Published CommPRO.biz 2013.10.03

Wall Street Ethics

Mid-September (2013.09.15) marked five years since Lehman Brothers, one of the largest investment banks ever, filed the largest bankruptcy ever, sending sky rockets up all over the world and marking the beginning of what we’ve come to call the “Great Recession.” Lehman’s implosion triggered a serious of herculean bailouts of the rest of our banking sector by the American taxpayers.

Hank Paulson, who became Treasury Secretary after a career at Goldman Sachs, saw a danger of another depression if the banking sector collapsed. He hurriedly threw together the bailouts. However, he failed to impose the controls needed to keep the banks from abusing these funds, leaving them free to award themselves over the top bonuses. The Federal Reserve kicked in billions more, throwing open the doors to the risky gambling (see London Whale) that caused the collapse.

Lehman wasn’t the only bank gone wild; all of the dozen or so monster banks were behaving badly. Lehman was just pushing the limits of the regulation-free climate the banking lobby created over the preceding two decades. Repo 105 was the accounting gimmick of choice at Lehman. The tricksters there would sell off billions of their really bad stuff before each quarterly reporting period, making their books look as though they were sound when in fact they were anything but. Emails, written just before the bankruptcy, show that senior management pushed their subordinates to cover their tracks.

On May 18, 2008, almost exactly two months before the bankruptcy filing, Senior Vice President Matthew Lee had a letter hand delivered to four of Lehman’s top executives with a copy to their house counsel. In it he detailed these practices and questioned both their legal and ethical grounds. Management responded by firing him. Later, Lee identified Repo 105 as one source of the collapse for the federal investigators. Matthew Lee is still out of a job today; nobody on Wall Street has hired this honest man.

Not so most of the schemers who played fast and loose with the financial facts at Lehman. According to a Huffington Post tally, three quarters of the Lehman folks -47 of 63 involved in the Repo 105 scam- are employed in the financial world and doing just fine thank you. In fact, while most Americans are struggling to recover from the crash and millions are unemployed, the Wall Street banksters are fine.

And why shouldn’t they be –aside from ethics and stuff like that– the banks know if they overplay their hand again, Repo 105 or whatever, a taxpayer bailout is just around the corner. So they gamble with your savings, secure in the knowledge that the FDIC will cover their losses and that we’ll loan them whatever they need to get back on their feet. Just don’t ask them to support the small businesses that create jobs or anything like that. Leave that to the suckers who run the regional and community banks.

Not for Sale

Not for Sale

There are –and always have been– so-called “pay for play” print and broadcast deals. That’s why federal law requires them to be labeled “advertising” or “paid programming”. Unfortunately, there is no such law covering internet content. So it should come as no surprise that web based news sites are being targeted by those looking for a plug for one thing or another.

While we understand legitimate efforts to gain media exposure, when there is money involved the ground rules need to be crystal clear.  Apparently, with no legal firewall, some of the slime that inhabits the fringe of every sector of media and marketing will attempt to slip over the ethical wall that protects most all of the world of commerce.  

Hamilton Nolan, who writes for the popular blog Gawker, recently received an email from a marketer suggesting an easy way to earn a little extra money. All he had to do was drop in a website link for one of their clients, only –of course– if it “fits naturally in the context of the article.” In a series of emails this solicitation was identified as coming from a so-called “marketing agency” specializing in this kind of placement. Payment offered began at $130 and escalated quickly to $175. Not bad, as Nolan noted, for five seconds’ work.  

The “agency” claimed to represent a number of “major” clients, Motorola, Dell, and T-Mobile, all of whom denied any connection. The agency also told Nolan that they had writers taking their bucks from a wide range of top ranked internet sites including The Huffington Post. You can guess Huffington’s response; it was mirrored by the other sites where writers and/or editors were said to be on the “take”.

Who knows how many clients these guys really represent? Or how many writers and/or editors at internet sites have succumbed to this siren call? There is always a certain amount of slime on both sides of the ethical wall. Sadly, one cannot exist without the other.

Don’t Mess With the Little Folk

Urban Outfitters operates a couple hundred retail outlets worldwide offering a range of  kitcehy goods from housewares to shoes to clothing and more, under six brand names. Their appeal is to teens and twenty-somethings striving to be “Hip,” whatever that means these days. It is a remarkable success story launched by Richard Hayne (now worth $1.8 billion) in 1970 with a single store on the campus of the University of Pennsylvania.

According to a piece in the Huffington Post and other sources, Urban Outfitters is caught up in an intellectual property dustup with Stevie Koerner, a Chicago based designer selling her jewelry online. She has a line of handmade silver pendants, many in the shape of some of the 50 states, a few countries and several continents. They all have a heart cut out; she calls these her “World/United States of Love” line.

So one day a design similar to her New York State pendant shows up in an Urban Outfitters’ store. Not cool, thinks Stevie, but not much I can do about it. She tweets a complaint with her sad tale and soon a “Boycott Urban Outfitters” movement begins. Before long Twitter is trending heavy with the message and it goes viral worldwide. Unconfirmed reports indicate that Urban Outfitters pulled their version from the stores tout de suite.

This is not the first instance of a ripoff design showing up in Urban Outfitters’ stores. A year ago The Brooklyn Paper and The Village Voice ran stories about similar design ripoffs involving Urban Outfitters. The issue has not escaped Urban Outfitters; reportedly they are now asking suppliers if their designs have been “inspired” by others. Given Ms. Koerner’s recent experience that message hasn’t done much to cure the problem. Perhaps a plainspoken, “If we find that you ripped this design off from someone, we will make you eat it and you will never sell us another dime’s worth of anything” might do the trick.

Getting the ripoff of Ms. Koerner’s design out of Urban Outfitters is apparently just the beginning of a reversal in her fortune. A note on her website, www.IMakeShinyThings.com tells it all: “Thank you SO much for the support everyone! Orders will take a bit longer due to the overwhelming response to Urban Outfitters! Please give me 3-4 weeks to create and ship your items! Xo.” Seems that taking on the giant retailer has raised her profile and business is booming. Good for her!

In Tom Friedman’s Flat World the lesson for Urban Outfitters and others in a similar position –is– don’t mess with the little folk; they can organize an army of supporters and even make billionaires back down. The lesson for the little folk like Stevie Koerner –is– don’t take it lying down; use Twitter and all the social media to go after anyone who has wronged you. The message for the rest of us –is– it is a new day, a brighter, nicer, kinder, more ethical day.