- Historic Sites
The Fear of Getting Caught
September/October 1987 | Volume 38, Issue 6
Until July 2, 1986, I felt comfortably detached from the current insider-trading scandal on Wall Street. That was the day I opened the business section of The New York Times and saw a photograph of a serious-looking young man above the caption, “Robert M. Wilkis, in 1976 photograph from the Stanford University Business School yearbook.”
Robert M. Wilkis? Bobby Wilkis! Bobby Wilkis and I grew up in the days recreated in the movie Diner, when every kid wanted to be John Unitas, no one had ever heard of Mitsubishi, and Ben Cartwright and his boys offered on “Bonanza” a weekly demonstration of the essential nobility of the American character. How in the world had Bobby Wilkis wound up with his picture in The New York Times under the headline 2 CHARGED IN BIG INSIDER CASE ?
The article itself answered that question. According to the Securities and Exchange Commission, Robert M. Wilkis and Ira B. Sokolow, investment bankers, and Dennis B. Levine, a mergers and acquisitions specialist, had collaborated in the largest insider-trading ring ever uncovered. For five years, the SEC charged, Bobby Wilkis traded in more than fifty stocks in advance of any public knowledge of the deals. To conceal this trading, he used code names, traded through Bahamian and Liberian corporations that he owned, and channeled funds through banks in the Bahamas and the Cayman Islands.
Bobby Wilkis earned about three million dollars from insider trading, according to the SEC. In a consent decree that he signed when the scandal broke, he neither admitted nor denied the commission’s civil charges, but he agreed to repay his profits and to pay damages, agreed to cooperate fully with the government’s investigation, and was permanently barred from working in the securities industry. He later was sentenced to a year and a day in jail.
As subsequent events have made clear, the main target of the SEC was not Bobby Wilkis, or even Dennis Levine. A $3.3 million payment may seem like big bucks to you and me, but it’s petty cash compared with the $100 million that Ivan Boesky agreed to turn over when the SEC snared him in the next phase of the unraveling scandal.
Financial buccaneers like Boesky have gotten the headlines lately, but dishonesty in business is not limited to Wall Street, nor to big business. Indeed, my guess would be that bribery and petty deception play a larger role in the lives of managers in small and mid-size businesses than in the lives of managers in our giant corporations.
Which is not to say that giant corporations are hotbeds of virtue. The truth, I’m afraid, is that when big business lies, it lies in a big way. When big business cheats, it cheats in a big way. And when big business steals, it steals in a big way.
Take the case of the Manville Corporation (formerly Johns-Manville), which is discussed in “Why ‘Good’ Managers Make Bad Ethical Choices,” an article by Saul W. Gellerman, dean of the University of Dallas Graduate School of Management, in the July/August 1986 issue of the Harvard Business Review.
More than forty years ago, executives at Manville began to see evidence linking the inhalation of asbestos to three diseases that often are fatal—asbestosis, lung cancer, and mesothelioma. Manville’s managers not only suppressed the research; they also concealed the information from their own affected workers.
In testimony at one of the court cases eventually filed against Manville, an attorney recalled how forty years earlier he had questioned Manville’s counsel about the company’s policy of concealing the results of chest X rays from employees. “Do you mean to tell me you would let them work until they dropped dead?” he had asked. “Yes,” he was told, “we save a lot of money that way.”
In the long run the company may have saved less than it supposed. If a court ruling being contested at the time of this writing is upheld, much of Manville’s equity will go into a trust representing people who have sued it or plan to sue it for liability in connection with asbestos. “For all practical purposes,” Gellerman concludes, “the entire company was brought down by questions of corporate ethics.”
Of course, business is not the only realm of American life that offers examples of dishonesty. I could fill the next fifty issues of this magazine with tales of political graft, but misconduct that transcends simple greed is more interesting. Who that heard it will ever forget the ring of Lyndon Johnson’s voice when he ran as a peace candidate in 1964 while secretly contemplating an expansion of the war. And who that saw it will ever forget the procession of power junkies lying under oath at the Watergate hearings, or the look of earnest candor on Richard Nixon’s face when he assured a worried nation that he was not involved in a coverup. On issues large and small, our nightly newscasts suggest, America’s politicians do not merely lie, but lie routinely.