Around the Nation
Thu July 26, 2012
From Enron To Penn State, How Cover-Ups Happen
Originally published on Thu July 26, 2012 2:38 pm
NEAL CONAN, HOST:
This is TALK OF THE NATION. I'm Neal Conan in Washington. Sex abuse in the Catholic Church and at Penn State, accounting practices at Enron, the break-in at the Watergate, in each of those cases and many, many more, senior officials lied to protect an individual or an institution. And while we've all learned that the cover-up is worse than the crime, very human impulses can overcome ethics, one lie can lead to another, and a bad situation becomes much, much worse.
If you've been involved in a cover-up, call and tell us your story. Our phone number, 800-989-8255. Email us, firstname.lastname@example.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION.
Later in the program, GQ correspondent Sean Flynn on the massacre in Norway almost exactly a year ago. But joining us now from his office in Latrobe, Pennsylvania, is Bruce Antkowiak. He's a former federal prosecutor, now director of criminology program at St. Vincent College. Nice to have you with us today.
BRUCE ANTKOWIAK: Thank you very much.
CONAN: And when you're looking into an alleged cover-up, are there characteristics, are there red flags that you look for?
ANTKOWIAK: Well, when a prosecutor looks at a case, take the standard case of some corporate fraud, they're looking to not only - you know, the old classic phrase about following the money is fine, but more important is follow the information. If you're trying to determine how high up the information flow went so that the highest corporate officials were the ones who ultimately made the choices not to disclose the true financial position of the company, for example, you understand that the information flow in a company like that comes from a wide variety of people and many times people who are far down on the corporate structure.
These people have generated the information, and many of them will come to know the truth about what is going on. They will recognize the wrongfulness of what is occurring. And even if - and I think you're going to have some people on who are going to talk about the psychological dynamics of what happens to people in a situation like that - there is still an instinct that prosecutors I think rely upon that the lower-level people will protect themselves by making sure they document the fact that they have passed the information up the chain of command and so that they are not left out on that very precarious limb of being the last person that they can - that we can prove knew about the underlying problem that the company had.
CONAN: So it's a little like investigating the mob, you go after the little fish, and they lead you to the captain, and he leads you eventually to the capo?
ANTKOWIAK: It's very, very similar to that except that these people are not themselves necessarily committing any crimes. They're simply aware of information that is necessary for the upper people to make decisions, and they are smart enough to know that this is information that somebody should be acting upon, and when that action doesn't come, they understand that their best protection personally is to make sure they have documented what they did.
CONAN: And as opposed to looking for fingerprints or DNA evidence, you're looking presumably for emails.
ANTKOWIAK: In this day and age, you are wading through a pile of emails, but many times, depending upon the level of sensitivity of the information that's being passed on, you know, people are smart enough to keep hard copies of things, as well, to simply make sure that when they are asked about this at a later point, whether by upper-level corporate management people or by the federal investigators, that they can produce a body of information to say this is who I told when.
CONAN: Here's an email question we have from Mack(ph): When is something a cover-up versus a decision to try to handle a matter discreetly and with little or no outside assistance first and then seek that assistance second if the first approach does not work?
ANTKOWIAK: The underlying question in a lot of these matters is what is the event that is at the heart of the problem. Is it a - is it a circumstance where what has happened is a crime? And at this point, it's not something that the institution is institutionally capable of handling, nor are they responsible for handling a crime.
If it's a problem in a company, if you realize you have a product that is - that has problems, that is defective, many times a company is going to try to correct that problem immediately and address that as quickly and as effectively as they can.
The - sometimes, however, what has happened in a company is a crime, and whether or not the upper-level people have had anything to do with the commission of that crime, they sometimes react to those kinds of circumstances in the same way that they would to a defective product or finding that some sort of filing was done improperly but in a correctable way.
The instinct in many of these circumstances by the upper-level people is look, this is my responsibility, I have to fix this. That's fine to a degree, but when what you're trying to fix is a crime and particularly a serious crime, you have to understand that at that point you've lost control of it, and you need to involve independent law enforcement personnel.
CONAN: And do you find sometimes as you're investigating these kinds of things, or you used to as a federal prosecutor, that people don't think they're criminals at all, that they're just protecting their company and the stockholders and doing the right thing?
ANTKOWIAK: Absolutely. The mindset of many of these people is that what has happened is a tragedy, it's too bad that this occurred, but it's fixable, it's correctable, and everybody can come out of this going forward together well, and we don't need to blow a whistle and decide that law enforcement people have to come in and leave this entire circumstance in a much different posture than it is now.
You do find instances of people who can, at least for considerable periods of time, convince themselves that what they are doing is wholly proper and wholly within the bounds of what they should be doing, and when looked at in the light of hindsight or looked at by some outside person who comes in and assesses what is going on, it sometimes shocks them to be told look, you should have called in law enforcement a lot sooner than you did.
CONAN: Well, let's talk now with Toby Groves. Back in 2004, his mortgage brokerage company, Groves Funding, ran into some financial problems. Groves lied on a loan application in order to cover a quarter-million-dollar loss then roped his colleagues into documenting another loan that in fact did not exist.
In 2006, the fraud was discovered. Toby confessed to the FBI and served two years in prison. He's now a researcher and speaker on organizational psychology and joins us on the phone from Cincinnati. Nice to have you with us today.
TOBY GROVES: Thank you, Neal, glad to be here.
CONAN: And just following up on that last question: When did you realize you were a criminal?
GROVES: I totally agree with what he's saying because in the beginning, I actually felt a duty to do what I was doing. I recognized that we had lost monies due to errors at the company, my company, that lost monies belonging to our customers. So I justified that I needed to do whatever I needed to do not even at that point intending or thinking that it would be illegal or even unethical.
But it got dicey because we were losing money, and I was in a Catch-22 because if I was going to take a loan, I could not say that I was making what I had in the past. So I took one of the aggressive loan products that was available at that time and no income documentation, and I stated my income, but I stated it obviously more than what I was making, which is improper.
But to me at that time, it seemed like it's what I needed to do.
CONAN: And then one thing would lead to another to another.
GROVES: Exactly because the losses - you know, I should have known, the losses weren't all contained already. They were still occurring and growing, and I needed to become more aggressive, but at that point then I felt kind of trapped in what I was doing.
CONAN: And again, was there a moment you said oh my God?
GROVES: Yes, and that was that moment when I realized, like, this is probably not going to end very well for me, and I need to - I need to figure out, you know, what the best way to go forward is. So I can tell you that when that occurs, you're not thinking very rationally. And so I asked others, I even talked to our corporate attorney about, you know, what to do.
But we had worked so long together, all the people at the company, the people that served us, that they wanted to assist and just, you know, what this gentleman was talking about is, you know, we can come out of this without having this turn so ugly. We can fix this and go on with life, and of course, you know, it almost never works that way.
CONAN: So eventually you were caught.
GROVES: Yes, but it did take a long time, and there were a lot of people involved. It took on a life of its own, and every day was hell because I knew that it needed to end, but I didn't know how to end it.
CONAN: And didn't know how to end it, 911.
GROVES: Yeah, and that's a good point, Neal, but I don't know how to explain that I could not do that. I felt like I had to see it through at that time. Now in hindsight, that seems, you know, ill-conceived. But at that time, I can tell you there reached a point where I felt like I had to see it through whatever that might be.
CONAN: And as you did that, did you realize that you were also embroiling a lot of people at your company?
GROVES: Yes, at one point. In the beginning, I didn't, but, you know, there comes a point where you realize that oh my God, you know, this is a lot of problems for a lot of people, and that's a very difficult realization. And you end up having then, you know, every day you have choices to make, and you're trying to pick the least of the evils.
So, you know, when federal agents showed up at the door, I was incredibly relieved.
GROVES: Yes, absolutely.
CONAN: That's interesting. Well, Toby Groves, thanks very much for your time today, appreciate it.
GROVES: Thank you.
CONAN: Toby Groves, the former CEO of Groves Funding, a mortgage brokerage, currently a researcher and speaker on organizational psychology. He joined us on the phone from Cincinnati. He served two years in prison for, well, covering up, which is our subject today.
We'd like to hear from those of you who've been involved in cover-ups. If you can give us a call, 800-989-8255, or if you'd rather email us, email@example.com. Emails is maybe where you got in trouble in the first place. Stay with us. I'm Neal Conan, TALK OF THE NATION, NPR News.
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CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. We're talking about cover-ups - Penn State, Iran-Contra, Enron - how they start and why otherwise ethical people get caught up in a web of lies. More about that in a moment with the author of "Blind Spots: Why We Fail to Do What's Right and What to Do About It."
But right now we're talking with Bruce Antkowiak, the former federal prosecutor, now director of criminology program at St. Vincent College in Latrobe, Pennsylvania. If you've ever been involved in a cover-up, call and tell us your story, 800-989-8255. Email is firstname.lastname@example.org. And West(ph) is on the line, West calling us from Nashville.
WEST: Hi, yes, thanks for taking my call.
WEST: I was doing social work, and in my training, was instructed to falsify documentation, thus making more money for the nonprofit by getting our impoverished clients to sign blank pieces of paper and then falsifying the hours. I rocked the boat. I lost my job. And, you know, I can't talk about it with anybody because everybody in this business knows everybody else. And, you know, I don't even tell people who I worked for.
CONAN: So they got away with it?
WEST: They continue to get away with it. I have a friend who worked there, and she met the guy who was running the company, who had started the company for this purpose as, you know, like this government money snowflakes fall, and well, he's quite rich. He's a very rich man.
CONAN: And this is a nonprofit.
WEST: Yes, a nonprofit. And I've seen corruption in nonprofits all over the place.
CONAN: Bruce Antkowiak, we don't like to think our own industry is vulnerable to this, but nonprofits I guess are just as vulnerable as any other place.
ANTKOWIAK: Oh no, there's immunity from any sector for this. And what this gentleman has identified is one dimension of these cases, which is how difficult it is for law enforcement to initially be alerted to them. Unless there is a person - and many times it's a more mid- to higher-level individual who will get terminated for some reason and then contact law enforcement and say, you know, you ought to check out what's going on over there, or just happenstance, an audit that happens by a government entity where, you know, strange documentation starts to appear, and money doesn't seem to be where it should be.
The initial question is how does law enforcement begin to know where to look. And the dynamic of a person at a very entry-level position being put in these kinds of very uncompromising and unfortunate and in many ways just fearful positions is part of the reason why it's difficult for law enforcement to get on to these cases in the first place.
Yes, there are laws that protect whistleblowers, but very few people, you know, in a situation where they have a job, where they're working in a place, consider that as a true, viable alternative to trying to hold on to that job.
CONAN: Wes, I wonder, we were describing behavior earlier of people lower down in the chain keeping documentation to protect themselves. Did you try any of that?
WEST: No, I didn't. I just couldn't bring myself to do it. And as a result, I, you know, was working 60-hour weeks, and, you know, I could have made it a lot easier on myself, but I just couldn't bring myself to make someone - you know, to take advantage of someone's trust like that.
CONAN: And so eventually you quit?
WEST: Well, I was actually fired over a funding issue because they wanted to get cheap, and I wanted funding for a very disturbed client and her abused son, and...
CONAN: I can hear this is hard to talk about even now, but having been fired, did you not say well, then, it's not a question of keeping my job anymore, maybe I can call the police?
WEST: No, I really couldn't, you know, because it's one guy against a bunch of people who want to keep their jobs, if you know what I'm saying. Everyone falsifying the documentation is doing it to make more money, keep their jobs. And they kept these people PRN so that they would get more money the more hours they falsified.
CONAN: PRN, what does that mean?
WEST: PRN is as-needed, and so they didn't get benefits or anything, they were just paid by the hour, and therefore being paid by the hour, (unintelligible) doing everything. They encouraged them to falsify documentation. So if I had reported it, I - well, having made some very powerful people angry on the food chain, like I said, everybody knows everybody, and I just went elsewhere and got a job. But I don't talk about where I worked.
CONAN: West, thanks very much for the phone call.
WEST: You're welcome.
CONAN: Here's an email, this from John(ph): I have no question, just a disturbing cover-up of an incident when I was an elementary school principal. It illustrates the point of how institutions protect themselves and not children. A teacher backhanded a child in her room and bloodied his lip and nose. I took it to the district administrator. She told me to bury it. I was young and green, so I did. I quit a year and a half later, disgusted with the system and with myself. Since then, I have a great career as a child advocate and a counselor in that same public school system.
Well, joining us now from a studio at Harvard Business School is Max Bazerman. He's a professor of business administration at Harvard and wrote - co-wrote the book "Blind Spots: Why We Fail to Do What's Right and What to Do About It." Thanks very much for being with us today.
DR. MAX BAZERMAN: Thank you for inviting me on your show.
CONAN: And why is it - tell us a little bit about the psychology. Blind spots, people become so inured to protecting their institution they fail to see their own ethical standards?
BAZERMAN: Yeah, I think that the cover-up obviously doesn't start with a cover-up. It starts with a set of actions. And often, a lot of the unethical behavior that we see is like the way - is like what your second guest described: There was some small action that he took, and at the time it wasn't even coded as an ethical issue, he was simply trying to solve a problem, solve a business problem.
And once he engaged in one unethical behavior, that escalated out of control, and he had to engage in more unethical behavior. And once the behavior was out of control, perhaps the ethical aspects started to fade. And then once people are involved in unethical behavior, we don't have an intuition that it makes sense to fess up at the first opportunity.
Rather, what we often do is try to deny that we were involved in any bad behavior to begin with. One of the interesting themes that you talked about is loyalty, and to the extent that we feel loyal to our organization, that really keeps us from admitting to the wrongdoing and admitting sort of the bad behavior that we've been involved in and the bad behavior that our organization has been involved in.
CONAN: And in sort of a I guess perverse way, the stronger the traditions of the organization, the more loyalty it generates and therefore the more possibilities for this kind of corruption.
BAZERMAN: Absolutely. So we heard from the Catholic Church, we also heard from the Paterno family that we are under attack, and all of a sudden, in the sense of battle, we engage in behavior that we wouldn't condone at the forefront.
In "Blind Spots," with my co-author Ann Tenbrunsel, what we highlight is that an awful lot of evil behavior occurs without the perpetrator having any intention of doing anything wrong to begin with, but rather our pattern of normal behavior, basically, gets out of control.
CONAN: I understand that. I just wanted to go back to Bruce Antkowiak just for a moment. We're talking about sort of corporate situations - Catholic Church, Penn State, that sort of thing, even Enron, even Watergate - there is another kind of cover-up where you're involved with intimidating people, no?
ANTKOWIAK: On no question, and these are - these are usually circumstances where, from the outset of the criminal activity, there's an anticipation that you need to cover this up, that we need to make sure that there are no lines left that lead to us. You know, the classic even in the white collar area, the classic Ponzi scheme at its inception tries to deceive people into thinking this is all going to be fine in perpetuity, knowing very well there's going to be a point where you, the Ponzi scheme operator, are simply going to take all the funds and try to leave the country, letting people ultimately find out what happened.
To keep up the deception, where you know from the outset that you need to keep this thing covered up, you will turn to almost any means possible, to buying people off, to promising them a great benefit, to threatening them that they will in fact suffer dire consequences if they blow the whistle on this.
I seem to think that the - that kind of behavior is more associated with a scheme that from its outset understands the need to keep a cover-up in place at least for a discernible period of time.
CONAN: Let's get another caller in. This is Crystal(ph), and Crystal's on the line with - I'm putting her on hold and taking her off. So I'm - there we - if I just do it - there we go. Crystal, are you there?
CRYSTAL: Yes. Hello, Neal.
CONAN: I apologize. Crystal's on the line with us from Portland.
CRYSTAL: Hi. I'm actually just reading "The Corporate Whistleblower's Survival Guide." Oh, it's such a catharsis that you're talking about this topic. And I've noticed also all of the - these pyramids coming down, and I guess sometimes things come up that maybe you didn't think about much. And I felt guilty for having been a part of I guess what I thought was not much of a cover-up, but it was strange.
And I - it was the university, and I was in the student government, appointed on the judiciary. And we had decided to - that there was a rape case, and we decided that it was both academically and institutionally part of what should be looked into. And there's a - an office, an agency, basically, that sort of monitored student groups, organized them and - they reportedly said they gave training and support, advocate for students.
But they came in and made us rescind our decision and threatened - they had a university lawyer with us. It was all very strange. Shortly thereafter, I became engulfed with the same office, telling me that I had not fulfilled my student requirements...
CONAN: But let's go back to the rape case just for a minute.
CRYSTAL: I never looked into it. I never looked into it. And I just feel so guilty, but at the same time I can see how things manifested. I don't know if they were just being lazy and, like, trying to give the case to the police. It was basically whether or not it occurred on the university, on the property.
CONAN: Oh, so where the jurisdiction was.
CRYSTAL: Where the jurisdiction was.
CONAN: And they just didn't want the university to be involved if at all possible.
CRYSTAL: I don't know. I don't know how big it was, but it wasn't the only time strange things happened during my tenure in student government. Yeah.
CONAN: So this can eat away at you, obviously, for a long time.
CRYSTAL: Well, yes, because these things still occur to women on campuses and...
CONAN: Sure. Do you feel - even if the school did not take its, perhaps, its proper role, was the rape investigated by the police?
CRYSTAL: Not that I know of, no.
CRYSTAL: I don't think they took it seriously enough to even give - I think the student government was trying to give this...
CONAN: To downplay it.
CRYSTAL: To set a precedent and to give student support in situations like this, and we never got the chance.
CONAN: I see. In a lot of places, there's no statute of limitations on rape.
CRYSTAL: Yes. Are you talking to me?
CRYSTAL: I - at the university?
CRYSTAL: No, I don't think there's a statute of limitations.
CONAN: No. Thanks very much for the call. I know you're very conflicted about this. It's an awkward situation. I can't advise you what to do. But thanks very much.
CRYSTAL: Thank you.
CONAN: We're talking about cover-ups today, and we're - our guests are Bruce Antkowiak, who's a former federal prosecutor, and Max Bazerman, a professor of business administration at Harvard Business School. You're listening to TALK OF THE NATION from NPR News.
Bruce Antkowiak, that kind of a case, it is murky. I'm not sure it was our caller's responsibility to report this to the authorities. But is that a cover-up?
ANTKOWIAK: On her part, no, certainly not. She is a person now that is left in the dark about what happened. It may well be that that case was referred to law enforcement, they assessed it and didn't think it was legitimately worthy of prosecution. You simply don't know.
Just as a broader point, though, the one thing that needs to be mentioned about these cover-ups is, you know, the role of outside lawyers who come into these things. I think that's one of the most important things that I always look at when I see a case involving a cover-up.
Was there an attorney who was brought in from the outside to assist in this? And what role did they play? Did they uphold what we all hope to be the highest standards of the profession and do what the client needs in that circumstance, which is sit down with that client across the table and say, what you're doing is wrong?
You may be undergoing the sort of psychological turmoil that our professor is discussing and has discussed in his book. But you have to understand that what you're doing is breaking the law and you're continuing to break the law and you have to take some more definitive measures to stop this.
CONAN: Let me just turn again to Max Bazerman. And that idea of an outsider, clearly in terms of addressing this situation if you've got concerns, bringing somebody in with a fresh perspective, that would remove that blind spot, no?
BAZERMAN: I think that there is a potential to use the outsider, but I'm very sympathetic to Crystal's story, and I think that many of us have watched inappropriate behavior. Hers is quite extreme. But many of us have seen sexist behavior, racist behavior, people cheating, people stealing and have not acted on it.
Why don't we act on it? We don't know who we're supposed to talk to. We don't know what the consequences will be. We think that someone else can act on that information. And we sit by and do nothing and then potentially have regret later on.
One way of thinking about this sort of insider/outsider is to think of ourselves as having an inside self who's in the midst of the action and an outsider who could more objectively look at that situation. And I would encourage all listeners, when they're in a situation where they see wrong going - occurring, to try to put themselves in the outsider role and to imagine a friend describing this episode and having the friend ask them, what would you think would be the appropriate behavior in this situation? That may allow the person to see that they actually do have a moral obligation to act, whether that means talking to someone higher up in the organization, calling the police.
But so often, we don't do that. What I find amazing across the Enron story and the Madoff story and the Catholic Church and the Penn State story is that there were a fair number of people who had information and yet did not act on that information. And I think we all bear a moral responsibility to at least consider whether we should be acting when we see wrongdoing occur.
CONAN: And ask ourselves what would this look like in the newspaper. Thanks very much for your time, today, Max Bazerman.
BAZERMAN: Thank you.
CONAN: Max Bazerman, a professor of business administration at Harvard Business School, co-author of "Blind Spots." Our thanks as well to former federal prosecutor Bruce Antkowiak from Latrobe, Pennsylvania. It's the TALK OF THE NATION from NPR News. Transcript provided by NPR, Copyright NPR.