Where is MIT’s Angel Gabriel?

Gabriel Bitran, Sloan business school professor, dean, all sorts of great things, a man who specialized in podcasts with names like USING POWER FOR GOOD … where’d he go? MIT’s website promises to take you to his faculty page, but when you click on his name, it takes you to the business school directory, and under the Bs there’s no Bitran.

Wha’ happened?

Well, I think we can assume that MIT has been, uh, ambivalent about Gabriel Bitran even since last May, when he was found guilty of massive hedge fund fraud. MIT kept him on the faculty even as he began spending his salary on a $4.8 million settlement while dealing with having been barred forever from the securities industry. I mean oh well let’s keep him on anyway

But now the investor lawsuits are coming in, see, and what might have been a nice quick clean no-jail-time fraud case is turning into a protracted series of court appearances. Perhaps MIT has quietly decided to dump the guy.

In the grand tradition of…

Henry Mintzberg [scroll down], the head of Tel Aviv University’s undergraduate business program has urged students not to major in business.

“Study of academic disciplines prepares students to think scientifically in these fields and form the foundation for advanced studies in graduate degree programs,” he said.

One student is outraged:

“Too bad he doesn’t have the integrity not to head a department he doesn’t believe in.”

Do you have to insist on majors in order to believe in your department? UD says no. UD says it shows integrity to care about the quality of undergraduate education your business… minors?… are getting and steer them toward actual academic fields. (Wee UD herself found that the hard-bitten vocationalism of Northwestern University’s Medill School of Journalism was not enough to keep the mind alive, and quickly transferred to the English department.)

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Meanwhile, on the business ethics front, a New York judge has sentenced an insider trading to lecturing.

“To the extent possible, Mr. Fortuna can speak at his college and school of business and other institutions about his own situation and how [easy] it is for him and others to have committed this crime and the difficulties he’s encountered as a result,” [Sidney] Stein said yesterday as he imposed the sentence.

UD foresees an entire industry of MOOCs arising out of the synergy between large numbers of incarcerated insider traders and the need for business schools to deal with their profession’s, er, ethics problems. The general title for these MOOCs would be INSIDER GATING, with subtitles specific to each incarceree’s case.

“To think an ethics course is going to make ethical students is living in a dream world. I would be most suspicious of anybody who makes straight A’s in Ethics. If you want more ethical people, pass laws that can be enforced and enforce those laws. What keeps me on the straight and narrow is the idea of appearing before the Accountancy Board or even before FINRA, the SEC, or the Securties Board of my state to defend my license. That is my motivation to be ethical.”

This commenter, responding to a typically mushy article about teaching ethics in American business schools, says what UD always says about this subject. Either you scare b-school grads into good behavior, or forget it.

I mean, plenty of b-school grads are good people and will follow the law yadda yadda. Plenty aren’t good people, however, and they won’t follow the law. Are b-schools responsible for trying to change the not-good people into good people before they leave their business programs?

UD thinks it’s sweet of them to try, sweet of them to rig up be-good courses. But it don’t make no nevermind and you know it and I know it.

In line with this sensible commenter’s comment, UD, she reminds you, has proposed the following:

1. Drop all business ethics courses.

2.
Initiate a program of visiting lecturers drawn from convicted business fraudsters residing in local prisons.

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UD thanks David for the link.

“[A] state like Illinois with a high corruption rate makes a better investment than a state with a moderate corruption rate… The reason is that the return for your bribe is more certain in a highly corrupt environment.”

A recent study by a group of business school professors has intriguing implications for MBA programs throughout Illinois.

Because traditions and lines of bribery tend to be both clear and reliable in fully corrupt countries, it’s far easier to do business in them than in only partially corrupt countries.

The authors of the study see no reason why this principle couldn’t apply to American cities and states; and, a Chicago Tribune columnist points out, “Chicago just last year was deemed the nation’s most corrupt city and Illinois the third-most corrupt state in a well-publicized analysis.”

Rather than force their MBA students to take absurd ethics courses (UD‘s critique of these courses may be enjoyed by clicking on the category Beware the B-School Boys), business schools throughout Illinois might instead exploit their state’s curious advantage by offering modules on the tradition and fine-tuning of graft.

Last Thursday, early evening…

UD was entering a blue line train at Foggy Bottom, and a woman with lots of luggage sat down next to her. The woman apologized for taking up so much room with the luggage, and UD commiserated. “No fun dragging lots of stuff from one car to another.”

The woman explained that she commuted twice a week to a lectureship at GW University’s school of business. “I teach a class in business ethics.”

Readers of the UD category Beware the B-School Boys know that UD has what to say about that.

In her shy, tongue-tied way, UD took advantage of the three minutes they had before they went their separate ways at Metro Center to tell this woman all about her area of specialization.

The woman was a good sport, and she came right back with a defense of the enterprise, and UD came back from the defense, etc., etc.

I swear it was all very amiable, with the woman (they exchanged names on the platform, but if you think UD remembers swiftly exchanged names on noisy platforms, you don’t know UD) insisting that “in the long run” unethical behavior destroys shareholder value, and UD insisting that short-term profit seems to suit a lot of people perfectly well, thank you, and that for instance insider trading – both unethical and illegal – seems absolutely rampant — you might say even structural to the economy — and even after the feds finally drag in Steven Cohen it will continue to be a practice many business people defend and engage in…

UD‘s hastily attempted point (swaying train, unsteady luggage, crush of commuters) was that business schools are hopelessly up against a humongous cognitive dissonance between moral scrupulousness and the nature of competitive financial markets. She was not saying, she yet more hastily hastened, that free marketeering was the work of the devil. She merely pointed out that mild to extreme cheating was endemic to the project, and the business school that fails to take this into serious account runs the risk of having its ethics component be a laughingstock.

You see, the rhetoric of university business ethics courses always looks like this. This Globe and Mail article begins, as most on the subject do, with the rampant reality:

Over the past decade, a succession of high-profile corporate crimes has spurred business schools, globally, to infuse business ethics and leadership into course content.

Not just the last decade, of course; corporate misbehavior and crime has been massive for decades. And business schools have been offering tons of ethics courses through all of those decades. But, you know, check out this category, Beware the B-School Boys. Just read the latest entry in it, about the dean of Columbia University’s business school.

Anyway, the Globe and Mail story goes on to announce that this new guy is really going to turn things around at Ryerson University…

Yet the language he offers his interviewer is dead jargon city. Leadership is a process, not a position… Let’s talk codes of conduct…

Faithful UD readers know what she proposes. Toss the courses. Initiate a lecture series featuring business cheats who got caught. These guys are often articulate, charismatic… Incentivize them by taking a bit of time off of their sentences for each speech.

The Dean of Columbia University’s Business School Shows his Students…

… how to do business.

If you want to make big money – say $1200 an hour – you can’t be too scrupulous about how you do research, and you can’t be too scrupulous about your clients.

As Matt Taibbi points out, Hubbard took $1200 an hour from the now-notorious Countrywide Financial Corp. to be an expert witness on their behalf in an insurer’s lawsuit against them.

… Hubbard testified on behalf of Countrywide in the MBIA suit. He conducted an “analysis” that essentially concluded that Countrywide’s loans weren’t any worse than the loans produced by other mortgage originators, and that therefore the monstrous losses that investors in those loans suffered were due to other factors related to the economic crisis – and not caused by the serial misrepresentations and fraud in Countrywide’s underwriting.

In other words, the Dean of the Columbia University business school testified that the fact that Countrywide claimed to have conducted thorough due diligence when in fact it was pressuring underwriters to approve 60 to 70 mortgage applications a day and failing to verify any income levels or other key information (to say nothing of the outright falsification of such data, which also went on on a mass scale) – he testified that these issues were irrelevant.

For that amount of money, you’d expect scrupulous research techniques.

Not.

So how did Hubbard manage to analyze Countrywide and conclude that mass fraud in its underwriting procedures wasn’t problematic? Easy: He didn’t look at the underwriting! All Hubbard did was take a group of Countrywide loans and compare them to a group of other loans from the same time period.

When that comparison revealed that Countrywide’s loans failed at about the same rate as the non-Countrywide loans, he smartly concluded that fraud wasn’t the problem and that macroeconomic factors must have been the cause.

Except for one thing: He left out the fact that about half of the loans in the “non-Countrywide” pool he selected for his analysis were originated by companies that were also being sued for underwriting fraud and other irregularities. What Hubbard did is compare a bunch of bad loans to a bunch of bad loans.

Taibbi concludes:

[T]his awesome ability to non-absorb information makes him qualified to be one of America’s leading academics.

ANOTHER feather in Wharton’s cap!

The Wharton School of Business. UD has lost count of how many graduates, just this year, have been indicted for incredibly high-level fraud.

[Craig] Toll … [is] charged with defrauding … investors out of $40 million, and scamming the federal government out of … $10 million [he was] given to help finance construction of a Haitian factory to build homes for hurricane victims.

Toll, 64, is a graduate of the University of Pennsylvania’s Wharton School of Business.

… [He is charged with] 23 counts of fraud and money laundering

Do you suppose anyone at Wharton notices how many of their graduates are criminals, or are under indictment? Or are, like Brown University’s highest-profile trustee, getting buzzed by the SEC an awful lot?

Hell, maybe Wharton’s proud of it. You have to figure there are tons more graduates out there successfully defrauding people.

“No one … contributed more to our class discussions of Sissela Bok’s `Lying,’ nor was anyone in our class as acute on the issues of moral capacity raised by Camus’ `The Plague.”‘

See now here’s a whole article about how exceptionally morally reflective Mathew Martoma was in college and graduate school.

One of his friends calls him “very smart and ethical,” and wonders: “Did the situation and SAC push him over the edge?”

Brown University’s highest-profile trustee, Steven Cohen, does run a strikingly … aggressive hedge fund, but if you allow people to blame Martoma’s insider trading indictment (he’s accused of the most lucrative insider trading in history) on his environment, you’re allowing them to blame the bad behavior of everyone (and everyone here means everyone from a less wonderful, less gloriously privileged environment than Martoma’s, which is to say everyone) on their environment. If you blame Martoma’s downfall on the misfortune of his having been hired by the most powerful, prestigious hedge fund in the world, I mean boooohoooo. Fuggedaboutit.

This guy isn’t your average impressionable morally middling guy. He’s described by lots of people as keenly knowledgeable and sensitive in the moral realm. There’s Dr. Rieux over there risking his life every day to save Oran from the plague, presiding stoically at the bedside of a child dying in appalling agony; and here’s Martoma bringing to that novel acute insights on the capacity of human beings to empathize with and sacrifice for one another. How can a guy able to reason about morality at that level cheat and steal like a son of a bitch?

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Er, is this really a problem for you? Do you really think there’s a puzzle to work out here? Have you read Dr. Faustus, Notes from Underground, Hamlet, or almost any serious work of literature?

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We can go back and forth, and I’m happy to go back and forth, about the utility of ethics courses in business school. Say we appoint David Petraeus to lecture in such courses, along with other people we think of as moral paragons. If we’re lucky, the focus of his lectures will be the very complex vulnerabilities and blindnesses and compulsions that lie within all of us.

Not that understanding this, even on a very high level, will tend to make you, personally, more ethical. Ask Michael Martoma, and many other insider traders who share his excellent upbringing, his excellent education, and his exquisite moral reasoning, about that. If anything, the staggering good fortune these people have enjoyed all their lives, their easy entry into elite settings, their great wealth, even their great intellect, tends to make them feel removed from the common suffering humanity that Dr. Rieux found so compelling. These days, Americans are wealthy in ways unimaginable in the past. Steve Cohen’s personal fortune is close to ten billion dollars, and Michael Martoma moved very much in Steve Cohen’s world. The power, and the almost absolute removal from common human life, this sort of wealth — or a life lusting after this sort of wealth — yields, has — obviously — for many people — disastrous moral consequences. No business school is going to talk honestly about this, because no business school wants to be in the business of saying Come to study here, and we’ll teach you all about limits.

I have tried to tell you. Clifford Orwin has tried to tell you. Stanley Fish has tried to tell you.

But you won’t believe us that ethics courses in business school are a total waste of time and money. As Orwin says:

By the time a student arrives at university, and a fortiori several years later when he ambles on to his MBA, his ethical character is already firmly set. Whether virtue can ever be taught was already a thorny question for Plato. Whether it can be taught to adults, in a classroom, shouldn’t be a thorny question for anyone.

Yet even with the latest amazing, high-profile evidence for our position, people continue to resist the idea:

A former student at Harvard Law School, [Mathew Martoma] co-wrote papers on medical ethics before seeking a business degree at Stanford University and joining a little-known Boston hedge fund. … [Martoma is] at the center of what U.S. prosecutors describe as the most-lucrative insider-trading scheme they’ve ever uncovered… [At Harvard Law School he] wrote two medical-ethics papers, one of which identifies him as a member of Harvard Law’s class of 2000 and as the former deputy director of the National Human Genome Research Institute’s Office of Genome Ethics.

Martoma’s partner in crime, University of Michigan professor Sid Gilman, spent decades on safety and ethics and compliance committees.

As ever, beware the b-school boys.

A trustee of the University of Colorado Business School has been indicted for insider trading. Guilty or innocent, he seems already to have been scrubbed from the school’s pages.

“1983 Wharton MBA recipient Anil Kumar and Adam Smith have also received probation sentences, and Thomas Hardin, a 1999 Wharton graduate, is awaiting sentence on similar charges.”

When you’re a student reporter at the University of Pennsylvania, and when the subject is the Wharton School’s scads of insider traders, you have to do a lot of digging. There’s a history here, and it’s pretty impressive.

Another reporter goes farther back:

[L]ast week’s conviction of a prominent Wharton MBA alum [was] the biggest insider trading case since the 1989 conviction of junk bond king Michael Miliken, another Wharton grad.

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UD thanks JND.

“Mr. Goel met Mr. Rajaratnam while the two were business-school students at the Wharton School of the University of Pennsylvania.”

Wharton: Forcing Ground of the Great Insiders!

I’ve enjoyed following Ayal Rosenthal on this blog…

… because he has stamina and guts and epitomizes this blog category: BEWARE THE B-SCHOOL BOYS. And I’ll always be able to follow his lawsuits because I don’t think they’ll ever end. Always another effort to appeal an NYU decision to deny him his MBA because while he was a student there he was found guilty of insider trading.

UD enjoys the special human interest part of Rosenthal’s story: It’s a family affair.

‘[T]he teaching of economics does have an effect on students’ behavior: It makes them more selfish and less concerned about the common good.’

AWKward.

A former student of [University of Chicago Business School professor Gary] Becker’s told me that he found many of his classmates to be remarkably amoral… They perceived any failure to commit a high-benefit crime with a low expected cost as a failure to act rationally, almost a proof of stupidity. The student’s experience is consistent with the experimental findings I mentioned above [See this post's headline.].

AWKward.

Yes, UD‘s back in one of her most-used categories: Beware the B-School Boys. Click on it at the bottom of this post for years of stories about guys who went directly from America’s very best business schools (Wharton does our financial criminals proudest, but Harvard’s in there trying) to a life of global money mayhem. The swath of destruction they leave suggests that remarkable amorality is only Part One. There’s also a brilliant nihilistic malice in play.

Since the deeper they get into their business school curriculum, the more some students seek to reduce the earth to cinders, one might ask, as Luigi Zingales does in the pages of Bloomberg’s (whose founder makes anyone who doesn’t flaunt his rule-breaking, anti-social, privileges look stupid), whether, as he puts it, business schools “incubate” criminals.

UD
wouldn’t use the word incubate. B-schools refine criminals; they take naive inchoate rapacious instincts and educate them. They also – as the Rajaratnam case confirms – bring criminals together. They provide the critical mass without which conspiracies cannot flourish.

It’s Syracuse University’s Best Friend Forever, Jamie Dimon.

Commencement speaker, recipient of an honorary Doctor of Laws degree — Dimon’s the Joe Paterno of Syracuse. Let’s catch up with his latest accomplishment.

JPMorgan Chase & Co. (JPM) had already lost more than $700 million on synthetic credit bets and Chief Executive Officer Jamie Dimon was told that number could climb to almost $1 billion when he dismissed press reports about the positions in April as a “tempest in a teapot.”

While JPMorgan booked a $718 million loss on the positions held by its chief investment office in the first quarter, it didn’t publicly specify the loss when releasing the results April 13. When an analyst asked Dimon that day about media coverage of the trades, he dismissed them as a minor issue.

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