WEBVTT - On Background: White-Collar Crime and Punishment 0:00:15.276 --> 0:00:29.876 Pushkin. Hey, there, Against the Rules listeners, I appreciate you 0:00:29.956 --> 0:00:32.796 indulging me while I record some background interviews from my 0:00:32.876 --> 0:00:36.716 next book, which is mostly about Sam Bankman Free, the 0:00:36.756 --> 0:00:41.716 founder of the cryptocurrency exchange FTX. Last year, while I 0:00:41.756 --> 0:00:45.996 was on the scene, FTX collapsed dramatically. As I record this, 0:00:46.676 --> 0:00:49.756 Sam Bankman Freed is under house arrest and awaiting what 0:00:49.836 --> 0:00:52.916 looks like a very complicated trial. The whole thing feels 0:00:52.916 --> 0:00:55.036 like it could become the white collar criminal event of 0:00:55.036 --> 0:00:58.236 our age. But if you took the long view, the 0:00:58.316 --> 0:01:01.996 historical view, maybe this whole affair would look a little different. 0:01:03.156 --> 0:01:06.556 Welcome back to on background from Against the Rules. I'm 0:01:06.596 --> 0:01:19.596 Michael Lewis. As i've been writing about Sam backman Fried's case, 0:01:19.716 --> 0:01:22.156 I've also been wondering about how this would all have 0:01:22.196 --> 0:01:25.316 gone down fifty or a hundred years ago. Of course, 0:01:25.316 --> 0:01:27.596 there wasn't any crypto back in the day. But I 0:01:27.596 --> 0:01:31.076 find myself curious to hear an historical perspective on white 0:01:31.116 --> 0:01:34.636 collar crime in America. I've been wondering, have we gotten 0:01:34.676 --> 0:01:39.076 more lenient about it tougher? And what is prison like 0:01:39.436 --> 0:01:42.556 for white collar criminals these days compared to what it 0:01:42.636 --> 0:01:45.516 used to be. Fortunately I found someone who could answer 0:01:45.556 --> 0:01:49.676 these questions and more. Eugene Saltis. He's a professor at 0:01:49.676 --> 0:01:52.516 the Harvard Business School, or HBS as it's also known. 0:01:53.436 --> 0:01:55.476 A lot of his students have gone on to populate 0:01:55.516 --> 0:02:00.556 boardrooms and c suites superachievers. But at some point Saltis 0:02:00.596 --> 0:02:04.396 got interested in the type of superachiever who achieves bad things. 0:02:05.596 --> 0:02:09.396 He sought them out, usually in prison, an interview them, 0:02:10.476 --> 0:02:13.596 and he published their accounts and his analysis in an 0:02:13.636 --> 0:02:17.756 excellent book called Why They Do It Inside the Mind 0:02:17.796 --> 0:02:29.556 of the White Collar Criminal. I kind of just want 0:02:29.556 --> 0:02:33.556 to start by asking you how you business school professor 0:02:33.636 --> 0:02:40.476 got interested in white collar crime? So I began quite accidentally, 0:02:41.396 --> 0:02:43.636 I think, probably like anyone that gets involved in I 0:02:43.716 --> 0:02:45.636 heard thinking about white collar crime. Who was up at 0:02:45.636 --> 0:02:47.876 three in the morning watching actually a show called lock 0:02:47.956 --> 0:02:51.716 Up on MSNBC, And I was imagining, if I had 0:02:51.876 --> 0:02:54.276 half an hour with the white collar criminals, these former 0:02:54.276 --> 0:02:57.476 executives who were in the news, what would they say 0:02:57.516 --> 0:03:00.396 what led them there to their current predicament, which is 0:03:00.396 --> 0:03:03.116 generally a medium security prison. And so that night I 0:03:03.276 --> 0:03:05.636 actually wrote some letters to individuals who I had been 0:03:05.636 --> 0:03:08.316 following the news then loan behold. A couple of months later, 0:03:08.796 --> 0:03:11.516 some volunteered that I could come visit them in prison. 0:03:12.036 --> 0:03:14.036 One thing led to the next. A couple of years later, 0:03:14.076 --> 0:03:16.556 writing a book, and now my entire world is immersed 0:03:16.556 --> 0:03:20.116 there and it's found at home. In the Harvard Business School, 0:03:20.116 --> 0:03:22.596 you actually teach a course I do. I teach a 0:03:22.996 --> 0:03:26.676 second year of course called Borderline that titles very descriptive. 0:03:26.676 --> 0:03:30.556 It's on conduct that somewhere between legal, illegal, moral, immoral. 0:03:30.996 --> 0:03:33.876 It's all the things in business that fall in between 0:03:33.876 --> 0:03:37.116 the cracks of business. What we spent a lot of 0:03:37.116 --> 0:03:40.396 time focusing on are actually entrepreneurs. And I think that 0:03:40.516 --> 0:03:44.036 in the best case, entrepreneurs who for a while you 0:03:44.116 --> 0:03:47.756 might engage in something like puffery, you don't actually put 0:03:47.796 --> 0:03:49.396 in a lot of internal controls. I mean, this is 0:03:49.436 --> 0:03:51.916 what we do see in a case like FTX, and 0:03:51.956 --> 0:03:53.996 then you go from this little working out of your 0:03:53.996 --> 0:03:57.476 garage the next thing running a multibillion dollar enterprise, and 0:03:57.516 --> 0:04:00.756 then bad things happening and you look back and say, 0:04:00.796 --> 0:04:04.116 how did that occur? Could that have been prevented? And 0:04:04.156 --> 0:04:05.676 so that's in the best case what we look at. 0:04:05.676 --> 0:04:08.796 We look at other instances of people's circumventing rules thinking 0:04:08.836 --> 0:04:12.276 it's very clever. This is very enron esque. You see 0:04:12.276 --> 0:04:14.556 a law and you think of a way of going 0:04:14.596 --> 0:04:18.196 around it because the law doesn't say you can't, and 0:04:18.356 --> 0:04:21.236 you have the mentality show me where it says I can't. 0:04:21.756 --> 0:04:24.036 Sometimes it works and people come very wealthy because of that. 0:04:24.116 --> 0:04:26.116 Other times you get a lot of trouble. So the 0:04:26.116 --> 0:04:28.516 students when they're coming to the class, they sort of 0:04:28.516 --> 0:04:30.956 in a frame of mind of what do I do 0:04:31.036 --> 0:04:34.996 to prevent this happening to me? Everyone starts in what 0:04:35.076 --> 0:04:37.716 I call them more moral mode, almost like an ethics class. 0:04:38.236 --> 0:04:41.876 How ought you behave in these situations? That's not how 0:04:41.916 --> 0:04:44.916 these decisions are made. No one spends half an hour 0:04:44.996 --> 0:04:47.556 pondering them. You don't have all the information. You're not 0:04:47.596 --> 0:04:50.196 bringing diverse viewpoints, and that's why a lot of times 0:04:50.236 --> 0:04:53.116 smart people make, with the benefit of hindsight, poor decisions. 0:04:53.836 --> 0:04:57.796 As your class paid any attention to FTX, We're absolutely 0:04:57.836 --> 0:05:02.196 going to get there because FS is fascinating. Would interest 0:05:02.236 --> 0:05:06.676 you about it? So I will say two dimensions. The 0:05:06.756 --> 0:05:10.636 first is again and I'm relying on the publicly available 0:05:10.636 --> 0:05:13.796 information is separating on the two narratives. The one that 0:05:14.196 --> 0:05:18.756 the prosecutors and sec and other agencies are describing, which 0:05:18.756 --> 0:05:23.076 is this is a fraud since its inception, which is 0:05:23.116 --> 0:05:26.276 story one. In story two is these are these are 0:05:26.316 --> 0:05:30.756 are set of very very smart kids effectively who built 0:05:30.756 --> 0:05:34.356 actually in a pretty remarkable business that frankly would have 0:05:34.396 --> 0:05:36.836 benefited from a couple of weeks at HBS about internal 0:05:36.836 --> 0:05:39.756 controls and compliance systems, and never set any of that up. 0:05:40.196 --> 0:05:43.236 So it wasn't someone overnight decided to take ten billion 0:05:43.236 --> 0:05:46.116 dollars in transfer from one entity to another. But it's 0:05:46.156 --> 0:05:48.676 the fact that they never actually spent the time to 0:05:48.676 --> 0:05:52.276 put together ways of not coal mingling funds. So it's 0:05:52.396 --> 0:05:56.356 not this egregious, deliberate fraud. It's just a matter of 0:05:56.636 --> 0:06:02.716 really incredible sloppiness, which still has the extraordinary detrimental consequences 0:06:02.756 --> 0:06:05.396 that we've seen. I'm surprised that you've been able to 0:06:05.396 --> 0:06:09.556 discern that much that the first narrative is so powerful 0:06:09.916 --> 0:06:12.396 in the media right now, that you've even heard the 0:06:12.436 --> 0:06:16.596 second narrative. I spent a lot of time thinking, probably 0:06:16.636 --> 0:06:19.076 always about what these other narratives are, because I think 0:06:19.716 --> 0:06:22.476 there's this simple story that we like to tell, and 0:06:22.516 --> 0:06:26.876 it's also the same story that enforcements and prosecutors they 0:06:26.916 --> 0:06:29.796 need to tell. But I will say, having spent a 0:06:29.836 --> 0:06:31.676 lot of time with a lot of very smart people 0:06:32.036 --> 0:06:34.916 that have found themselves, you know, facing these circumstances, I 0:06:34.916 --> 0:06:37.916 think it's much more complicated when it starts digging down. 0:06:38.436 --> 0:06:40.876 Why do you think people don't like to see that? 0:06:42.756 --> 0:06:45.076 I bet you when you when you find yourself at 0:06:45.076 --> 0:06:47.796 a dinner party and you start to explain that Bernie 0:06:47.836 --> 0:06:51.156 Madoff was much more complicated than you know. I bet 0:06:51.156 --> 0:06:54.596 people bridle at that it was fraud. You're welcome to 0:06:54.596 --> 0:06:56.676 being my like wingman at any dinner party when this 0:06:56.756 --> 0:07:04.316 pops up. Yes, when you get to know any particular 0:07:04.476 --> 0:07:09.436 messy situation where maybe some illegal stuff was done, and 0:07:09.436 --> 0:07:11.356 and you start to really understand it, and then you 0:07:11.436 --> 0:07:13.756 try to explain it as in as complicated a way 0:07:13.836 --> 0:07:16.756 as it actually happened. People who are watching it from 0:07:16.756 --> 0:07:20.156 the distance that most people watch these things, reading, reading 0:07:20.156 --> 0:07:22.596 the newspaper, you know, whatever, whatever news, whenever it gets 0:07:22.596 --> 0:07:25.556 to them, they're not they're not they don't really want 0:07:25.596 --> 0:07:30.356 to enter into that conversation. I'm empathetic because there are 0:07:30.396 --> 0:07:33.716 a lot of victims. I mean, FPX, there's a million 0:07:33.756 --> 0:07:36.156 people roughly that are wondering, am I going to get 0:07:36.196 --> 0:07:38.156 my money back? It? Did I just lose everything? As 0:07:38.196 --> 0:07:41.476 it down to zero and anything? But I will say 0:07:42.396 --> 0:07:45.716 the kind of strong, vilified argument I understand, and if 0:07:45.716 --> 0:07:47.636 I was in their position, I wouldn't want to hear 0:07:47.676 --> 0:07:51.836 any other explanation. But but simultaneously, it doesn't go a 0:07:51.876 --> 0:07:55.596 long way to explain underlying root causes, the psychology about 0:07:55.636 --> 0:07:58.236 what happened and how can we stop this from happening again. Yes, 0:07:58.236 --> 0:08:00.716 it's not very helpful. It's not it's not very helpful 0:08:00.756 --> 0:08:03.836 at improving us. So the ANLJA I've often thought of 0:08:04.036 --> 0:08:07.596 is when there's an airplane crash, yep, immediately what happened? 0:08:07.596 --> 0:08:09.436 You call, oh, you call the airlines in, you call 0:08:09.596 --> 0:08:11.956 you know, FA, you call a pile of agencies. They 0:08:11.956 --> 0:08:16.116 come in and a manufacture and their first and foremost 0:08:16.156 --> 0:08:17.996 goal is let's get to the bottom of this. Is 0:08:17.996 --> 0:08:20.916 it whether is it air traffic controllers? Is it the pilot? 0:08:21.316 --> 0:08:24.076 And they really want to know what happened here? That's 0:08:24.116 --> 0:08:26.436 not true with white collar crime. Everyone has what I 0:08:26.476 --> 0:08:29.196 call an agenda. You know, the people that prosecutors, their 0:08:29.276 --> 0:08:31.796 job is to get people, send people to jail, the 0:08:31.836 --> 0:08:34.876 people working on you know, the claimants in bankruptcy, they're 0:08:34.876 --> 0:08:37.556 trying to get money back, the defense counsels, trying to 0:08:37.716 --> 0:08:39.716 explain why this is not the story that you hear 0:08:39.756 --> 0:08:43.916 in the news, the promise there's no independent third party 0:08:43.996 --> 0:08:46.236 that's sitting there. Interesting. I want to know why this 0:08:46.356 --> 0:08:49.476 happened and what can we do to make this not 0:08:49.556 --> 0:08:52.676 happen again. That's what I'm supposed to do. That's what 0:08:52.796 --> 0:08:54.476 your book is. I mean, there is a there are 0:08:54.556 --> 0:08:57.076 players in the society who have an incentive to play 0:08:57.076 --> 0:09:00.796 this role, right, and that's that's it's sort of what 0:09:00.836 --> 0:09:03.196 a writer is supposed to do. Who walks into this situation. 0:09:04.316 --> 0:09:06.836 One of the things I've noticed is that when someone 0:09:06.876 --> 0:09:09.716 gets into this kind of trouble, whether it's Dan Ryan 0:09:09.756 --> 0:09:15.236 People or Bernie made Off or Sam Bankman Freed, their 0:09:15.276 --> 0:09:18.436 point of view becomes kind of taboo that they're not 0:09:18.796 --> 0:09:21.916 actually allowed to offer their point of view. They try, 0:09:22.636 --> 0:09:25.236 but people don't want to hear their point of view anymore. 0:09:25.876 --> 0:09:28.196 And so I think that part of the problem is 0:09:28.196 --> 0:09:31.276 just like who's allowed to speak once one of these 0:09:31.316 --> 0:09:34.756 things blows up, and who's allowed to have any kind 0:09:34.796 --> 0:09:38.116 of credibility, and the cases got me wondering a little 0:09:38.116 --> 0:09:41.156 bit about just the history of white collar crime, like 0:09:41.836 --> 0:09:45.436 when even the term was invented and why, and sort 0:09:45.476 --> 0:09:48.596 of like who's the original white collar criminal? What's the 0:09:48.636 --> 0:09:52.316 history of the subject. So the term white collar crime 0:09:52.356 --> 0:09:55.276 is actually comparatively new. We can actually point to a 0:09:55.276 --> 0:09:59.476 sphysific person sociologist named Edward Sutherland, and this is back 0:09:59.516 --> 0:10:03.076 in the nineteen thirties. He literally created a book white 0:10:03.076 --> 0:10:08.436 Collar Crime that coined the term and raise the idea 0:10:08.476 --> 0:10:10.756 at the time that there were a lot of things 0:10:10.796 --> 0:10:14.436 that companies were doing that ought to be criminal, but 0:10:14.516 --> 0:10:16.796 simply because there were no laws on the book, we're 0:10:16.876 --> 0:10:18.916 not criminal. What were the kind of things? Was he 0:10:19.076 --> 0:10:22.036 talking about? A lot of basic fraud, A lot of 0:10:22.516 --> 0:10:26.316 stuff that we look pretty conventionally it's pretty criminal today. 0:10:26.476 --> 0:10:31.156 Anti competition was a big area, but there were i'll 0:10:31.156 --> 0:10:33.756 say massive gaps that you could do some pretty awful things. 0:10:33.836 --> 0:10:36.236 I mean, at this point we were pre sec This 0:10:36.316 --> 0:10:39.116 is pre to a lot of our modern securities laws. 0:10:40.236 --> 0:10:42.716 We've come a long way since. I mean I was 0:10:42.716 --> 0:10:45.476 looking back at like Occupy Wall Street where people were saying, 0:10:45.476 --> 0:10:47.996 you know, no one's held accountable, and I appreciate where 0:10:47.996 --> 0:10:50.716 people were coming from. I take a long window. Let's 0:10:50.756 --> 0:10:54.316 go back decades in fifty and seventy five years. We've 0:10:54.316 --> 0:10:56.956 come a long way and people are held to account, 0:10:57.076 --> 0:11:00.436 maybe not perfectly by any means, but we're not another 0:11:00.556 --> 0:11:04.436 Southerland's time. And why did this problem exist? Explain why 0:11:04.596 --> 0:11:06.596 there was room for someone to come in and write 0:11:06.596 --> 0:11:08.596 a book that said, look, there's all this bad stuff 0:11:08.596 --> 0:11:11.196 going on and it should be illegal. It's not illegal. 0:11:11.636 --> 0:11:15.116 We need this whole category called white collar crime. When 0:11:15.156 --> 0:11:18.956 you say crime, people thought it meant a street offense. 0:11:18.956 --> 0:11:21.716 It's a violent offense of someone you know, hurting you 0:11:21.956 --> 0:11:25.596 or taking your pocketbook. White color crime bides very nature, 0:11:25.676 --> 0:11:28.276 much more amorphous. If there's a murder, you have a 0:11:28.316 --> 0:11:32.316 body and the question is who did it, it's unquestionable 0:11:32.396 --> 0:11:34.916 that had happened. If you think of white collar crime, 0:11:34.956 --> 0:11:38.236 in almost all the instances, it's the prosecution not only 0:11:38.276 --> 0:11:41.436 has to show that X did it, but they're trying 0:11:41.436 --> 0:11:43.236 to show that it was a crime in the first place. 0:11:43.276 --> 0:11:46.516 Because how do you separate sloppiness or a mistake or 0:11:46.596 --> 0:11:51.356 an adverse market change from someone deliberately tried to take 0:11:51.396 --> 0:11:54.036 a company under for their own benefit gain. White color 0:11:54.076 --> 0:11:57.156 crime is messy and harder to dramatize the victims. So 0:11:57.316 --> 0:12:00.356 this book gets published. Does it have an effect? No, no, 0:12:00.716 --> 0:12:03.076 it didn't get a lot of press outside of more 0:12:03.116 --> 0:12:06.276 obscure academic circles, and a lot of people said, whoa, whoa, 0:12:06.316 --> 0:12:08.476 this guy is saying all these people are doing things 0:12:08.476 --> 0:12:10.756 that are criminal. Let's look at the law. The law 0:12:10.796 --> 0:12:13.316 says these are not crimes. And so it kind of 0:12:13.316 --> 0:12:15.916 looked like, in some kind of ultra progressive argument that 0:12:15.956 --> 0:12:17.676 I'm going to call people a criminal who are not. 0:12:18.436 --> 0:12:20.596 But they missed the broader point which he was making 0:12:20.676 --> 0:12:22.396 is that maybe we need to think about all the 0:12:22.436 --> 0:12:26.916 institutions that protect these entities and powerful individuals. Let's take 0:12:26.916 --> 0:12:38.516 a quick break. I'm back with Eugene Saltis on background. 0:12:39.356 --> 0:12:41.516 Before the break, we heard how the term white collar 0:12:41.596 --> 0:12:43.916 crime didn't really get much traction when it was first 0:12:43.956 --> 0:12:47.476 introduced in the nineteen thirties, but in the nineteen sixties, 0:12:47.716 --> 0:12:52.556 during the Kennedy administration that started to change. There was 0:12:52.996 --> 0:12:56.276 a massive case of price fixing in the electrical space 0:12:56.716 --> 0:12:59.556 ge and Westinghouse. This is the first time you had 0:12:59.916 --> 0:13:04.356 senior level executives at major companies being criminally prosecuted. Actually 0:13:04.716 --> 0:13:08.316 front page of Life magazine. It was an executive, a 0:13:08.396 --> 0:13:12.596 well known an executive literally going into jail. So the 0:13:12.596 --> 0:13:15.436 main arguments that the lawyers were making in defense of 0:13:15.476 --> 0:13:18.716 their their their clients were this is a fine gentleman. 0:13:18.836 --> 0:13:21.596 You should not send this fine gentleman in a prison 0:13:21.716 --> 0:13:24.916 with I believe they actually used the word pimps and prostitutes, 0:13:25.716 --> 0:13:27.276 and so it wasn't they didn't do it, but like, 0:13:27.396 --> 0:13:29.756 why would you send this fine gentleman? That's not where 0:13:29.996 --> 0:13:35.476 gentlemen go? So class class distinctions were being made. Yeah, 0:13:35.556 --> 0:13:37.676 and was there a place to send them other than 0:13:37.716 --> 0:13:40.916 the places where pimps and prostitutes were were their white 0:13:40.956 --> 0:13:44.756 collar prisons? I don't believe there were. Since they weren't 0:13:44.756 --> 0:13:47.036 bringing these people to book, that wasn't really a special 0:13:47.036 --> 0:13:49.516 place to put them. No, no, not at all. But 0:13:49.916 --> 0:13:51.676 I mean these senses were shut. I mean we're talking 0:13:51.676 --> 0:13:54.396 like a couple of months. Because what happened immediately when 0:13:54.396 --> 0:13:59.356 the Westinghouse executives got out, the president of Westinghouse actually 0:13:59.396 --> 0:14:02.956 noted again about these fine gentlemen, and they were rehired 0:14:03.196 --> 0:14:07.916 back in their exact same positions. I mean, it's really 0:14:07.916 --> 0:14:10.756 it's interesting how the ulture is moved, right, I mean, 0:14:10.796 --> 0:14:14.676 it really is different. It is really different. I'll give 0:14:14.676 --> 0:14:17.356 one other spin that's interesting. I will say the person 0:14:17.396 --> 0:14:20.436 who probably had the greatest impact, Actually we go to 0:14:20.436 --> 0:14:22.356 the eighties. We have to jump all the way to 0:14:22.396 --> 0:14:24.236 the eighties. Yeah, we gotta go all the way to 0:14:24.236 --> 0:14:25.876 the eighties. But the person who led it is the 0:14:25.916 --> 0:14:28.796 part that's interesting is Rudy Giuliani. When he was a 0:14:28.956 --> 0:14:31.556 US Attorney of the Southern District of New York, he 0:14:31.636 --> 0:14:33.956 did over fifty prosecutions. He's the one that we now 0:14:33.996 --> 0:14:36.196 think of the purp walk is like that's standard affair now. 0:14:36.476 --> 0:14:39.836 That was Giuliani's innovation. And so you know, Giuianni's had 0:14:39.996 --> 0:14:43.116 a really a storied career and he's the one that 0:14:43.156 --> 0:14:46.716 created that. I'll say, the modern senior prosecutor who holds 0:14:46.796 --> 0:14:50.876 senior executives and and doesn't mess around, you know, prais 0:14:50.876 --> 0:14:54.556 them through the office and handcuffs and uh, you know, 0:14:54.916 --> 0:14:56.516 puts them in the back of the car. You know, 0:14:56.596 --> 0:14:58.116 it's interesting about that. I mean, there's a lot that 0:14:58.156 --> 0:15:01.436 is interesting about that, but that that first, it doesn't 0:15:01.436 --> 0:15:03.876 happen till then. So the question is like why then, 0:15:04.556 --> 0:15:07.316 I mean, if that approach becomes the standard approach afterwards, 0:15:07.356 --> 0:15:09.076 it is because it worked. I mean that it worked 0:15:09.156 --> 0:15:12.076 for Giuliani, it made it more popular, people liked it. 0:15:13.516 --> 0:15:16.916 But what is it about that period that leaves it 0:15:16.956 --> 0:15:21.956 open to this innovation. I mean, I think because a 0:15:21.996 --> 0:15:25.756 prosecutor him or herself makes a name, and I think 0:15:25.756 --> 0:15:28.476 there is an element of the personality in building up 0:15:28.516 --> 0:15:30.876 you know, the career of the individuals who are holding 0:15:30.876 --> 0:15:35.116 people to account. Is it a uniquely American phenomenon. Yeah, 0:15:35.196 --> 0:15:39.436 there's no country that that that is even close. It's 0:15:39.516 --> 0:15:43.556 challenging to hold individuals accountable. You indict an individual, they 0:15:43.556 --> 0:15:45.916 fight for their life because there's nothing left other than 0:15:45.996 --> 0:15:48.716 trying to protect their reputation. So they will go to court. 0:15:48.716 --> 0:15:52.076 They will spend every penny they have. The white color criminels. 0:15:52.116 --> 0:15:54.756 Many of the ones that you interacted with had long sentences, 0:15:54.796 --> 0:15:57.676 and we're not in minimum security prisons. They were in 0:15:57.956 --> 0:16:00.756 what looked like a real jail. Yeah. Yeah, you have 0:16:00.796 --> 0:16:03.516 a year plus sentence, which means you're you're not getting 0:16:04.476 --> 0:16:07.396 lighter touch facility, You're getting the real deal. I mean, 0:16:07.436 --> 0:16:10.436 they're dangerous and so this is where we hear them 0:16:10.556 --> 0:16:13.596 hiring consultants and other people to kind of inform them 0:16:13.596 --> 0:16:15.876 about what their experiences like and how to quote, you know, 0:16:15.956 --> 0:16:20.316 survive during their their sentence. So once you're up and 0:16:20.436 --> 0:16:22.836 you have a couple of years sentence, you're you're not 0:16:22.956 --> 0:16:24.916 going to a prison camp, which would be I think 0:16:24.956 --> 0:16:27.996 what most people think of as the white collar prison. Yea. 0:16:28.156 --> 0:16:30.596 I mean you're you're in oftentimes a medium security prison. 0:16:31.156 --> 0:16:33.516 You know, it's it's not a pleasant place, I will say. 0:16:33.716 --> 0:16:37.436 I mean, they're loud, noisy, dirty, They're they're exactly what 0:16:37.476 --> 0:16:39.916 people think. Who did you? Who did you? Who did 0:16:39.916 --> 0:16:41.596 you visit? By the way, anybody I would have heard 0:16:41.636 --> 0:16:43.916 of My first visit probably was one of the more 0:16:43.916 --> 0:16:47.436 prominent Dennis Kolswalski, the former CEO of Tycho. I remember him, yep, 0:16:48.236 --> 0:16:50.636 one of the most highest paid executives in the country. 0:16:50.996 --> 0:16:53.036 A rock star by any account. I mean, he was 0:16:53.116 --> 0:16:56.596 the next up and coming Jack Welch and uh yeah, 0:16:56.276 --> 0:16:58.916 he was the first person that went from you know, 0:16:58.956 --> 0:17:01.276 flying in a Gulf stream to you know, being in 0:17:01.436 --> 0:17:05.196 actually a prison in upstate New York. Described visiting him. 0:17:05.236 --> 0:17:07.676 What was it like? I was really nervous coming in. 0:17:07.676 --> 0:17:09.996 I will say, it was this pretty off place and 0:17:10.556 --> 0:17:14.036 there's you know, downs Koswalski there wearing a polo shirt. 0:17:14.436 --> 0:17:16.476 The warden was kind enough to give us effectively a 0:17:16.556 --> 0:17:19.476 lawyer visiting room, which sounds like it was nice. But 0:17:19.516 --> 0:17:21.676 it had like a one of those flashing lights that 0:17:21.756 --> 0:17:25.116 was like half flashing and it and it felt very 0:17:25.196 --> 0:17:29.356 very small and again kind of dirty and cold. But 0:17:29.636 --> 0:17:33.116 what was amazing is immediately I remember, you know, kind 0:17:33.156 --> 0:17:35.676 of the I would say, almost the grace that mister 0:17:35.836 --> 0:17:39.356 Kolzwalski had when we started the conversation. And I appreciate 0:17:39.436 --> 0:17:42.636 how quickly people can evolve. You can go from flying 0:17:42.636 --> 0:17:46.116 into G six to prison and it's not immediate, but 0:17:46.196 --> 0:17:49.036 you learn how to evolve and adapt, and we're surprisingly 0:17:49.036 --> 0:17:53.356 adaptable creatures. Did you go visit Bernie made Off? I 0:17:53.396 --> 0:17:56.516 was never actually permitted by the prison. Every Wednesday night, 0:17:56.636 --> 0:17:58.996 actually I would speak to him at seven pm in 0:17:59.036 --> 0:18:01.596 my office. You would call collect my Harvard office and 0:18:01.596 --> 0:18:04.876 we would speak and hundreds of pages of correspondence. What 0:18:04.916 --> 0:18:06.916 did he want to talk about? Did he acknowledge that 0:18:06.956 --> 0:18:10.556 he had done something wrong? Yes, he absolutely did admit 0:18:10.716 --> 0:18:13.596 that he did something wrong, But he did have the 0:18:13.596 --> 0:18:18.836 ability to rationalize and justify why the adverse impact that 0:18:18.876 --> 0:18:22.156 that had on on so many victims was not what 0:18:22.276 --> 0:18:25.116 people were making it out to be. I call he 0:18:25.116 --> 0:18:27.356 had they put all their eggs in one basket. That's 0:18:27.396 --> 0:18:31.396 like investing one on one failure. He had these interesting 0:18:31.396 --> 0:18:35.956 ability to kind of explain or provide a different way 0:18:36.316 --> 0:18:41.316 of seeing the world. Did he feel wronged? He would 0:18:41.316 --> 0:18:43.876 have preferred obviously to not have been in prison. But 0:18:43.956 --> 0:18:47.036 I think for a long time he thought that was 0:18:47.116 --> 0:18:48.596 the end of the road. I mean, at some point 0:18:48.876 --> 0:18:52.356 by its very nature, whether you know, he admitted it, 0:18:52.396 --> 0:18:55.436 which is what he did, or he died and those 0:18:55.476 --> 0:18:58.956 pieces would have been exposed, it was inevitable in some way, 0:18:59.076 --> 0:19:01.596 and I think he knew that getting to know these people, 0:19:02.036 --> 0:19:04.196 did you find the more you got to know them, 0:19:04.276 --> 0:19:07.876 more sympathetic you were with their plight. I'm empathetic and 0:19:07.956 --> 0:19:10.636 the basis of you know, this is not what they 0:19:10.676 --> 0:19:13.836 wanted to have their career. And as I became a 0:19:13.916 --> 0:19:16.996 husband and had some kids during the course of the project, 0:19:17.076 --> 0:19:19.596 so you know, missing your kids growing up, that would matter. 0:19:20.196 --> 0:19:22.356 But at the same time, what they did deserve the 0:19:22.356 --> 0:19:25.636 sanction that they're getting and it's harsh and it's difficult, 0:19:25.996 --> 0:19:29.596 but that's what we demand. Did you have the sense 0:19:29.676 --> 0:19:31.836 that in most cases these were not people who were 0:19:31.916 --> 0:19:36.036 kind of born criminals, that they circumstances and their personality 0:19:36.076 --> 0:19:38.276 had interacted in such a way they kind of found 0:19:38.276 --> 0:19:40.596 themselves at the top of a slippery slope and slid down. 0:19:40.596 --> 0:19:43.676 It exactly made off. I don't think he was a 0:19:43.716 --> 0:19:46.636 born criminal. I think he had a lower ability to 0:19:46.676 --> 0:19:49.156 empathize with others. So it's the extent that he found 0:19:49.196 --> 0:19:52.516 himself in a position engaging in behavior that ultimately was 0:19:52.516 --> 0:19:55.476 taking advantage of people. He didn't have the compunction to 0:19:55.956 --> 0:19:58.316 stop in a way that maybe other people might may have. 0:19:58.796 --> 0:20:02.196 But he was not destined to create a massive pyramid 0:20:02.236 --> 0:20:05.316 scheme or Ponzi scheme. It just made a series of mistakes, 0:20:05.316 --> 0:20:07.876 and rather than pulling back from those mistakes, he I 0:20:07.916 --> 0:20:10.156 would say double down and triple down, and you know, 0:20:10.676 --> 0:20:12.556 it starts as something much smaller and grows to something 0:20:12.676 --> 0:20:15.476 much more significant, and often starts as something very legitimate. 0:20:16.316 --> 0:20:19.796 I mean, a lot of great entrepreneurs start with creative 0:20:19.836 --> 0:20:22.796 ideas that do push the bounds of law. We can 0:20:22.836 --> 0:20:25.196 think of uber and airbeing b You know, they looked 0:20:25.236 --> 0:20:29.476 at zoning laws, they looked at taxicab laws and thought 0:20:29.596 --> 0:20:33.596 they're outdated, or they're antiquated, or they don't fit the 0:20:33.636 --> 0:20:35.796 modern world. Just kind of ignoring them for a while 0:20:35.876 --> 0:20:38.876 until quote the law catches up or you're able to 0:20:38.916 --> 0:20:41.836 lobby and change them. Sometimes that works very well, and 0:20:41.916 --> 0:20:44.876 sometimes it ends very badly. If you to get your 0:20:44.916 --> 0:20:47.756 students in a room and say here's what you need 0:20:47.796 --> 0:20:52.956 to watch for to prevent you becoming the next Bernie 0:20:52.996 --> 0:20:58.476 made Off or whoever, what tips would you give them? 0:20:58.556 --> 0:21:01.356 I've had sinstead of run into two issues and problems 0:21:01.436 --> 0:21:04.276 later on. Who are savvy and smart and I think 0:21:04.316 --> 0:21:06.916 thoughtful people by by all accounts from all my interactions. 0:21:07.676 --> 0:21:09.996 We go through all the exercises, all do the training, 0:21:10.676 --> 0:21:13.436 we all talk about how we're high integrity, moral people, 0:21:14.196 --> 0:21:16.196 but we never really are able to step back and 0:21:16.196 --> 0:21:18.796 look at our organizations and look at ourselves at what 0:21:18.876 --> 0:21:21.756 I call it an unbiased way. Something that I always 0:21:21.756 --> 0:21:24.156 struggled with is while I'm talking to people that are 0:21:24.156 --> 0:21:27.396 literally sitting in prison, people were still reflecting how they 0:21:27.396 --> 0:21:32.476 were high integrity. You know, businessmen or attorneys are entrepreneurs, 0:21:32.796 --> 0:21:35.436 who made a mistake, but otherwise they're high integrity people. 0:21:36.236 --> 0:21:38.436 And I always reflected, well, that's the same thing we 0:21:38.476 --> 0:21:40.716 all do, you know if we you know, when we 0:21:40.756 --> 0:21:43.596 make mistakes, it's not like we change our view of ourselves. 0:21:43.636 --> 0:21:46.116 Why should we expect someone that does it one hundred 0:21:46.156 --> 0:21:49.356 times more and would view it differently. And so humility, 0:21:50.276 --> 0:21:53.516 I guess the characteristic that I'm most fearful of when 0:21:53.556 --> 0:21:58.636 people are so confident in themselves that they can't see others. 0:21:58.636 --> 0:22:00.596 They don't want to surround themselves by people who may 0:22:00.596 --> 0:22:04.316 have different views and opinion because that isolation is what 0:22:04.396 --> 0:22:08.196 leads to poor decision making. So it's interesting you're identifying 0:22:08.276 --> 0:22:11.196 the condition in the person in the environment that might 0:22:11.276 --> 0:22:13.676 lead to this sort of thing, lack of humility being 0:22:13.676 --> 0:22:17.996 one of them. What else are there other signs that 0:22:18.036 --> 0:22:22.956