 2008, enron, theres very much in the headlines and that evening out of personal curiosity, this is not a scholarly project at all. I did what i think a think a lot of people have the back of my, what are some of these guys thinking. I thought maybe if i could do it theyre doing on the show and spent time talking with them might see a different perspective. Spee01 so give us a sampling or list of who it is you spoke to spee02s over the last seven years roughly 50 people, most of which were convicted criminals, some civilly and some have been overturned. A prominent a prominent name big data from enron, dennis and the former co tyco, people convicted of ponzi schemes in stanford, number one and two of the recent ponzi schemes in history. Host how did you approach them and why do you think they agree to talk to. Guest thats a great a question as an attorney asking that. I approach them as an educator, im someone the teachers the material to my students at harvard Business School. Its not something a student would ever think they would face, so i wanted to see how did some of these individuals some of which are llama the school it check, what happened along the way. So i wrote a short letter, i would like to better understand your perspective, can we spend time together. The first night when i spent the first ten questions that i receive some responses. Someone from the sales, Stephen Richard roden only elegant eightpage cursive letter back, others set im happy to chat, my plenty of time now, come visit me. Hes in upstate hes in upstate new york in a prison. So i started taking them up on this offer. Was started at half now here, letter there, and email if theyre in federal prison back and forth threaded special system began something that has become more apparent to me that it was interesting and humbling speaking to some of these extraordinary intelligent individuals that face consequential sanctions, teacher her their perspective. Why they spoke with me, i think one thing of privilege to be an academic is that i can commit to spend as much time as i needed to understand their perspective. I could say not going to try to write something or teach something till the end of the week as a journalist might have a deadline. I could spend weeks, months maybe years corresponding to try to really understand how they see the world. Thats the ultimate goal of the project. Also i think many simply just missed their business world. I keep finance, we can talk about the financial crisis, we can talk about going whats going on other firms. Most firms. Most of the conversation was not about their case, most of the revealing aspects was talking about everything else, was going on in the wall street journal. I would send them books that i was reading, hearing what they had to say versus my colleagues and students whose oftentimes was fascinated. Host did you talk to Family Members, victims . Others who are around these individuals in the crimes that were committed . Guest i did. Much more my focus was on the individual, in some instances Family Members and many of the cases much of the correspondence is among the family. I think its her easy and i approach it like many people that we see this extraordinary crime that cost such devastation to say someone is going to get one or two years in prison does not seem very much but to see what that does to a family, was with the kids, its quite extraordinary. And humbling. Even if it is short, nothing from their perspective with their family and also to see how they get out of prison how some people are finding Different Things to do and pollution in different ways and others are stuck having the sanctions on them is something they cannot overcome. And in some cases like made off, some people were truly devastated by his actions. Part of my goal speaking to the victims is to go back to some of like bernie made off and set i just had this conversation can you help me understand why this doesnt seem to be resonating with you. Thats why learn about their personality, some just didnt seem to settle in, there is people on other side that lost everything. Host would ask the question whether you thought they were truthful with you, though perhaps the way you describe it youre not necessarily in the business of trying to determine what the truth was in confronting them with it, is that right . Guest the broader goal, their subjective view of the world. I wanted to put myself in their shoes and see how they view the world. Their own cases and as any prosecutor knows her defense knows that peoples memories, even if theyre trying to be truthful, theyve all been changed. Particularly when it comes to their cases. Even the best Case Scenario is hard to remember the details but on top of this most are convective villains such rely on untruthfulness would be a little naive on my part. This this is why try to rely much more of the other information i was going around their case at the time. For example example we have a lot of email and in some cases there is show me that they were not worry us to after they completed the deal. They werent worrying they were celebrating and described how they went out with their spouses. So that piece of information is more powerful, its not something widely reported. If you know people are doing after you come back up, what they were thinking a little bit better time or their immediate reaction. Thats it is trying to do his piece it together in a different way. Host the sig digestion was that i didnt want to my defense lawyer that night i went out had a party so therefore i was not really intentionally doing anything wrong. Guest i dont want to say intentionally but they werent worrying about what theyre doing. We all do some things that are wrong, well speed driving the car, we know its wrong but we still do it. But if we know that something is actually harmful and going to create a significant personal harm or devastation moe generally have a deeper pause for going ahead and i would argue. Many of these cases i think making note that theyre pushing something aggressively could be wrong this could lead to a slap on the wrist, it would not lead to the kind the consequences that we saw described in the book. Host let me ask, what you think is the difference, if there is one between the white collar criminal and those who can commit other types of crimes the be it burglary or drug crimes or assault, as their fundamental difference between the profile of the perpetrator . Guest i think it leads to the profile of the perpetrator of the crime itself. The thing thats different about most whitecollar offenses is you dont have to get close to the victim, so the victim themselves are distant and think of like insider trading. Its difficult to identify the actual name of the individuals and we could say more broadly is systematic it creates a harm to the Financial System as a whole. Host anonymous persons on the other side of the trade so we can think of, they exist, its not to say it doesnt exist but you cannot pick them out to and actually see their picture. In other cases even when there are identifiable victims the timing in which theyre identified is offset. Like a ponzi scheme. At the time of harming the individuals investing in an investment scheme, theyre clamoring to give him more money, theyre trying trying to give him our leadership position in industry, you come home and most of the day looked pretty good, its only when its revealed later that all of this starts to unwind and becomes clear that there are people being harmed. So this is where i find it interesting, i can spend hundreds of hours it with individuals in the room and i never once worried about if one of these guys going into my back pocket and stealing 20 out of my wallet. Many of these individuals, through funds that i own, retirement accounts, have actually taken far more than 20 for me. The question is why do i not need to need them stealing 20 my wall but many would, without steal a couple hundred from my account and i think thats the fundamental difference in terms of these crimes. You can do some pretty devastating things and not have that good feeling of doing something harm. Host as opposed to put it a knife at someones throat and demanding their wallet. Guest right which takes a fundamentally different kind of person or a different kind of deaf desperation. Host he also point out that in addition to the anonymity of the victim in the longer time it takes the victim to be revealed, it is the act itself and you talk about how the crimes are often committed by the click of a mouse or erasing and putting in a new number on the balance sheet. Is the nature of the act also something that distinguishes the whitecollar criminal from others . You can create extraordinary devastation. Theres 11 case in which someone uses the white spot feature and excel and could cause hundreds of millions of dollars of loss for the firm. And it takes 30 seconds, doesnt feel all that harmful at the time. Its really the click of a mouse or signing a paper. One that was prostituted after Stephen Garfunkel a former cfo, he described he was actually comfortable and didnt feel bad about signing many documents attesting to a false letter of collateral, youre just signing a sheet of paper so what it was only once he actually confronted by someone, it was a banker who did not think the numbers made a lot of sense and he said the numbers dont line up that he was going to be forced to lie to someone facetoface and then at that point he said its a lie, this doesnt make sense so the most subtle distinction of lying on paper is very easy, lying to their faces harder and we can keep escalating from their. So does the fact that, does does this give you some insight potentially into how one might better deter White Collar Crimes, knowing how it is different from other type of crime, does i give you any insight or did you reach a conclusion about how best to prevent it . Guest this is a challenging question. One thing thing that initially surprise me but then over time became something they came to expect is that most of these people, even theyre doing something egregious, the kind, the kind of think thats going to land you in prison, its not a gray, its not if we hire great lawyers we can get up this comments youre going to prison for some time, they still found ways of not seeing how they were ever can go to prison. Thats extraordinary to realize that even if you do something really wrong that you never see that outcome happening, this isnt a deliberate cost and benefit calculation, theres two ways to increase the cost, we can either increase the probability of being caught that we increase the sentence once caught. So i think the historical approach weve taken has been, lets increase the cost associated with once youre caught. So rather than a potential sentence of one year coast from three to five and in some cases they argue that some of them actually look to long compared to serious personal. Host i think there is one cited in your book that about a 12 milliondollar fraud that impacts shareholders in the 19 80s was punishable by approximately three years in prison which is by the early 2000, that had increased fourfold to somewhere between 13 and 16 and 16 years in prison for the same offense. Obviously a drastic increase the penalties and sanctions and fines. But your point seems to be, that may not have much of an impact on deterring whitecollar crime. Guest were talking about the most privilege here. It is a specific type of individual. Whether you go to prison for six months or three years, that id is not resonating in most of these cases. You still think thats were someone else commits those guys that go to prison not me. Host how about the fact of prison. Guest so this goes to the other way, and two other norms, this stuff is wrong its going to have really serious sanctions associated with it which could be heavily financial penalties and it could be prison, something that people normalize and this is what happens to people that do this kind of thing. Thousand peoples minds i think that would change. Thats not a costbenefit calculation, that becomes part of our norms and culture about whats appropriate and whats not appropriate. I think think the challenge is that you need resources. In order to detect more cases especially the more difficult cases you need resources to police which is challenging because this is a political consideration of how much resources to investigators have. Host what about if white collar criminals you find dont really make that costbenefit analysis, then do you or in your book have suggestions on how it is that this crime can be better deter . Guest i go back to the individual at the end. The people in here i not predisposed or have any inclination to actually want to do something criminal. These are things that happen because of the things theyre exposed to, the norms and cultures in which they grow up in a firm and and the pressures they face, i think of for example the Business School student, theres not one Business School student when theyre about to leave a prestigious Business School that says my goal is to go out and become wealthy and prove the industry, donate to wonderful organizations and then maybe near the end of my career it might engage in some fraud or insider trading, no one thinks like that, but we can find cases of people doing exactly that he had this extraordinary career as one can have, more than three decades, one of the most well respected firms the world, potentially ceo he became the lead person of the most celebrated firms and what it means and soon after his retirement hes on the board of a number of prestigious firms, Goldman Sachs is one of and at 1. 23 seconds seconds after Goldman Sachs Board Meeting is calling a wellknown billionaire , hedge fund and divulging confidential information. This is against everything that he did it for being successful. Spee01 let me stop you there for moment. I moment. I was going to say the cynic might suggest thats exactly the kind of approach and conduct that gets you head in the business world. It is not a place necessarily where ethics and morality prevail, but its those persons who operate in gray area and may be across the gray area that get ahead. So what what he may have done was an extension of how he operated mckinsey. Guest it could be. Its impossible to rule that out. One thing i think about in the case of him and the other partner mckinsey is that one of the most cherished values at a place his client confidentiality. This is a place where you dont talk in an elevator about your clients. You dont even tell your spouse, you go to st. Louis but you dont know what firm youre working for. It would be a remarkable to be a was spent decades in that culture in one hand teach it, lead it, and do it successfully around client confidentiality and then to not respect that and still succeed and thats how i look at both of those cases, they were exposed, they were successful in the confines of it mckinsey culture. Strong culture, and protecting client confidences. But thats an artificial norm or intuition. Its not something we have been born, not something weve been evolutionary designed to protect. Something we learn to do when were exposed to that, but if youre exposed to a different type of culture, that of a corrupt hedge fund, youll get involved with that culture. So when they interact with people who differ from the which one may argue perhaps in some cases this could of occurred earlier, but what we know unambiguously is when these individuals were operating and spending time with someone to very much act differently they adopted that different type of culture, that much grayer progressives and undermined,. Thats a a little disturbing because it suggests that culture morality is perhaps more temporary than we would like to believe. Once youre out from under the environment that encourages and fosters moral behavior and good conduct, that you become susceptible to crossing the line. Guest i agree exactly. Thats a challenge. We spent a lot of time, theres aisles of management books about moral character, values of moral compass. And thats nice to think about it to believe that if we have this set of moral value sitting here today this is how it will be going out in any circumstance or situation but ill say the psychological evidence push very heavily back say the situation far dominates the individual person. We can see these instances where he spent 40 or 50 hours in a Business School taking ethics or you could spend a couple weeks at a corporate training program. Thats going to be dominated by about 40 hours in the classroom thats equivalent to about you first four days on the job. So whatever culture you been exposed to a day five at the Financial Institution will dominate whatever experience you may have had in a classroom or training exercise. And thats a culture that youre going to adopt. And i think we tend to describe morality is this value that is above and i see it driven by cultural norms that people can aspire and i think in most cases they do aspire to do well but when facing tremendous pressure and the wrong incentives we see people doing things that are different. In the recent wells fargo case in the news, we have a case where wells fargo had effective culture and that they had several thousand people doing what the firm incentivized for simultaneous simultaneously those incentives lead people to do things that were a host of regulatory challenges. So the question is, this is where it becomes tone from the top, but what is the culture thats been set within a firm because thats whats going to motivate peoples incentives and ultimately their ethics. Host so i get to the fundamental question of why they do it, and you kind it had a very interesting portion of the book where you survey the theory as to why white collar criminals do what they do, going back back to the 1800s, including somewhat curiously the view that prevailed at some point time that suggested you could actually tell who is going to be a white collar criminal by the way they look, their physical appearance, a high four head and pointed nose might suggest youre going to be an embezzler. Can can you tell us about that theory . Guest this interview is taking place in 1939, i would not be the person who would be here. It would be a colleague from harvey, ernest was the head of our anthropology department. He was most wellrespected person the country when it came to talking about criminality, why crime occurs how he came how it came about this, his a physical anthropologist so the shape and size of bodies, what he did was one of the most complete studies of criminal still by today standards which is a laboratory of graduate students go out and have 10,000 convicted felons and he took a couple hundred measurements. Measurements of the length of the earlobe, the angle of the nose, the eyelashes, this is still the prevailing view of less hundred 50 years years before this, something about the individuals body is related to their propensity. And he thought the trick is that i need to do this more carefully and with more rigor, we have to get a lot of careful detail and measurements, 1939 Harvard University publishes his book describing criminality. He has a wonderful place in the book showing what a whitecollar offender looks like. And he says he gives six or seven characteristics and if a person looks like this they are a, theyre going there can be the whitecollar fenders. How this turned out to be true it be wonderful for regulators. He could just sit through a database of photos. It turned out that died out as a theory, very much in part because he is leading proponent of eugenics and people started to see how this correlated with some of his arguments. It turned out they left ultimately and faulty correlations. But its totally gone away and that theres a criminologist from the university of pennsylvania who is actually done some interesting work committees and neural criminologist so not the persons face or body shape that is causing, but their mind, we just need to go deeper inside the body. So inside the body. So hes done some really fascinating work mostly with violent offenders looking at people with spousal abuse or murder. They have some type a different brain makeup that seems to make them have a higher propensity associated with these offenses. Hes done a recent paper with a colleague that does Business Ethics where they brought in a number of lowlevel whitecollar fenders and it started preliminarily, maybe see differences in brain structure with people who are, more likely, they have a higher capacity almost intelligence which is a humbling conclusion, but the theory is round in a different way a more careful way. Ultimately the arguments around whether its a physical cause, there are explanations. But i will say many the people i spent time with the difference between them and the executive in my class is a prominent ceo, if i was to not have their cvs, i can flip around their cvs and i dont think most people will be able to tell the difference, theyre cordial, intelligent, everything you would expect a corporate expect a corporate leader to be. So the idea that there is a physical cause to whitecollar criminality is it an explanation and can contribute but probably not the answer. Host so was about my conclusion in your book . Youve identified culture is one cause, as it also situational, just the set of circumstances coming together to create a perfect storm to make someone who otherwise would not cross the line to do so . What conclusion did you ultimately reach . Guest it doesnt look like so much of what i think is a failure of managerial reasoning what even looks like reasoning trusses oftentimes not actual genuine reasoning its just justified only previously thought and you think youre going back and forth but we have psychological evidence but it actually comes down to her intuition. Citing much of the failure is a failure of managerial intuition rather than reasoning. You could say it would take a different path or approach to address some of these values. So by that you mean managers based a lot on intuition, gotten instinct and they just dont give a lot of thought to those situations when what theyre instinct is telling them is to do something that they should know better to do. Exactly. They dont have that initial gut instinct telling them, screaming out that this is going to be very harmful or devastating. So going back to the speeding example, we all know its wrong but to the extent your speeding your gut doesnt bubble up and think that its doing some terrible. Although there could be serious consequences associated with that but that doesnt strike us in our gut, what we need to do is to think of whitecollar crimes in some cases where you might know youre doing something wrong but youre able to rationalize or justify its not so bad. Other people are doing it, or do not even thinking about it until someone brings it up to, tell your spouses next year until 22, slow down your going to fast. In the book i think you mentioned if you see an accident or police car you might slow down because all of a sudden you are reminded. Guest in those reminders often lack. A lot of the situations we can think of them as ethical dilemmas were just doing the right versus wrong thing. Theyre very easy to solve if were to sit with a sheet of paper look at that. You dont need an elaborate discussion to figure out should you call someone after Board Meeting within 20 seconds and divulge confidential information . Thats not really a difficult ethical dilemma of what we see people and quite brilliant people falling crazed to the simple failures and this is where the classroom and training is different from the real world , in training youre given the dilemma. Someone pointed out should you do this or shouldnt you, its isolated its isolated from the other decisions are making. You also see that their people in the room theyll think differently than you. So theres what i corporate governments and ideas and we need independent directors. A lot of that is checking the box from a regulatory perspective that you have some of that deemed independent but its not generally independent terms of thought in the second be pushed back on the ceo one is a privileged position. Host lets talk about that. We have an interesting story about Mark Whitaker from midland and what it is that ultimately convinced him that the contact he was engaged in was improper. Guest he was a rising star. Host by the way the focus of the Movie Insider with matt damon. Guest probably one of the most hope high profile people to play that. He was a rising star at adm, in the course when he was promoted to a more Senior Division they basically brought him under said this is how businesses really done, and theres a number of Chemical Products used, you go to your people, japanese, people in europe and they sit around and literally figure it how they should set the prices. This is illegal. And also as i read they wrote down false names and the expense report so no evidence of who they met with, you could say they put a fair amount of effort, this wasnt something that came in one day, this is by going on. Host it was clear to Mark Whitaker that he knew what he was doing was wrong. Guest it shouldve been. I think there is some public apprehension but again this is how theyve been doing it, this is how the senior people tell you what youre doing, if you want to stay in the position of privilege, the file can you adapt to what that team is telling you, but one night when he goes home and is talking to his wife ginger. Hes describing describing what hes doing and his wife reacts with shock. , this is not who you are, this doesnt represent what you should be doing and you know this is wrong. It took someone to shake him and someone who he respected and trusted and also completely outside the business and wasnt contaminated by the different norms and intuitions that were being created within adm. At that point he became a whistleblowing. One of the most senior in history on the started secretly taping many of these reports. Which may be tragic but also said something in the case so he becomes a whistleblower for the government, at the point that is a whistleblower he did something even more shocking, he actually started embezzling, he doesnt talk to his wife about it so he keeps doing it, and if youre a government informant, while your informant during a crime, youve increased your propensity being caught by some high degree and he went to prison for not the offense that his wife took the best route out of at the time, he ended up went to prison for Something Else stupid,. Host so this suggests that perhaps one route of decreasing White Collar Crime is to populate companies and corporations with persons who are outside the culture but who are there present during decisionmaking so they can offer a voice that may be untainted by the group that may occur in some companies, ive heard of this happening in some companies, do you think thats a viable solution . Guest Companies Endeavor to do that but theres a tremendous opportunity there. The challenges that so much this comes down to compliance things we need to do to follow the rules. What many many forms to us or trying to avoid we bring more compliance, sometimes race my people see more rules and what you do as it requires more thought of how to keep doing what ive been doing but its a perverse outcome that weve seen in a lot of cases, what you would much rather have us people, and sit back and say it this way supposed to be doing does this represent why he went to this for and reflects what you trying to do in this industry . That requires a different approach, we spent time talking about the role that attorneys play, i believe that a lot of firms attorneys play the role of council but thats for the legal conduct when youre giving legal advice about whats appropriate or not when it comes to the laws and regulations. At least i can say from talking and speaking to many senior managers, there look into that attorney because it someone is operating outside that has the ability to see the culture differently. The the challenge that counsel plays in this case in one hand youre hired because he reflected what the client wants, at the same time potentially with the client wants in that moment is different from what they would like in the longterm interests. This is something speaking to colleagues at Law School Friends that are attorneys i think it something that outside counsel could play a greater leadership role. When youre not just a person about whether their following rules and regulations but in some cases you the chief ethics officer in some cases. Thats a much more humbling position. I talked to colleagues in law school and they shy away when you bring the world of ethics in this context, but i think this is where we see managers wanting to offset and some set those obligations to someone else and sometimes its attorneys and it could be Technical Accounting matters. Historically this is not the run of the role where accountants and attorneys are viewed as the people who are going to jump in the room and give it a different ethical lens. Host i think a lot more backups on them probably is given credit for, that outside Service Providers and advisers prevent companies and individuals from taking certain action but a lot of that doesnt show up in the statistics because it never happened. When when the other hand there circumstances where it appears the attorneys and accounts are in daimlers and seem to be facilitating the wrongdoing and that does come to light. Maybe the solution then is you should have a board room where manager meeting with all the members of management are bored around the table they need to have all their spouses and significant others around perimeter of the room whispering in their ears when the moral compass goes off. That would actually do a lot of good in these cases. Just a just a different view, give one example of been a venture capitalist, and about interesting when i came across this was gonna write about it in his back viagra fee, is a well celebrated venture capitalist and when he hired a new cfo the cfo came in and looked at that compensation arrangements and said i see were doing one thing that looks not competitive, turns out most of our competitors are other firms with their lawyers and accountants they adjust the option date to make it the most attractive for senior executive. The initial response was this looks great we probably need to do this, looks like a free lunch additional compensation with no additional risk, but his intuition around when it came to technical finance and accounting matters by not be perfect, hes a strategist at heart, is an innovative thinker. So we have a routine procedure that he always wanted to go to counsel just to bring some of that outside this environment within Silicon Valley and passed by him, a friend and attorney comes back ive looked over this a pilot different ways and theres no way that this make sense that it could be legal and i recommend against it. He went back to the cfo and said i know everybodys doing but its not for us. So that becomes part of the backdating scandal and the cfo actually is one of the people who went to prison for this. And to reflect on this site because he had a better moral compass or values than other executives, but because he had a better compliance system and control, i think its its like a personal preservation framework where he knew where his weaknesses were, he also knew that getting advice from just the little inner circle may not always be right. So he anticipated this i could intercede so say this is a fascinating incident, he was aware of when he might be compromised and he knew how to devise this system. Host so lets talk about some of the individuals he spoke to and lets start with bernie made off, tell us about your interaction with bernie made off and in the book you identify a particular episode that i think one might describe as a little chilling, and and it gave a little insight into his character. Guest bernie made off ive been corresponding with for years. Every wednesday night for a couple of years would speak on the phone, hundreds of pages of correspondence back and forth. He was a well a well respected leader in the financial industry. Many innovations were think about nasdaq can be attributed to advances at his firm. But simultaneously he started off with an Investment Management business that grew to become one of the largest ponzi schemes in history. Despite the fact that he created a large ponzi scheme he was never destined to create this massive failure but then the question is well what happened. I spent a lot of time talking trying to understand how this problem grew and why he could never get out of it. One of the things i found humbling when i think of his cases, i think most of us like to believe in that we would never let something grow like this and be calm and get out of control which is what happened. Theres no underlying business, its a ponzi scheme in the classical sense that theres no way he couldve imagined by the late 90s that he couldve ever gotten out of this. The question is, the people around you are putting you on a pedestal, clamoring clamoring to give you more money, you go home on friday night and have dinner with your wife and your two kids of any say, this is enough. I should call the doj because this needs stand. I think most of us would say we know this needs to end, ill do that next week. The next week comes in is the same repeat. I know this is wrong and needs to stop it i dont want to end it right now and watch everything ive done collapse. And i think that is a fairly humbling and difficult question task, how many of us would have the character after that final dinner with her family decide today were going to end it even though its not being forced. Host may be long sentences are a deterrent to confessions. Thats a very provocative way, he has a light sentence is the second he turned himself in he would never have another meal his family. Thats an interesting way of framing it, but i think when it comes to why did this happen in the first place . How did it start growing in how to clamp down this is where he is different than any other people i spend time with. Unlike the other people which i describe is people who engage in crimes that may have devastated people but they didnt know them, they didnt see those victims on it really basis. Thats not true for made off. These were family, friends, people in the jewish community, how do when you know these people are going to lose money, how do you just say its okay to give me your money to a Family Member asked. These were not the remote victims that we spoke about earlier actually the extreme opposite. Its most close close members that he was spending time around. So referring an instance when trying to understand his personality and how he feels views the world. We normally have our talks wednesday evening prepare, both of his sons died while he was in prison, one committed suicide on the anniversary when he turned himself in and the other died of cancer. I was reading the obituary when his second son died and i was reading and it literally just came out i picked up the phone and it turned out the call from the federal prison do you accept this call. In a surprise because they didnt have a call scheduled this time with anyone. But i took the call and it was bernie made off. Ultimate my stomach just sunk when i heard his voice. Im reading the obituary of his son at that exact moment near talking to some of his father and he just heard on the radio and asked if i could read him the obituary. This is something where ive been fortunate my life i havent had to deliver or speak to people, it said. The hardest point in ones life, the loss of a child, so my researcher, i read the obituary to him and im at a loss of what to say after, so sorry if theres anything i could do, maybe he wants me to pass it along to someone or i dont know. Im at a loss. What you say to someone and he says im fine. Im fine. Then theres a pause. Ellipsis we go back and talk about the Interest Rates that were talking about last wednesday and for the next 11 minutes we talk about Interest Rates. He was talking about Interest Rates, is kind of haunting. I went home and my wife saw me pale and i said this is most just concerning conversations ive had in my life. The first reaction is maybe he was in shock will talk about something different. I dont think it was that the following wednesday we speak we go back and talk about Interest Rates. It was an issue and for four minutes he was focused on it was sad and devastating but then he can compartmentalize it and the switch. And and its as easy as being able to switch. And thats where his psychological makeup is just different. Most of us dont have that capacity to descartes compartmentalize. I think thats what help facilitate he can see his world operate and he can compartmentalize them in that way. Host when he was soliciting money was just a solicitation but the consequences and ramifications and all that would flow is not something that entered his mind at that time. Guest right. Something which i dont think he can differentiate is a most cases his you would be telling people i cant take your money right now. On one hand he was saying i told people not to give me more money. Strictly speaking that seems to be true, but that marketing pitch which is something we could teach in Business School tell people not give you your money makes him want to give it to more. See dont know if its good nature or thats a great marketing pitch. I generally believe it was probably a great marketing pitch in the back of his mind he could rationalize that he said i told them not to give me their money so they give me their money thats their fault now. Its a pretty sinister rationalization. Im deceiving them, but its a classic we get the 8009 contract line contract when you click on something online will say well online 623 we said that it could happen its not our fault you clicked on it. Its not reasonable way, it doesnt make it okay. Host you have so many interesting stories in the book about individual whitecollar criminals, are there others that stick out in your mind . I know for example Allen Stanford who took a different view of blame to everyone including the u. S. Government and claim there is no wrongdoing at all. That was one of the most extreme, this is not any fault of my own, it was anything short of the pages i could give out that this is a fault of the u. S. Government. Whats interesting is that we can separate the two parts, heres one of the few cases in which a finance institution was shut down prior to its failure. Which on one hand is a goal of lawenforcement to stop it before more victims are created. Guest most the times things collapse and fraud is known and then things kick in. So you could argue the best Case Scenario to stop it before it starts. He looks at that and says there are other firms i couldve failed if they didnt have government bailouts or whatever, i didnt take a a government bailout and they put me in receivership. So he uses the logic that because i didnt pale it must be legitimate as a way of providing some comfort that this is not his fault it was someone else and its a challenging question, theres a 99. 9 chance of them is going to fail, it makes sense for to be taken over, if, if theres a 1 chance might be a legitimate business. I think what the receivership another things prosecutors put together suggest this is closer to the 99 sigh. He sees this asthma the 1 side. The allegations i recall is that there is misrepresentations about what he was doing with the money. So its hard to argue that he would succeeded if the government had stepped in. Guest if you look at the management, i did spend time trying to say to the extent his business was legitimate, he should be one of the greatest investors. Warm buffet should be calling him for advice if you look at the rate of return and the only example he provides is there is an ecuadorian that produce 30 return. , to generate the returns he did over decades there shouldve been hundreds of deals. It doesnt, his cfo, an old College Buddy of his, the cfo was in some nasty things. He essentially stole the money in a trust when his wife died that was meant for his kid. Ultimately you look at the other major executives they turned into government witnesses or whistleblowers in their get none of them knew what the business actually was. You can see the internal emails going back where we dont ask questions we just sell the stuff, it it makes it much harder to think that there was an actual legitimate business that he only knew about and no one else could fine. So the receivership continues to document more more evidence suggesting that there was no real investment. You you could say that there is investments, but by the golf course or some lamp or couple hundred Million Dollars in and marking it up to 3 billion is not the investment generating legitimate return. Host anyone else stick out in your mind . This is the case where he wanted to build this worldclass law firm and didnt have the money to do that. And ends up creating a false note