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.

A top partner at the firm is also representing one of the suspected leakers, James V. Mazzo, who was the chief executive officer of Advanced Medical at the time of the takeover.

What could be duller than insider trading? It’s so de rigueur even Martha Stewart does it. But universities don’t yet regard it as mainstream enough to want insider traders on their boards of trustees.

UD has said for years that with the takeover of BOTs by way high-flying business people (see the recent Unpleasantness at the Board of Visitors Club) we’re going to see more and more trustees dumped because of suspicions of or accusations of or convictions on insider trading charges.

Now three universities – UC Irvine, University of San Diego, and Chapman – need to start a Google News search on Mazzo, a trustee.

When UD was a tyke, her mother, who bred dogs, took her to many dog shows up and down the east coast. Once, while her mother was gazing at handlers running English Cocker Spaniels round and round and round, UD wandered away and got lost. (What’s the definition of trauma if you grew up in Bethesda, Maryland? Getting lost at a dog show.)

The one thing UD took away from all those shows was a phrase she heard over and over again at them: CLEAN-UP CREW, RING ONE. Or two or whatever. UD seems to have been impressed that a group of people existed whose function was to rush about cleaning up dog shit.

With the soon to be infamous “muppet” letter published in today’s New York Times, corporate clean-up crews are pressing pooper scoopers into service all over the country. Let’s see if we can help them. Here’s the mess in the ring. Here’s what Brown University’s president, until very recently a highly paid member of the Goldman Sachs board of trustees, was in with.

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. [Scathing Online Schoolmarm says: Nice bit of humor there.]

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there.

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. [He’d actually have done better not to list the particular accomplishments – it edges toward boasting, and humility is the idea here.] [Update: See? A lot of people are having fun with this.]

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.

Hokay, so what’s corporate clean-up going to do?

Oh, you know.

So do I.

First, it’s going to impugn the guy. Secret resentments; he was close to retirement; he was increasingly irrelevant and he knew it so he thought he’d take a last potshot. (Damn! Traitors everywhere.)

And – if that’s how he feels, why did he stay so long? Cashing in baby, cashing in, just like everyone else! Do you know how much money he made last year? Twenty, fifty mil, maybe? If he’s so pure, we await his return of the cash…

Stuff like that.

And anyway! Muppets is a term of endearment.

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Notice that one thing his conscience couldn’t take anymore was looking college students in the eye and telling them Goldman was a good place to work when he knew they weren’t exactly going to be turned into model citizens.

Well, he can stop worrying about that. These students come from universities whose boards of trustees and presidents have been in bed with Goldman and Goldman veterans for a long time. So…

Muppets of Barnard College! I give you your president, Debora Spar, Goldman Sachs board of trustees! Goldman will be giving her around $500,000 a year to do … pretty much what Brown University’s Ruth Simmons did. Pretty much nothing. Pretty much rubber stamp hundreds of millions in compensation each year for Goldman executives.

See, she’s a muppet too.

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Update: Live-blogging the Muppet Show:

TO SAVE GOLDMAN SACHS, LLOYD BLANKFEIN MUST GO

shouts a headline that just appeared at Forbes.

B-b-but…! What happens to Barnard College in that case? The reason its president got on the Goldman board is that Blankfein’s wife – until recently herself a member of Barnard’s board – seems to have put her there.   This is from 2011:

Chairman and Chief Executive Officer Lloyd C. Blankfein’s wife, Laura, is a Barnard College alumna and is listed on the school’s website as a member of the board of trustees. She has resigned that post, Stephen Cohen, a spokesman for Goldman Sachs, said today. The Lloyd & Laura Blankfein Foundation donated $50,000 to Barnard College in fiscal 2010, which ended Jan. 31, 2010, and $25,000 in the previous year, according to the nonprofit’s federal tax filings.

You put me on the Barnard BOT; I put you on the Goldman BOT. And look at those numbers, will you? Blankfein’s been making around fifty million dollars in compensation each year for many years. Can you believe he and his wife were willing to part with – let’s do the math – $75,000 for Barnard?  Who said greed?  Shut up about greed!

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Favorite headline so far:

Goldman Sachs Exec Suddenly Realizes His Company Is Evil, Quits in NYT Op-Ed

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G is for Goldman, it’s good enough for me!

Be proud, Barnard muppets, of your very own Cookie Monster!

The real muppets, in this story, are Goldman’s board members, who have never had any real control over how the company is run. And, frankly, never will. The most remunerative skill, at Goldman, is the ability to flatter someone into believing that they’re incredibly important and clever and sophisticated, even as you’re getting that person to do exactly what’s in your own best interest. No one rises to lead Goldman Sachs who doesn’t have that skill. And you can be sure that Lloyd Blankfein uses it on the board every time he meets with them.

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We promise it’ll never happen again: Andy Borowitz writes a Lloyd Blankfein response.

At Goldman, we pride ourselves on our ability to scour the world’s universities and business schools for the finest sociopaths money will buy. Once in our internship program, these youths are subjected to rigorous evaluations to root out even the slightest evidence of a soul. But, as the case of Mr. Smith shows, even the most time-tested system for detecting shreds of humanity can blow a gasket now and then. For that, we can only offer you our deepest apology and the reassurance that one good apple won’t spoil the whole bunch.

… the-drunk-coach-in-the-Mercedes, should-we-have-luxury-boxes-in-the-new-stadium type stuff… But when your university lies in the very heart of what Newt Gingrich calls elitist America, you get to go big-time all the time. Did your president really sign off on Lloyd Blankfein’s sixty-eight million dollar bonus? (Yes!) And is one of your highest-profile trustees being buzzed by the SEC because so many people who worked for him have been arrested for insider trading? (Yes again!)

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UD thanks Roy.

… is the latest school compelled to press the TRUSTEE DELETE button. Anthony Chiasson, arrested for insider trading, has been dropped from Babson’s board of trustees.

The beautiful synergy between hedge fund guys and BOTs (school gets money, hedgie gets respectability) has been all screwed up by the SEC, and any university that’s gone the hedgie trustee route bigtime (I’m looking at you, Brown) should probably be engaged in… call it proactive winnowing.

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Steve Cohen is a Brown trustee.

Or should I say Très SEC… Brown University’s bouquet has been very Securities and Exchange Commission lately, with the distinctive aroma of federal investigation wafting in particular from the school’s board of trustees. Steven Rattner (after his, er, troubles he seems to have left the board), Steven A. Cohen (a current trustee)… And of course from the school’s president, a loyal Goldman Sachs trustee during the wonder years.

Cohen, a perennial SEC object of interest, has yet again been informed that his firm is under investigation for insider trading… Leaving Brown University with a venerable intellectual dilemma: Hold onto him because some day he’ll give us a slice of his fortune? Drop him before he dries up and goes the route of Rajaratnam?

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UD thanks Roy.

One of its high-profile trustees is reported to be “pretty confident” he won’t be indicted for insider trading.

Whew!

… reads a banner that keeps popping up at high-traffic locations on the campus of Brown University. It’s there to greet the trustees, who met a few days ago on campus. And to, you know, get some discussion going.

The banner targets one trustee in particular:

Steven Rattner ’74 P’10 P’13 …has settled allegations with the Securities and Exchange Commission and the New York Attorney General’s Office that he performed illegal favors to garner business for the private investment firm Quadrangle Group by paying multi-million dollar fines and accepting temporary bans from the securities industry.

Here’s an article that evokes the larger world of which Rattner is a part. The students are right to ask whether these sorts of people should be closely associated with universities. A couple of excerpts:

… Virtually every one of the major players on Wall Street was … embroiled in scandal, yet their executives skated off into the sunset, uncharged and unfined. Goldman Sachs paid $550 million last year when it was caught defrauding investors with crappy mortgages, but no executive has been fined or jailed — not even Fabrice “Fabulous Fab” Tourre, Goldman’s outrageous Euro-douche who gleefully e-mailed a pal about the “surreal” transactions in the middle of a meeting with the firm’s victims. In a similar case, a sales executive at the German powerhouse Deutsche Bank got off on charges of insider trading; its general counsel at the time of the questionable deals, Robert Khuzami, now serves as director of enforcement for the SEC.

… [It’s] a closed and corrupt system, a timeless circle of friends that virtually guarantees a collegial approach to the policing of high finance.

… You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It’s not a crime. Prison is too harsh. Get them to say they’re sorry, and move on. Oh, wait — let’s not even make them say they’re sorry. That’s too mean; let’s just give them a piece of paper with a government stamp on it, officially clearing them of the need to apologize, and make them pay a fine instead. But don’t make them pay it out of their own pockets, and don’t ask them to give back the money they stole. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. What’s next? Taxpayer-funded massages for every Wall Street executive guilty of fraud?

The mental stumbling block, for most Americans, is that financial crimes don’t feel real; you don’t see the culprits waving guns in liquor stores or dragging coeds into bushes. But these frauds are worse than common robberies. They’re crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let’s steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy.

Brown University trustee Steven A. Cohen continues to attract a lot of attention. Bloomberg asked an expert to track his company’s trading patterns:

At Bloomberg’s request, Houman Shadab, an associate professor at New York Law School, reviewed SAC’s holdings in stocks that federal prosecutors have identified as subjects of insider leaks. He also reviewed the government’s complaints against Longueuil and Freeman.

“While the trades by themselves don’t prove insider trading or fraud, they are consistent with patterns federal investigators are examining based on trading of nonpublic information,” Shadab said in an interview Feb. 8.

Brown University students are beginning to wonder…

Worldwide, happiness equates very strongly with equality — mostly status equality, but the countries that have a very short ladder between the richest and the poorest people are a lot happier than those where a few people make a lot of money and a few people don’t make much money. In Denmark, a CEO only makes about three times as much as an average worker, whereas here in the U.S., you can have a CEO making many thousands of times as much as an average worker.

The author of a new book about the happiest places in the world helps us put the resurgent insider trading scandal in the United States in context.

The reason UD goes after universities like Brown and Harvard and Chicago, whose boards of trustees include increasing numbers of the morally shady hyper-rich (boards of trustees have always included small-time crooked cronies — we’re not talking about that), is that of all cultural locations, universities are supposed to be serious places, engaged in serious thought about how to live. Trustees run universities; they set all sorts of crucial policies; they sign off on all sorts of crucial decisions. Symbolically, these people embody and articulate the foundational values of their academic institutions. They’re trustees, after all, people to whom students and faculty entrust the ethical and intellectual, as well as financial, welfare of the institution.

Remember the law professor at the University of Chicago who got into all sorts of trouble and enraged thousands of people because, with a household income of around $450,000, he complained about his deep unhappiness in the current economy, under a President who might increase taxes on some of that money?

If that guy had been located anywhere outside of a university, no one would have batted an eyelash at his sense of entitlement, his refusal to take even a hint of a civic attitude toward his wealth and good fortune. In every place in this country except universities (okay; maybe churches), people positively applaud amoral acquisitiveness. Greed is good, yadda yadda…

So it’s always something of a shock to realize that a university like Harvard until recently paid each of its top investment people 35 million dollars a year, and that it hoarded unto itself a 35 billion dollar endowment.

I mean! No one’s asking for universities to be shabby thready head in the clouds sorts of places; but really…

Blinded by the billion dollar blizzards swirling around hedge fund managers, universities have been piling their boards higher and deeper with these people. Of course the universities know they’re taking a risk by elevating possibly insider-trading hedgies to positions of immense trust. Will the hedgies have time to give the school a one hundred million dollar gift before they have to go to prison? How much damage to the reputation of the school will its high-profile association with financial criminals generate?

Well, we’re about to find out.

Meanwhile, universities might take a deep breath, shake themselves off, and ask whether putting their presidents on the boards of places like Goldman Sachs, investing in firms like Steve Rattner’s, and handing the fortunes of the institution over to money-obsessed cheats is, in the long run, a wise policy.

If so, that school must be doing a Yeshiva. Doing a Yeshiva is slang for anxiously airbrushing a Merkin or a Madoff from the webpage listing your trustees or your executive committee or whatever when the Merkin or the Madoff gets in trouble with the law.

Big trouble.

Samberg of Pequot Capital is being investigated for trades in Microsoft shares in 2001, around the time he hired an employee from Microsoft. That employee didn’t stay long at the fund, but eventually got a $2 million payment from Pequot, which was disclosed in a recent divorce action. The payment rekindled the SEC’s interest in the on-again, off-again case.

When it got a big gift from him, Columbia Business School praised Samberg’s “commitment to cultivating ideas that will help business schools shape society.”

Insider trading. It’s an idea. An idea that shapes society.

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Update: They’ve got his name on a teaching excellence institute.