Peter’s Going to Federal Prison Camp

When I spoke with audiences about taking steps to cultivate habits that lead to good character I always invited questions. Understandably, people frequently told me during those exchanges that they considered themselves ethical people and that they couldn’t envision a scenario that would lead them to cross ethical lines. When I heard such assertions I applauded their level of certainty, the strong moral compass expressed. Then to lighten the mood, I offered a joke I heard while I was in prison.

An older man with a prosperous look about him sat at a bar. After eyeing a striking young woman, he approached her. Wasting little time with small talk, the man propositioned her. “If I were to give you $5 million would you sleep with me?”

The woman paused for a moment while looking at the man, surprised at the question. When she answered, she said yes.

“Would you sleep with me for $50?” the man followed up.

“What do you think I am? A prostitute?”

“We’ve already established that,” the man said. “Now we’re simply negotiating on the price.”

The point I strove to make in telling the joke was that failing to practice habits of good character leaves us

vulnerable to falling off track. A strong moral center could provide a foundation. Yet my observations convinced me that the foundation, or self-perception, wouldn’t significantly protect us from the possibility of falling of course. To paraphrase the wisdom of Gandhi, we had to ensure that everything we thought, everything we said, and everything we did stayed in harmony with our strong moral center. When we made such practices part of our daily lives—like brushing our teeth—we wouldn’t even consider propositions or actions that were inconsistent with the honest, trustworthy people we considered ourselves to be.

News reports made clear to me, however, that many among us crossed ethical lines, and even broke criminal laws, while still considering themselves as morally upstanding citizens. In February 2010, for example, Time magazine reported that 95 percent of all digital music was downloaded illegally. Artists and industry executives considered such piracy as theft, no different from stealing a record off the shelf of a music store. Musicians and those who sponsored their work had a massive investment in time and money to make products available to consumers, yet it was clear that many of those consumers did not consider ethical implications—or criminality—when pirating music by downloading it illegally.

While in prison I met many people who considered themselves ethical, trustworthy, and honest. They were men who grew up in stable communities, men who lived with aspirations of leadership and saw themselves as good citizens. They never envisioned possibilities that could lead them into struggles with the criminal justice system. Circumstances surfaced, however, that took them off course. Despite self-perceptions of having strong moral centers, their lack of focus on making values-based decisions and leading harmonious lives, blinded their judgment.

Peter was an example of just such a man. He was in his early 40s when we met at a Starbucks near my home. He sat alone at a table, his Bible and other religious books open in front of him as I walked in. With gold-framed glasses, sandy hair that he kept cut short, posture that suggested decades of sedentary work, and soft hands more accustomed to gripping pens or telephone handsets than picks or shovels, Peter personified management of small business. Curious about what would bring such a man into trouble with the law, I introduced myself and thanked him for contacting me. Peter called me on recommendation from his attorney.

Peter’s identity, as it turned out, was rooted in his Mormon faith. He described himself as being of “pioneer heritage,” meaning that he took family pride in that his ancestors had been part of the settlers who crossed America with Brigham Young and the founders of the Mormon Church. Peter was one of six children of loving parents, both of whom had careers as schoolteachers in the city of Liberty, Utah. The devout family was active in church participation.

Peter told me that character and veracity had been of the highest importance to him since he was a young child. “I can still remember the first lie I told,” he said, “and the shame that tormented my conscience for years afterwards.”

“What was it?” I asked.

He laughed. “It’s funny to think back on it. I was in the sixth grade in band class. We had a teacher who was kind of strict. I had to use the bathroom, but I was nervous about asking permission, so I tried to hold it, squeezing my legs together to block the urge. When the time was right I dashed off to the bathroom, but I didn’t make it. I wet my pants and the stain embarrassed me. My best friend asked me what happened. Being too embarrassed to admit that I’d wet my pants, I lied, telling him that I had fallen in a puddle. I was so bothered by the way I felt about myself after telling the lie, that I vowed I would never lie again.”

As I listened to Peter tell me how being honest became integral to his life at such a young age, and about his devotion to the Mormon faith, I wondered what would have prompted him into affairs that led to his troubles with the law. He told me that he had graduated high school in 1987, and after a two-year mission “to proselytize, to teach, and to baptize,” Peter finished studies at Weber State University and graduated with a degree in technical sales.

While describing his background, Peter said that when he was 23 he married Shauna, who also studied at Weber State and was active with him in Mormon Church groups. The couple supported themselves by managing apartment buildings and through Peter’s earnings as a sales representative for an electronics company. Peter’s ambition, however, was to establish himself in a business of his own. He considered himself an entrepreneur at heart and aspired to both the freedom of time and the profits that would come with business ownership. He and Shauna welcomed the first of four children into their family in 1994, and in 1995, when he was 26, Peter launched his first business.

Attending church services regularly, Peter was observant of the necktie styles many of the young men wore on Sundays. Some of the young men in his church wore ties with prints of cartoon characters. Being a devout Mormon, Peter didn’t think such attire was appropriately reverent for church services, and his judgment on neckties sparked an idea. Despite having no experience in the apparel industry, Peter began to make some inquiries.

Research convinced Peter that an apparel company in the Orient could manufacture and deliver ties featuring his own design at a net cost of $2 per tie. Since neckties typically sold at prices of $20 each in his area, Peter believed he could persuade local retailers to purchase the ties from him at a fair wholesale price that would provide a sufficient mark-up. Using his personal computer, Peter designed neckties in solid colors with small images of a Mormon temple. He formed a company that he called “Temple Ties” and soon took delivery of 1,200 neckties.

Without advance purchase orders from established retailers, Peter had to create his own distribution system. He presented his ties to local businesses, offering to sell them on consignment. Temple Ties became a success, giving Peter a sense of accomplishment.

To meet the growing demand for neckties and other products Temple Ties offered, Peter needed additional capital. He brought in a financial partner and over the next two years the business thrived. Peter’s business naiveté along with his tendency to trust, however, made him susceptible to manipulation. His partner swindled him, he said, forcing him to walk away from Temple Ties three years after starting the company in his living room.

Having successfully launched one small business, Peter couldn’t bring himself to return to the workplace as someone else’s employee. Even though his wily partner at Temple Ties had taken advantage of his trust, Peter appreciated the learning experience and he realized that he enjoyed the adrenaline rush that came with the pressure of running his own company. He became obsessed with starting a new business venture.

That obsession with business led Peter to neglect other areas of his life. He described himself as a workaholic who—while searching frantically for the next big opportunity—gave insufficient attention to his duties as a husband and father. While his wife wanted Peter to participate in family responsibilities and restore stability, Peter yearned for the money and freedom that came with the success he’d achieved with Temple Ties. As Peter cocooned himself in his home office contemplating new business ideas, the family’s financial resources ran dry. That loss of balance weakened Peter and his marriage began to suffer.

He launched a second apparel company that failed. Then he tried other importing ideas without success. Months without generating income turned into years, leading to dampened spirits and diminished energy levels. Peter was desperate, and when a man pitched him on the idea that riches could be made by mining gold from a Mexican mountain, Peter became intrigued. Despite his lack of experience or knowledge of mining, he devoted six months to raising $200 thousand in capital from investors to further the gold mining effort, but in the end the venture yielded only dirt—albeit of high Mexican quality, but it was still just dirt.

By 2005, the bank holding his mortgage had foreclosed on his family’s home and Peter’s wife divorced him. Sad and broken, Peter said he was eager for any type of income-generating opportunity to win back his wife’s respect and love. It was in that state of mind that Peter agreed to join the business that led to his problems with the law: property management.

Gordon, an acquaintance of Peter’s, explained how his experience with Internet data mining allowed him to scan public records in search of single-family homes that banks were about to foreclose upon. Gordon suggested that Peter approach the homeowners to offer property management services. After listening to Gordon’s idea, Peter agreed.

Peter would contact the homeowners who were about to lose their properties to foreclosure. If the homeowners would move out and vacate the property, Peter said that he would work toward the possibility of arranging a short sale. (A short sale meant a sale of the property for an amount less than what was owed on the mortgage.) The short sale would not cause as much damage as a foreclosure would to the homeowner’s credit score. If the homeowners agreed to vacate the property, Gordon paid Peter a commission, then Gordon would rent the property out, keeping the income generated by the rental until the bank either foreclosed or agreed to a short sale.

Peter said he did not question the legality of such a venture. Since he had lost his home to foreclosure, he knew the process was gut-wrenching. By convincing the homeowners to vacate early, he convinced himself that he was providing a service that would spare the family some humiliation and give them an opportunity to put themselves back on track. With a short sale on their credit report rather than a foreclosure, Peter told the families that they would not face as much resistance when they attempted to purchase another house.

He saw his service as a way of helping the families make a new start, and the entrepreneurial aspects of property management enticed him. He could establish his own hours, and the income he earned would allow him to show his ex-wife that he was becoming more stable. During his first year in property management, Peter earned $60 thousand enabling him to pay his child-support obligations. Rather than expressing admiration, Peter’s ex-wife questioned the legitimacy of his venture.

“How can you collect rental payments from a property you don’t own?” Shauna asked with skepticism.

“I’m not collecting the rent,” Peter countered. “I’m being paid to persuade the homeowners to vacate the property early so I can work to arrange a short sale before the banks foreclose.”

“But your so-called partner collects rent on properties that he doesn’t have any rights to, and you’re helping him. How can you say that’s legal?”

“Well, it is.”

Shauna’s persistent questions shook Peter’s confidence. During his second year of property management, he consulted an attorney for clarification. The attorney explained that Peter was involved in a risky venture that potentially could expose him to a variety of criminal charges. Only adherence to strict boundaries (that included full disclosure to apprise lenders and possible bankruptcy trustees of rental income from the properties) would keep Peter within the law. After talking with the lawyer, Peter realized that all of his practices didn’t comply, but he was on track to earn $90,000 that year. So long as he was honest with the homeowners, Peter convinced himself that the business could continue.

Peter’s delusion came to an end early one morning when eight federal officers wearing bulletproof vests woke him with their weapons drawn and pointed at him. They searched his records, questioned him, and confiscated his computer in their quest to gather evidence. Over the next four years the authorities disrupted his life while building a criminal case against him. In time, the man who said that he considered himself moral, ethical, and honest pleaded guilty to criminal charges of fraud, in violation of the United States Criminal Code, Title 18, which makes participating in swindles a federal crime. Peter was sentenced to serve 24 months and was burdened with a criminal restitution order of $300,000, which will hamper his life after going to federal prison.

When Peter told me his story, he was looking for guidance on how to make the most of his federal prison term. I empathized with his tendency to deny that he had crossed criminal lines, as I had once comforted myself with the same kinds of denials. What I had more trouble grasping was his apparent willingness to continue with the property management charade after his conscience convinced him it could be wrong, and especially after a lawyer confirmed that his actions violated criminal laws. It was disturbing to see the regularity with which people refused to accept how violating clearly written criminal codes belied their assertions of personal commitments to morality, to virtue, and to honesty.

On 21 January 2010, for example, Diona B. Henriques published a front-page story in The New York Times. The title screamed “F.B.I Sting Snares Arms Sellers; Bribes for Foreign Deals Charged.” The article described an undercover Justice Department operation to prosecute people who violated the Foreign Corrupt Practices Act. That law prohibits American citizens and companies from bribing foreign government officials for business purpose. Despite the clarity of the anti-bribery law, 22 top-level business executives sent written confirmation that they would pay bribes and that they participated in individual “test” deals the federal agents contrived. Reminding me of Peter, the story described one executive who consulted with an outside law firm to inquire about his vulnerability to criminal prosecution. Despite legal advice from counsel to reject the corrupt proposal, the executive attempted to subvert the law to close the deal.

Without question, those business executives considered themselves honest, ethical people. My guess was that given the opportunity to answer simple questions of whether they understood the difference between right and wrong, as Peter did and as I once did, those business executives would have answered that they could distinguish right from wrong. Not one of those executives could have imagined on the morning of 19 February 2010 that he would be arrested by Federal agents at gunpoint and taken away in handcuffs while industry colleagues at a trade show looked on.

At what point did those people who considered themselves honest and ethical become vulnerable to crossing lines that would expose them to the criminal justice system? They were well educated; they were serving the corporate community in positions of responsibility; and they presumably understood laws that prohibited corrupt practices. Nevertheless, despite written codes, an understanding of right and wrong, and legal counsel, the prospect of millions of dollars worth of corrupt business compelled them to cross lines that resulted in their being charged with violating criminal laws. Besides charges of corruption, the executives faced money laundering charges that carried prison terms of 20 years.

The more I listened to people like Peter, and the more stories my research revealed about people like the business executives ensnared in the sting operation, the more convinced I became that regardless of how moral or ethical an individual perceived himself today, without the daily cultivation of good character, anyone could fall off track. This was a lesson that students and business executives alike would be well advised to embrace. As Lanny Breuer, the United States assistant attorney general said, “We are going to bring all the innovations of our organized crime and drug war cases to the fight against white-collar crime.”

Peter told me that he had grown up with a commitment to honesty. When people in audiences I addressed told me that they were honest, ethical people, and that they couldn’t envision scenarios that would lead them to cross ethical lines, I sometimes thought of Peter. He had said that even thoughts of dishonesty brought back uncomfortable memories from childhood of wetting his pants. Yet he was on his way to serving a 24-month sentence in federal prison. Peter hoped to redeem his good character, but his story made clear that no one was immune from the need to train and exercise a commitment to ethics. Unfortunately, as Time magazine reported in its story about illegal digital downloads of music, millions of people who presumably identified themselves as being honest regularly engaged in theft.

Chapter Thirteen Questions

  • What did Peter’s self-description about being a workaholic imply about his values?
  • How did Peter’s definition of success influence his ability to make ethical decisions?
  • How do commitments to make ethical decisions compare to commitments to comply with the law?