SECTION 4G – THE CULTURE OF GOODNESS
CASE 4.32 – BERNIE MADOFF: JUST STAY AWAY FROM THE SEVENTEENTH
FLOOR
Answers and Key Discussion Items
1. Discuss with the students whether we who are beneficiaries have obligations to speak up when we
are concerned. There were flags in the Madoff case, from the auditor for this multi-billion fund being
housed in a strip mall to the lack of volatility in the portfolios to the secretive nature. However, the
2. It is hard to understand how Mr. Markopolos could have done more. The problem was that he was
3. Mr. DiPascali let his loyalty to Bernie interfere with his judgment and what should have been his
response to a criminal enterprise. He let the compensation get in the way of detached analysis of
UPDATE – Mr. DiPascali has been testifying in a fraud trial in December 2013 in exchange for a
reduced sentence pursuant to a plea bargain.
CASE 4.33 – ADELPHIA: GOOD WORKS VIA A HAND IN THE TILL
Note for the students that this case is here because often the notions of social responsibility and ethics in
business are presumed to be synonyms. The Adelphia case illustrates a magnificent corporate citizen run
by generous individuals. The problem was that there was no distinction between personal property and
corporate property. The basic ethical category of taking things that don’t belong to you was at issue in
this case that was labeled a “classic one of treating the company like a personal piggy bank” by one of the
government lawyers associated with the prosecution of the case.
Answers and Key Discussion Items
1. Many have pointed to John Rigas as a modern day Robin Hood because he did do so many good
things for all the communities in which Adelphia was a presence as well as for individuals in
Coudersport, PA. However, this case follows on the heels of a discussion of the role of property rights
in corporate functions. There are the governance issues: corporate property is property that belongs
2. The officers got so comfortable for several reasons:
a. Adelphia had been privately owned, so they were used to doing what they wanted when they
b. There were gradual kinds of blurring. For example, the town Christmas tree benefits the
company although it is an expenditure and did involve personal rewards and gratification. They
c. They justified actions in the name of investments – involved family members, but were
investments.
d. They were doing great things for Coudersport and Pennsylvania at a time when there wasn’t
Compare & Contrast
1. You might have the students watch the movie, “Changing Lanes” with Ben Affleck, Samuel L.
Jackson, and the late Sydney Pollack (mentioned in Reading 1.3). Pollack plays Affleck’s senior
partner in a law firm and is also Affleck’s father-in-law. Affleck learns that his father-in-law has forged
documents, embezzled from his clients, and suborned perjury. When Affleck asks Pollack how he
lives with himself when he has broken all those laws, Pollack responds simply that with the money
2. Mr. Rigas’s statements, the students will find, are typical of executives who are charged with criminal
misconduct. Discuss with the students the difficulties business people have in internalizing ethical
missteps. They lack the objectivity that the newspaper test and other models were designed to help
us overcome the tunnel vision we sometimes have when we are questioned about our conduct. Use
CASE 4.34 – THE ATLANTA PUBLIC SCHOOL SYSTEM: GOOD SCORES BY
CREATIVE TEACHERS
Use PowerPoint Slides 222 – 225.
Answers and Key Discussion Items
1. There were targets that were set and had to be met to earn bonuses and avoid embarrassment.
2. Once they met the targets, the targets were upped and there was no way to meet them unless they
3. There was always retaliation, threats, and a culture of fear and silence.
4. The teachers, the principals, the administrators, the schools themselves – loss of accreditation, the
city of Atlanta because of a pall cast over the school system, the students – who were grades behind
5. They were rewarded. They feared what would happen if they did not cheat. There was recognition
CASE 4.35 – THE NBA REFEREE AND GAMBLING FOR TOTS
Answers and Key Discussion Items
1. Could have been a form of addiction; could have been debts; or could have been that he felt
2. Yes, this is a different picture, but often this part of their lives is a form of cover for what they are doing
3. There is a bit of rationalization here – what they did is SO much worse than what I did and they
CASE 4.36 – GIVING AND SPENDING THE UNITED WAY
Use PowerPoint Slides 226 and 227.
Answers and Key Discussion Items
1. In light of the purpose of the United Way, the nature of its donors and the problems of too many needs
and too little funds, Aramony’s salary and expenses were not balanced and did not take into account
2. The Board was responsible for the supervision of the expenses and had the authority to halt the
expenditures.
3. Aramony may have been behaving as other CEOs of large multi-national organizations behave, but
4. Compensation in for-profit corporations should be whatever the market is. Salary, benefits, and perks
should be set along the lines of industry. CEOs of non-profits must be particularly sensitive to their
5. Chao faced the decline in donations, the tarnished reputation of United Way, public outcry, and local
chapter uprisings and withdrawal from the national United Way. In short, Chao faces the task of
6. Mr. Aramony, to use the colloquial, has some kind of nerve. However, his agreement with United Way
CASE 4.37 – THE BAPTIST FOUNDATION: FUNDS OF THE FAITHFUL
Use PowerPoint Slide 228.
Answers and Key Discussion Items
1. The similarities are eerie. There was the drive to keep the financial performance going. There were
transactions that were really just selling air that were used to keep the numbers at the growth levels
they needed. There was the constant acquisition of both properties and new investors in order to
2. The conflicts: transactions with board members; board members who were parts of transactions
3. The board members had a bit of a Fastow and Sullivan complex (Cases 4.15 and 4.16). They
honestly believed that with enough time and transactions that they could save the company and not