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The Fear of Getting Caught

July 2024
6min read

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.

What about science, the realm of disinterested inquiry? I’ve got a file a foot thick on the subject of recent frauds in American science. At Emory University and later at Harvard, Dr. John Darsee built a dazzling career based on phony laboratory data. At Yale, Dr. Vijay Soman fabricated data in an insulin study, thus setting off a scandal that cost his supervisor and co-author, Dr. Philip Felig, an appointment as chairman of the department of medicine at Columbia University’s College of Physicians and Surgeons. At Cornell…but you get the picture.

Let’s return to the consideration of dishonesty in business, from the perspective that opens if we step back from the present. Anyone who is interested in the role of business in American life should take a close look at the discussion of Benjamin Franklin in chapter 2 of Max Weber’s The Protestant Ethic and the Spirit of Capitalism. Weber sees Franklin as representing the spirit of capitalism “in almost classical purity.” After noting that our archetypal self-made man commends honesty, industry, frugality, and punctuality chiefly because of their utility as means of gaining credit, Weber observes that “where, for instance, the appearance of honesty serves the same purpose, that would suffice, and an unnecessary surplus of this virtue would evidently appear to Franklin’s eyes as unproductive waste.” To Franklin, Weber charges, virtues “are only in so far virtues as they are actually useful to the individual, and the surrogate of mere appearance is always sufficient when it accomplishes the end in view.” This attitude seems to Weber “inevitable for strict utilitarianism.”

The distinction between affirming honesty as a matter of principle and affirming it as a matter of policy takes us to the heart ol a permanent dilemma. Free enterprise has much to recommend it, and honesty has much to recommend it, but no law of logic guarantees that free enterprise shall be honest. Caveat emptor has always been the morality of the marketplace. Honesty may be the best policy if you care about getting into heaven, but if your chief concern is to get rich, honesty may seem an inconvenient virtue.

From a business perspective it is even possible to imagine cases in which the appearance of dishonesty might be good policy. The late attorney Roy Cohn, for instance, may have been a saint in private life, but his reputation for nastiness undoubtedly helped him in his business. If you’re selling your services as an intimidator, it doesn’t pay to have the manner of a choirboy.

In view of the severity of Weber’s criticism, it’s important to note that Benjamin Franklin took care not only to appear industrious and frugal but also (as he relates in his autobiography) “to be in Reality Industrious and frugal....” Franklin always emphasized character. In the world of Poor Richard, the way to wealth was the path of virtue.

When the desire for gain exceeds the fear of getting caught, and no inner voice objects, the stage is set for scandal.

What about the world of Bobby Wilkis? Greed and fear, it’s said, are the forces that drive Wall Street. When the desire for gain exceeds the fear of getting caught, and no inner voice objects, the stage is set for scandal.

What are the forces that work to sustain honesty in business? In the days of Benjamin Franklin, the fear of getting caught would have involved far more than the fear of the SEC. Bank accounts in the Bahamas do not escape the notice of an all-seeing God.

If faith fails, the fear of God gives way to the voice of conscience. If conscience fails, there is still the voice of the utilitarian ethic—the affirmation of honesty on grounds of policy. And if utilitarianism fails, civilization trembles upon its final support—the fear of getting caught.

That may be a slender reed, but it’s better than nothing. I don’t know what led Bobby Wilkis and his cohorts to involve themselves in the scheme that came crashing down upon them last year, but in the contest between fear and greed, I wish that fear had spoken more forcefully.

What is to be done? Already our business schools have swung into action, developing courses that pay special attention to ethical issues in business. Imagine that the National Football League, concerned about the level of violence in professional football, proposed that colleges spend more time lecturing college athletes on sportsmanship. Courses on business ethics will have exactly as much influence. The way to keep people from breaking the rules is to make them afraid, and the way to make them afraid is to catch them if they cheat and to punish them if they are caught.

In the week this past February when stunned colleagues watched as a senior executive at Kidder, Peabody & Co. was led out of his office in handcuffs, I happened to be reading a novel about money, George Orwell’s Keep the Aspidistra Flying. Of people who are not rich— people like the secretaries and data entry clerks at places like Kidder, Peabody—Orwell writes: “Our civilisation is founded on greed and fear, but in the lives of common men the greed and fear are mysteriously transmuted into something nobler. The lower-middle-class people in there, behind their lace curtains, with their children and their scraps of furniture and their aspidistras—they lived by the money-code, sure enough, and yet they contrived to keep their decency. The money-code as they interpreted it was not merely cynical and hoggish. They had their standards, their inviolable points of honor.”

Inviolable points of honor? Not always. Not on Wall Street, not on Main Street, not in City Hall, not even in the laboratories of our scientists. Nevertheless, I’m grateful to Orwell for this reminder that honesty is less rare than it sometimes seems, and grateful for a phrase that does justice to the current scandal. Cynical and hoggish.

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