years. >> ..

> >> end of wondering what happened to these days? that many people are respected been convicted for offenses then they disappear

so airily began as a personal interest that i saw the headlines in 2008 like world, and enron were still in the headlines and that of personal curiosity so i paid did what a lot of people had the back of their mind mike what were they thinking? maybe just spend some time talking with them to get their perspective. >> host: give us a sampling of values boat to. >> guest: over the course of the last seven years roughly 50 people most were convicted criminals of more civilians some cases were overturned but the executive from enron or tyco bought or the ponzi schemes the most well-known mike bernie made off number one and two of

recent history. >> host: how did you approach said allied today and talked to you question mark dad is a great question so i am approached them as an educator that att is this to my students at harvard business school is in something a student would never sanction so how did these individuals some are even along at the school what happened along though way? so to better understand your perspective we with spend some time together so when i send those first 10 questions i receive a number of responses steven richard actually was quite elegant eight pages of cursive letters of his challenges

other said i am happy to chat thai a have plenty of time now in prison. so i would take them up on this offer. maybe half an hour here or a letter or maybe a e-mail to a special system became more apparent to me that it was interesting and humbling that these quite extraordinary intelligence individuals to hear their perspective. one thing to be privileged to be an academic that i could spend as much time as they needed to understand their perspective so i will not try to write something in one week if i have a deadline aiken's spend years corresponding to understand

how they see the world because that was sealed summit goal of the project. many of them would just miss the of business world and i teach finance you can talk about the financial crisis or other firms in much of the conversation was not about their case the most revealing aspects was talking about everything else the "wall street journal", the books that i was reading and to hear what they had to savers is my colleagues are students was fascinating. >> host: did you talk to family members? victims or others that were around the individuals? >> i did. much more of my focus was the individual but in instances there were family members in many cases much

it is among a family with correspondence and i think that is very easy but when you see this extraordinary crime that caused such devastation that they would get time in prison to same what that does to a family it is quite extraordinary and humbling. and not a scene from the perspective of their family but now people are starting to get out of prison they're finding different things to do with. and others are stock having these sanctions on them that they can never overcome. some people were truly devastated by his actions and part of why to go back

to them to say i just had this conversation can you help me to understand? and i think that is where i learned about their personalities that some did not seem to settle that there were people on the heathers' side that lost everything. >> i would ask the question if you thought they were truthful although the way you describe it you were not in the business to trying to figure out what the truth was quite. >> that are broader goal is there is a subjective view of of world wanted to put myself in their shoes to how they view the world. with their own case as any prosecutor or defense knows people's memories even if they try to be truthful its changes with their case so even that if they were trying to be cheerful it is

hard to remember all of the details so there were convicted felons so to think there was not done truthfulness is the little my eve but that more of that other information that was going around at the time there was a lot of females in one case they were worried that night they were celebrating describing going out with their spouses. that piece of information is more powerful than it was more widely before did you know, what they're doing after you can figure out what they were thinking with their immediate reaction saliva's trying to piece it together. >> host: this suggestion was a did not run to my defense lawyer i had a party so why was not intentionally doing anything wrong.

>> i would say intention all but there are not worried that is just something different. we all do things that our wrong driving the car window that is wrong but we do it but if you know, that it will create significant personal harm or devastation generally we have a much deeper pockets. i would consider this is what considers the option and the first place maybe they knew they were pushing something aggressively could be wrong but would that be a slap bomb of rest as a consequence? that could offend a privileged life and a lot of cases. >> so what is the difference if there is one, between the white caller criminal and

those who commit other types of crime like a burglary or drugs? is there a fundamental difference between the profiles of the upper trader >> it is the perpetrator and the crime but most white-collar offenses is you don't have to get close to the victim. this occurs in into ways that the victims themselves are metamorphosis' like insider-trading it is difficult to identify the name of the individual is more systematic as a whole. the anonymous person is on the other side of the trade. not to say it does not exist but you cannot pick the amount.

id other cases there are identifiable victims the timing for them to be identified the is like a ponzi scheme when you harm the individual of that nine investment scheme investors were clamoring to give him more money and more leadership positions. they looked pretty good only when revealed later that it starts to unwind and becomes clear there were people harm to. i always found it interesting i could spend hundreds of hours with individuals in a room but then never felt the stealing $20 out of my wallet but many individuals with the stock that i owned owned, retirement accounts

they took far more than $20. so why don't i need to worry about them stealing $20 out of my wallet plaques but based dealer couple hundred from my account? that is the difference is pretty devastating but not have that done feeling of doing harm. >> host: as opposed to putting a knife to somebody's throat. >> guest: right that is a fundamentally different type of person or a different desperation or circumstance. >> in addition to the anonymity of the of longer period of time it takes the victims to be revealed it is the act itself how the crimes are committed or erasing to put in a new

number on the balance sheet is it the nature of the act that distinguishes the zero white-collar criminal? remain that is a good point with extraordinary devastation with that feature in excel it would cause hundreds of millions of dollars of the firm. it takes three seconds and it doesn't feel that harmful at the time. really they click the mouse or sign the paper. one was prosecuted after the as a former cfo. he described how ultimately he was prosecuted based on false collateral but he was comfortable and did not feel bad sending those documents because you were signing and

she does papers so what? and it was only once he was confronted by a banker would who didn't think the numbers made sense and said they don't wind up that he had to be forced to live face-to-face he said it is a lie. so the most subtle distinction that is on paper but to their face in is harder and then we go from there. >> so the fact says this give you sound insight potentially how one might better detour white-collar crime knowing how would is different from other types? did you reach any conclusions? >> guest: this is the bay challenging question. initially over time what i

came to expect it is most of these people, even when doing something egregious this incentive regis hire some great lawyers but once detected to still find ways that they would never go to prison. so extraordinary thing to realize he will never see that outcome happening with that regulatory approach if it isn't the deliver it cost and benefit calculation there are two ways to increase the cost they increase the are probability of being caught or increase the sentence but i think over the last few decades

let's increase the cost associated so rather than one year or three years or five years into in some cases they argue potentially even to long. >> yes i do think there was one reference about a $12 million fraud impact to shareholders in the '80s punishable by approximately three years in prison by the nearly 2,000 it increased fourfold in prison for the same offense so that increase of penalties and sanctions and fines but the point is that may not have much of an impact to deter white-collar crime. >> we talk about the most privileged with that type of

individual but if you go depression six months or three years, that idea is not resonating. it is those guys that go to prison. not to me. but this is the other way that this is wrong to have serious sanctions associated with it which could be present but for this is what happens to people that do this kind of thing if that was then there might think it would change. but that isn't to cost of calculation anymore it is the norm san the culture of what is appropriate or not appropriate so you need resources in order to detect

the more difficult to cases you need the resources to police which is challenging because obviously it is a political consideration how much resources to investigators have? >> host: if white-collar criminals don't make that cost-benefit analysis, then do you have suggestions on how with is the crime could be better deterred? >> igo back to the individual at the end this is my view of human nature that the people are not predisposed or have any inclination to do something criminal. it is what happened because of of norms and the cultures and the up pressures that

they face. so now when you're about to leave a prestigious business school so to become wealthy to improve the industry with the commencement to donate and maybe near the end of my career i main gauge and fraud with the insider-trading. nobody thinks that. but that is what they are doing exactly that. >> host: tell us about him >> as an extraordinary career three decades one of the most well-respected firms in the world and actually ceo. the lead person of culture and what did means then soon

after his retirement he is on the board of prestigious firms into devil's confidential information. >> so let me stop you there. was going to say this cynic but maybe that is exactly the kind of approach and contact that gets you a head in the business world isn't a place necessarily where ethics or morality prevail but those who operate in a the gray area or across the grey area get ahead so maybe

was simply an extension of how he operated at mackenzie. >> it could be. is a possible to rule that out but i do think the other partner mackenzie that one of the most cherished values is client confidentiality and this is a place you don't talk in the elevator about your clients go to st. louis but you don't say which firms your working for . it would be pretty remarkable to be in that type of culture to teach that and lead it successfully. and still succeed. in both of these cases that they were exposed and successful within the confines to reinforce the norms in and then we have

but if you are exposed to a indifferent type of culture and mendez start interacting with people that different and this could have occurred earlier, but in both cases there operating the day adopted the different types of culture and it is a little disturbing to suggest culture or morality is more

temporary then we would like to believe if you are out from under that environment for moral behavior and good contact you become susceptible to crossing the line. >> guest: i and agree exactly that is the challenge reid spend a lot of time and that we talking in business school about moral character or values or a moral compass. that is negative to think about and to believe if we have these moral values today this is how we go out. but psychological evidence the situation far dominates but to spend 40 or 50 hours in an ethics class in a

corporate training program that is dominated if you go to a major bank so presuming whenever culture you have? to make that will dominate never experienced you have had in a i think we describe morality as that people can aspire and most people do. did you do well? >> facing tremendous pressure and the wrong incentives they're doing things that our different. >> we have cases where wells fargo affected the of culture with several thousand people but

simultaneously that those incentives to lead people to do saying's clearly with a host of regulatory challenges. so the question is when i really becomes but that is what will motivate people since intense and ultimately their ethics. >> host: so getting to the fundamental question of why why, you have a very interesting question in the book where use survey the theories as to why white caller criminals do with they do including the view that to they say he will be a white-collar criminal by

the way that they looked of a high forehead and a pointed nose suggested you would be an embezzler. what about that theory? >> is - - and this interview taking place in 1939 the should be yang colleague from harvard one of the most well-respected person in the country talking about criminality and why crime occurs. so the size of the bodies to take of the 10,000 convicted felons and he attacked a couple hundred measurements the year low bin, the this is self-evident evening

viewed as a plant and and then harvard publishes his book to describe criminality . and he has a wonderful space in the book showing be affordability to give that sixers seven if they look like this they couldn't be white caller and this has been a wonderful. >> with the database the infernos put this to make

people started to see with it since it is the and cumin >> but the theory has not gone away totally. there is a criminologist from the university of pennsylvania who actually has done some interesting work starting as a narrow corolla just. it is their minds. to go deeper and said the body. looking at the commanders but one recent paper that does disinfectant. i know the white-collar

offenders sturgeon three important maybe to see some differences for those. >> pedophile was to not have the cd is then i don't think most people would tell the difference there cordial cordial, intelligent, everyt hing you would expect of a corporate leader to be.

i get it there is a physical cause for white-collar criminal a bed to probably not the answer so you have identified culture as one cause. it is it also situational? best set of circumstances come together for the perfect storm so said does not look so much of reasoning in everything clear going back and forth by we have.

>> i think most of those are the sillier xx mean managers will manage based don what they give a lot of thought in those situations gwent it tells them to do something that they should know better. >> exactly. if there nohow baghdad instinct this will be harmful or devastating. we all know what is wrong but because you are speeding you don't feel they are debts bubble up without the of propensity to hurt

someone goes up and think of the white caller crimes you know, you're doing something wrong view can rationalize that it is not so bad. other people are doing it it, or you do not even think about until somebody brings it up. >> i have so many of those reminders. live we can think of those ethical dilemmas. these are very easy to solve to put down the sheet of paper to look at them. you don't need to elaborate discussion shed you call

them after a board meeting. >> probably because you could say they are simple failure but this is were the classroom and training is different from the real world procured give them the dilemma. especially from the hundreds of others. you also see there are people in the room that will think of things differently so there is a lot of corporate governance but a lot of that is checking the box from a regulatory perspective let's talk about that with mark whitaker

archer-daniels midland and ultimately what convinced him that the conduct he was engaged in was improper. he was a rising star. >> q. is in the movie the insider. >> probably one of the most high-profile people. a rising star but adm as promoted to senior divisional they got him under the ropes to say this is how it is really done. with the number of these chemical products is very important to the food industry. the japanese are people in europe literally figure out how to set the prices. plainly is illegal.

>> and there is no evidence of food they met with. >> they can put a fair amount of effort. >> it is pretty clear he knows what he is doing wrong >> but there was some hint of the public and apprehension how the firms have been doing it people will tell you this is what we are doing. to stay in this position of privilege you feel that you adapt to what they are telling you. but if they start talking to his wife and you know, that this is wrong. somebody that he respected and trusted the who said

completely downside. >> guarantees different norms man from the then to a

fur that voice it is untainted by the group that could occur in some companies. would indeed think that this a viable solution? >> if companies can endeavor to do that. but there is a tremendous offer to 90. the challenge his of so much so many firms if we try to avoid a responding. >> sometimes very smart people what do you do?

so i keep doing what i used to do before but now staying in the boundaries. curley it was a reefers' this is what you are supposed to be doing. and what you try to do in this industry. that was a very different approach. i spent time .... >> 1/2 to go for it in you are actually giving legal advice that i've research talking to senior. >> but those that have the

ability to have that in a different light. but the children they play is that the money you're hired because reflecting what the client once that is of their long-term interest with the loss school and friends and our attorneys attorneys, as the tuesday and said kurdish and when it bleed to case but in some cases your the ethics officer in some cases. but is a much more humbling position. they shy away when you bring in the word ethics. i think this is where we see them to offset those obligations to someone else

will. also when it comes to technical accounting manners . as accountants and journeys are going to look into that ethical lends. >> i think the lot more of that goes on and is given credit for that and out with this serious providers to prevent companies and individuals it doesn't show up in the statistics because the never happened but there are some word appears that they were enablers and that does come to mind laugh laugh. >> maybe the solution is imagined a board room around the head table this have their spouses and significant others on the perimeter of the room

whispering in their ears when the moral compass goes off. >> he hired him for one of his firm sent said i feel we're doing one thing but if selig at the others in spite of silicon valley. but. >> can view the been one

from the there is no way that this could be legal. them when cfo's said i know everybody else was doing it. that is true but is not for us. the debt becomes part of that scandal and negative soleil went to prison for this. to have the better our moral compass and most say it is

the personal preservation framework yasuo getting bad advice knowing that he could intercede before his is a fascinating incident he was aware of when he may be compromised. >> so let's talk about those individuals and we will start with the bernie made off. and also you'll identify a particular episode that one made described as a that

maybe chilling gave insight into his character. >> i have been corresponding with him for several years now.

but we do like to believe we would never let this get out of control which is what happened there is no underlying business with but there is no way he could have imagined by the late nineties put the question n is at what point is people are around you that are clamoring to give you more money on friday night have dinner with your kids and your wife and then say i should call the doj. i think most of us would but

we don't want to end that right now one. i think so some are just a deterrent and don. >> is a very provocative way. >> that is more than the people i spent time with those the lighting cajun

crime but did not know them or see the victims'. but that is not true whiff bernie madoff with family and friends and the jewish community you know, they will lose money had to say it is so kay to give me your money? the remote victims that we spoke of earlier. >> actually it is the extreme opposite with the close members spending time around and one instance i try to understand personality to view the world. we would normally have our talks once her evening both sons died one committed suicide on the anniversary of turning himself in and

the other died of cancer. was reading the obituary and it literally just came out and i picked up the phone it turns out the call is from a federal office but it was very much bernie madoff. pet when i heard his voice i am reading the obituary at that exacta moment he asked if i could read it to him and this is of the have been fortunate that some of the hardest points in one life is the loss of five child. i am just another person's reid the obituary but i

don't know what to say after if there is anything i can do or to pass a note. what do you say to someone in this situation? i'm fine. then he says. >> guest: to go back to talk about the interest rates? for the next 11 minutes we talked about those. but it is haunting. this conversation is the most disconcerting have had in my life federal bank of first reaction but you talk about being different but little think it was that this was an issue and for four minutes to be focused

on a sad and devastating but then use which. it is always most have them have. >> negative she can then most cases a cannot take your money right now. but on one hand you can say hope people will give me more money. strictly speaking 544 from

been been be.

>> for is sample have posted a second of very different worldcom then warned everybody except for the wrongdoing off pet sphere that to bin is one of the extreme one the hon but this is a false afloat - - also head of the pair is refute cases for that financial assistance to shin was struck down. >> click at the time the financial industry things collapse agenda n this is

the best case scenario before it comes to the surface but. >> because i did not fail in must be legitimate. in the of way to provide some one comfort the this was somebody else. did say challenging question 99.9% they will bail them that makes sense to takeover but that 1% now i think the receivership and other documents together suggest this is $0.99.

i am not misrepresentations. that part will lead argue they would have succeeded. >> clutch at the of management and negative and to the extent his business was legitimate, warren buffett should be calling him for a rise looking at the rate of return. and he provides there was one ecuadorean ipo that produced but there have been hundreds upon hundreds with berkshire hathaway. as cfo.

>> then only sihanouk brought and nobody else could be defined. buttons to appeal to document to more evidence

this bin this is a covered been. >> by ken c. then as an at the -- epidemic but this this interesting even when the so larry now august 9 he invented to who live a long distance into not have the money to do that. and on behalf of one of the billionaire clients, what is amazing is as a personal production we are talking tens of millions. he could create all financial trump scratch one. he is very significant blow

respected as a hedge fund because after the first word he said the cost killed going up faster than the are revenue so it is still to the point where it is crazy but finally they decide that electronic signature by e-mail so he ends up impersonating somebody so that is the theory pretending to be an attorney for a hedge fund and someone that i recall actually knows this and does not recognize him. >> today just need to walkout of the room and this is the point there is a private jet waiting at the airport to go to toronto. he could have taken off but this gesture rose how delusional or lack self

awareness. you could say that to two different that was a pile of money would not extradite some people did exactly that. but he still thought he could get out of it to explain his way out which shows how crazy you can get in these situations. >> host: so coming back to the notion of how do reid minimize our reduce the level? point to the concept like public shaming or the jewish communities of these individuals who are shunned and the whole community was involved can you describe that for of way we can embrace that to try to prevent or deter

white-collar crime on a broader scale? >> that idea of that many times b.c. these executives like encases of wrongdoing and it all back up as needed politically but the orthodox jewish community when somebody in cages and the sanctions are placed upon them, they cannot take a leadership position but people are told not only to socialize. >> this is dealt with internally. >> but they are losing their homes. >> so we find in the

business community you don't see that same sense of outrage o curring. we seem that like elizabeth warren. . . the head of a major firm that made hundreds of millions of