Why Did They Do It?

I attended an interesting workshop at the University of St. Thomas Law School, sponsored by the Holloran Center for Ethical Leadership entitled, "Crime, Punishment & Redemption: Three Unique Reunions." Three panels discussed three cases of white collar crime. Each panel was composed of the perpetrators, the judge who sentenced them, and the U.S. Attorney who brought the case. Additional comments were made by very senior Federal judges. I am not a lawyer, but the human side of it all was very hard to listen to without some emotion.

The first panel concerned Stephen Rondestvedt, who came from a middle class background with a record of high achievement in his undergraduate studies and then in law school. Steve started a solo practice in the area of workman's compensation and disability claims. He said that his clients were not well-to-do generally. He got caught up in the pressure to upgrade his home, and his wife wanted to badly close on the new home before the old one was sold. So he had to come up with a $28,000 down payment, which he did not have because the business was sucking up his liquid resources. Under the emotional pressure to satisfy their aspirations, and with an inability to say "No, we can't do this now," he tapped the trust fund of claims money held for his clients. He firmly believed that he would pay it back so rapidly that it wouldn't matter, though as an attorney he fully realized the ethical and fiduciary violations the withdrawal represented. From there, the sense of entitlement got worse and eventually morphed into a fraud of $789,000. He served 20 out of a 46 month sentence in the Federal Penitentiary in Yankton, South Dakota. He was clear and candid about his weaknesses and his bad judgment. He has rehabilitated himself and is now Executive Director of Axis Medical Center in Minneapolis, which provides services to the primarily Somali community in Minneapolis. Why? Financial pressures to upgrade the lifestyle and an inability to postpone satisfaction led to a bad judgment in a moment of weakness. There was a perception that the act would not linger around long enough to constitute theft and betrayal of trust; it did much more and morphed into fraud. It ultimately cost him his marriage. Tough stuff.

The second case was David Logan, who while a City Administrator in Pipestone, took bribes from companies looking for city business over a long period of time. What started out as a legitimate desire to cut red tape and generate development, turned into a career of working with his hand out. Again, there was a sense of entitlement--after all, he was working harder than his peers and he was actually bringing development revenues to the city of Pipestone. From there, in a desire to flee the history, he became CEO of an industrial hog farm, where he got involved in generating fraudulent loans that were tied to hog prices as part of the terms. Ironically, while perpetrating these fraudulent loans, the history at Pipestone was being uncovered and he received the notice of Federal Court proceedings relating to his city career while he was in his new CEO job. In the end, the U.S. Attorney recommended a sentence in the lower range of 34-71 months, as part of the plea agreement. Here's where it got interesting.

Michael Davis is the Chief Judge of the U.S. District Court in Minnesota. While on the dais with Logan and the U.S. Attorney, Judge Davis who had not seen Logan since the sentencing, proceeded to tease out a much less sympathetic portrait of Logan, whom he sentenced to 71 months in Federal prison, the maximum term according to sentencing guidelines. Logan made the statement that the bank loans were eventually repaid, with the implication that no one was harmed. Judge Davis noted that this happened only because Logan "had made the right bets," that is hog prices rose dramatically during the loan period assuring repayment. It seemed to me that Logan, of the three cases, had not really acknowledged to himself the real extent of his crime.

Judge Davis then gently, but forcefully excoriated the system for focusing almost entirely on punishment of offenders as opposed to rehabilitation and for treating white collar crime, dealing with large amounts, as somehow more benign than a black kid sticking up a store for $100. He raised a lot of interesting questions, most of which I first ran into when I read the "Autobiography of Malcom X," in high school. We cannot incarcerate large segments of our population for longer and longer terms with no plans for what these individuals might do when they are released. No easy answers, obviously, but Judge Davis' quiet indictment of the process was worth listening to. The program was recorded by Twin Cities Public Television, and the Holloran Center will publish a transcript.

The third case was a couple where the husband was a senior HR executive for a large company, who told his wife to start a personnel consulting company in her maiden name. Nick Ryberg then hired his wife's company to provide "research support" for HR recruitment programs, for which no work was done. The false invoicing scheme billed more than $1 million! What was the motive here? Nick said it was "corporate ego," the feeling that he was smart enough to manipulate the system, that he was entitled because he was a corporate hitter and that he could deflect any questions and explain everything away. Corporate ego. Hubris. A sense of entitlement....

The person's background was not predictive of whether or not they would be lured into fraud and white collar crime. In the case of Steve, for example, his background, early family life, and parental values were all exemplary. Moments of weakness where the person loses their bearings seems to be the common descriptor. They all also seem not to have had confidantes who might have pushed back on their decisions. As the frauds grew, so did the sense of isolation and even desolation. Alcohol was the "drug of choice" to make the pain go away. The frauds were clearly toxic to relationships both with spouses and with children, who are often the forgotten victims.