Ray Boucher, Dean’s Distinguished Leadership Series

I was here about a year ago, and Dean Walker asked if I would be willing to come back up to the school of business and speak, and I said sure, thinking that I was coming to talk to a couple of classes like I do most of the time. And that’s what I anticipated this morning was going to be, until I was on Twitter a couple of days ago and saw this massive thing about this Distinguished Leadership series and it’s the inaugural one, so no great pressure. And I promised John that I put money out front so that anybody who paid for today if at the end of the lecture you feel like you want a refund, I will honor that refund.

When I did my Master’s thesis the concept of a corporation doing anything other than fast profits for shareholders was an anathema. My chair of my thesis committee refused initially to even think about allowing me to publish that thesis because it wasn’t about Darwinism. It wasn’t about the bottom line. It was asking an interesting question that at that time very few wanted to ask.

In fact, Dr. Francis was at the forefront of the development of the idea of management of change, of bringing in other other disciplines like sociology and like psychology into decision making and into the process of corporate America, and the thinking that went into it, and so what I was trying to do at that time was to ask a basic question: Do corporations have a broader responsibility? Do they have an obligation and a duty beyond simply, you know, putting money, fast profits into shareholders? So in the corporate world, that’s what you’re taught. You have to be above everyone else.

So when I looked at the lecture notes that I saw on Twitter from John I thought, “OK now, what do I do? Because I’m not a very funny guy, right, and I don’t have a sense of humor.” When I’m in front of a jury, the thing that connects me with the jury is that I’m honest and I’m sincere and I believe in my client and what I’m asking them to do, but I don’t tell jokes because I’m no good at it. So I asked my son, Matthew, who’s at Chicago. I said, “You know, Matthew, what do I do? You’re a student.”

He says, “Oh Dad, don’t worry about it, they’ll love you.” Great advice!

So then I asked my son Raymond who is a year older, and I said, you know, what do you think? He said, “Dad, just be entertaining,” and I said, “OK, now what?”

So I thought, “OK one of those entertaining movies that I know of is The Princess Bride.” So, I thought OK, maybe I can borrow something from The Princess Bride, and so I grab Inigo Montoya’s guide to networking success, and I thought I would share it with you because I think it is useful. So, my polite greeting is “Good morning. My name is Raymond Boucher.” The relevant personal link is that “I am a former student, an alum and rugby player.” And here’s proof that I actually went to Colorado State University. That’s not me with the bald head, but I had an incredible experience here at Colorado State University.

So then, the question is what can I talk to you about that might be of some use, some benefits, some help because I’ve had a blessed life? I have been at the forefront of incredible litigation that has had enormous impacts and I’ve been blessed to be able to do that. I met amazing people in doing so. I’ve seen the best of the world and I’ve seen the absolute worst of the world.

It’s an amazing thing when you think about how things develop. One of the professors that I had here, his name was Dr. McKeever – big, burly guy, massive hands. He would say something at every lecture that is the one thing in all of my schooling from high school to college to graduate school to law school that I remember. It’s interesting that it came from him and that class, but is so true and I use it all the time.

And what he said was this. He said, “People will do things in the name of a corporation that they will never do in their real life. They’ll never do it in their own name. They will do things under the umbrella and ambiguity and anonymity of a corporation that they would never do to a neighbor or loved one or member of their church, or a member their community.”

At the time, I didn’t quite understand it. When I was in your seats, I didn’t understand what that meant, and I do now. And I’m hoping that as I take you through some of my experiences, what he said will resonate for you. What I’d like to leave you with is the three things that I think are most important to take out of today and, hopefully, your experience here.

The first thing is voice, and there’s a duality to voice. The first part of it is that inner voice, that little thing that sits on your shoulder and talks into your ear and sort of tells you, “You know, what? That’s not the right thing to do.” That voice that when you have to make a tough decision is saying, “I’m not sure that’s what you should be doing,” and that comes down into your gut and you can feel it. Don’t lose that voice ever, because if you do, you’ll make some bad decisions and some of them will go through today.

The second is the voice of courage, the voice of conviction. When this voice tells you no, make sure that this voice stands up and does the same thing, because in your lives you’re going to be faced with decisions. You are going to be faced with opportunities and they’re going to be tough ones. You’re going to be sitting at a desk and you’re going to be looking at your husband and daughter in a picture as your boss comes in and says, “I want you to fire that bitch because she’s pregnant,” or, “I want you to eliminate this person from this group because he smells bad,” or because of his racial background or some other arbitrary, non-performance based decisions

And I can tell you that I’ve had experiences that would make your skin crawl if you heard and saw what happens in corporate America every day. And the decisions that people have to make! You’re sitting there, what do you want to do? You need your insurance. Your mom has cancer. You have to make sure the cancer treatment continues and you’re faced with a dilemma, a moral choice.

“Do I actually follow through and engage in market manipulation that will potentially destroy major communities in California?”

“Do I manipulate the accounting records that will take away the pensions of hundreds and hundreds of people, because I need this job?”

“Will I put profits over people?”

If I were to ask you today, how many of you would raise your hands right now and say, “Yes, I’m willing to put profit over people and make decisions that will kill individuals in order for us to make a higher profit in this business?” Not one person. But I can tell you you’re going to face those dilemmas and those challenges, and so that voice that you have is the one thing that will help guide you through.

The second is perspective. Life is on a mathematical continuum, right? It’s already started for all of us. We didn’t have a lot of choice in to when it began. We probably don’t have a lot of choice in it when it ends, but it’s finite and it will end, and during that time, maintain perspective. Recognize that this is your time in life to make an imprint in this world, in your community, with your families. The types of amazing things that you can do and changes that you can create in the world for the betterment of humankind, you have this amount of time to do it. If you maintain that perspective in the workplace in the corporate world that you live in, you will do great things. And it’ll help you ensure that you don’t make bad decisions.

The third is empathy. And I recognize that empathy and Dr. Francis, my academic advisor, would be rolling in his grave if I talked about empathy in the business school. But I actually believe that it is the foundation of most of the rules and most of the laws that you live. Human resources is all about empathy. If you don’t believe me go back and reread The Jungle. All the decisions about the environment and environmental controls and responsibility really come out of the question of empathy. And so the question becomes what are your morals? What are your ethos? What are the ethics that you live by and how do you bring them into the work environment and into corporate America?

So those are the three things that as I go through, and I’ll ask you questions, because that’s what I do. I’m a lawyer. I ask questions. I asked tough questions often, and I ask people, “Why? Why did you make that decision? What was it that went into the decision-making process? What was your motivation? What were the alternatives?” And you’ve got to be able to answer those questions to somebody like me to be able to feel good about the response.

Because I can tell you, again back to perspective, there are countless businesses that rose to the highest levels and were regarded as – and we’re going to look at one of them today – the model to follow that are no longer in existence. They’re on the wayside, in bankruptcy. And in the circumstances, we’re going to go through today, many of the leaders have been indicted and are doing time in jail. And that’s the reality of choices that we make. If we make the wrong choice, even under the ambiguity and umbrella of business, it can impact ourselves our lives, our families forever.

And so the other thing is a result of that in perspective recognize this: You’re going to have immense success in life. You’re going to be at the top, but you’re also going to fall. You’re going to stumble. You’re going to hit bottom. We all do and that’s OK. Because there’s Michael Franti tells you when the teacher’s in the room. And you’re going to learn amazing things when you grow back up and you rise back up above that. And you will and you can. It’s just perseverance, determination, and hard work. So keep an even Keel. don’t get too high in the highs, even here in Colorado and to low in the lows.

Cesar Chavez, a Poisoned Farmworker and Justice

So I want to talk to you about one of the first cases that I handled, and here’s a map. I represented a woman named Maria Chavoya. I was representing Cesar Chavez at the time. He called me up and he said, “Ray, can you come up to La Paz and talk to me?” And so I went up, sat down. Cesar Chavez was most amazing human being you can imagine. And we sat down, we started talking. What he was telling me was that there was this man who was working in the fields who died. He wanted me to take a look at it and he left a wife and four children. So, I said of course.

So, I went down and took a look at it. So what happened? on August 5, 1985. Mr. Chavoya was ordered into the fields to pick lettuce. He was working at Murata farms. He’d been working for six weeks straight, 12 hours a day, seven days a week, without breaks in the pounding heat of San Diego. The farm owner had had the farmed sprayed that morning with two pesticides and herbicides, Pydrin from Shell and Monitor 4 from Chevron. There’s a 24-hour requirement before anybody can be in the fields, after spraying.

Two hours later, his boss ordered all the farmworkers and pickers into the fields and begin picking, and they did. Within two hours. Mr. Chavoya started to get sick. By 3 o’clock, he stood up and he stumbled, like he was drunk, out of the field and he collapsed. The farm owner came over, kicked him, told his workers to get back to work. They went and got a van. They brought the van up and they threw him into the back of the van. Now this is organic phosphate poisoning. So now I’m going to ask you that question. What would you do? Farmer tells you to do one thing, your moral compass, your anchor tells you to do another. What do you think the farmer told Mr. Hitachi, who was the labor supervisor to do? Do you think he told Mr. Chavoya two blocks down the street to the clinic where they can reverse the effects of organic phosphate poisoning?

The farm is up here. They drove Mr. Chavoya two and a half, almost three hours, to Tijuana where they dumped him at a clinic, dead. A life that didn’t have to lose. They treated him like a dog. How many people would make that choice and decision? Mr. Hitachi had three kids. He couldn’t lose his job.

I represented the Chavoya family against the farm and against Shell and Chevron. The case against Shell and Chevron was that they knew that these two herbicides are used constantly, and they did testing individually for the effect it would have on humans, but they never checked the synergistic effect. If you take the two of them together, since they’re used with one another, what is the impact on human life? And what effect does it have? Both those companies began doing that analysis, still doesn’t do it enough. As a result of that case. Ms. Chavoya and her family will be taken care of for the rest of their lives, but the one they love the most is gone. They obviously will never see him.

Case Study: Lee Iacocca, Pinto and Cost-Benefit Analysis

How many of you when you’re sitting at the desk and you have an icon in an industry come up to you and say, “You know what? I want you to make a product for $2,000. I don’t care about safety. Safety does not sell. We just have to outdo the other side. We have to get these products out there so that the Japanese don’t overtake our industry.”

Here’s the guy. Lee Iacocca was the head of Ford in North America in the ‘60s. And at the time Toyota, Datsun – you guys don’t know what Datsun is – but all these all these manufacturers were dumping these, you know, cute, fun compact cars into the United States. And the fear was that the big three were going to go to the wayside and they had to catch up.

And so Lee says to his folks, “I want a car a compact car. I want it done within 24 months – norm was 48 to 50 months – I want it to cost no more than $2,000, and I want it to weigh no more than 2,000 pounds.”

And so his engineers went to doing that. Halfway through the engineering process, they realize there was a fault. There was a problem. And they raised the issue, but they’d already started tooling. This was Ford’s own manufacturing plant, but they had already started tooling and it was going to delay the production. The fix was fairly simple. An $11 fix. You’re the engineer responsible. What’s your choice? You got Lee Iacocca, your boss, telling you, “We’re not retooling. We’re going to do an assessment.”

Many of you may know what this assessment is, many of you may not but, this was the assessment: cost-benefit analysis. The benefits: savings – 180 burn deaths, 180 seropis burn injuries, 2,100 burned vehicles. At a unit cost, A few hundred thousand dollars we would have to pay out for each death, $67 would have to pay out for each injury, $700 would have to pay out for the cars. What’s the total benefit if we take those numbers? It turns out that it’s going to cost us $49.5 million to pay for the lives we’re going to take by failing to fix the car. Versus the cost: 11 million cars, 1.5 million light trucks, times $11 per car, $11 per truck. Multiply it out. It’s $137 million. It’s a simple equation. Let people burn.

The Pinto was a compact car that was a hatchback. That means that there’s no rear doors. It was being sold to middle America, $2,000 a car. The primary audience was hard-working men and women, most of whom had one or two children. Where do you think the children were sitting? So the defect was that any time there was a low-impact rear-end accident, this car had the probability, the possibility of incinerating. Going up in flames almost immediately because the way the manifold and the gas tank were designed. And that’s what started to happen.

Inferno after inferno after inferno, blew up. Kids sitting in back of the seat with parents trying save their child and unable to do so. So what happened? Based on those decisions, Lee Iacocca ultimately lost his job. All Pintos were recalled. Hundreds of millions of dollars were spent in litigation costs. Ford’s name was destroyed. Its reputation was destroyed for years and years and years. And the first corporate indictment for homicide in U.S. history in Indiana.

If somebody hit listen to that voice, if somebody had gained perspective, if somebody had an ounce of empathy, would they have made a different choice?

And as you see it’s so short-sighted. Because I can make a strong argument that if they had done the right thing, the shareholders would have been a hell of a lot better off. Ford would have beenbetter off. And the conscience of people would have been something that they could live with. And of course corporate America learned a lesson, right? Because we haven’t had any problems since. Firestone Tires maybe? I don’t know, Toyota airbags? And you know, the interesting thing is Ford was challenging and chasing VW. And of course, VW is a model of corporate responsibility.

Volkswagen Emissions Scandal

VW, they didn’t have a hybrid. So they wanted to figure out, “How can we compete?” So their idea was to bring in, and I’m trying to hit every academic area. So I want to get accountants. I want to get engineers. So we’re going to talk about computer people. So they said to the computer people, “Look we got to figure some way to defraud the United States government and to prove that our cars are more fuel-efficient than the hybrids are, so that we can sell them for a hell of a lot more money and gain a market foothold.” They sold 11 million cars that were rigged with a computer system that when they were tested, would pass tests with respect to emissions, but in reality they were putting up 40 times more toxic fumes.

How many of you as the computer geniuses that are asked to engage in a exercise to find a way to defraud, how many of you are going to say yes to that? And how are you going to find a way to say no? Well, you know when you look at that picture of your husband or your wife on the desk and you think about what you look at and night in the mirror, who you want to wake up to looking at in the morning, think about who you want that reflection to be. Ultimately, I’m going to ask questions. Ultimately, it’s going to be found out. Ultimately, you’re not going to get away with it. Not usually and not in the long run. So what happens here? How about that for a marketing monitor the marketing folks?

So what happened? You go home. “Hey, honey, how was your day?” “It was great.” “What is this about being charged with the fraud, you know diesel emissions Scandal?” Is this what you want your children to see when you come home that you were involved? Eight members were indicted. Two are doing serious time. I can’t ask questions. I represent sales people who lost significant amount of their income as a result of this. I can’t ask the questions of the people responsible because they take the Fifth and they’re in prison. So then how does that make you feel? He’s out of a job.

Kaiser Permanente and a Sexual Predator

You heard about sexual abuse, and I’ve been at the forefront of sex abuse from the very beginning. And you would think that you learn a lesson, right? So now I’m going to tap into those of you in health care and those of you that going into education.

One of the first cases I had involving sexual abuse was a decorated Marine who came out of the Marines in 1969. He was an endocrinologist. One of the world’s foremost endocrinologists. He dealt with children with diabetes and the growth hormone issues. In other words, at-risk children who already had a psychological makeup that was difficult for them to deal with as they fought through life. And he prayed upon them. And so as a part of the medical treatment that he gave them, he sexually abused virtually every single one of them. Thousands and thousands and thousands of kids.

By the early 1980s, and I think we could show ultimate in the ’70s, but by the early 1980s Kaiser Permanente and the partners were warned by several parents that their kids had been sexually abused. Now you’re the responsible person at Kaiser, right? You’re the head. What are you going to do? You’re going to do the right thing, right? You’re going to turn Peter Fisher into the police, you’re going to reach out to all the victims and try to see what you can do to help them through the issues that they are facing. I can tell you, I still to this day get countless emails and messages from victims of childhood sexual abuse that are adults today, thanking us for giving them a voice, for helping them stand up out of silence.

And I know you have an incredible program on behalf of human trafficking, slave trafficking which is unimaginable that it goes on at such high levels and is OK with so many people because it makes a profit.

And so at Kaiser they didn’t want to lose Peter Fisher, so what happens is they write a memo. Memos are always great. They might have been writing it to me, I don’t know and it says, “Another victim came forward. Peter fisher has been continuing to engage in sexual abuse. What do we have to do? OK, well, the first thing is we have to make sure that he’s no longer working with patients unless there’s a chaperone in the room.” Well, how about stopping him from working with patients? “We’re going to take the locks off the doors. And we’re going to wait, God forbid, for more victims to come forward.”

When I asked, “Where’s the requisition for the change of the locks?”

“Well, we never got to that.”

Where’s the notation to people that he can’t be in there without a chaperone? “Well, we never sent out a memo.”

Where’s the notation in his file that you talked to him? “But we didn’t talk to him.”

You never sat down with Peter Fisher and told him that several people came forward and accused him of sexual abuse? “No.”

So it continued for another decade until 1997 when Peter Fisher was finally indicted for childhood sexual abuse. He plead guilty to several counts and did time in Soledad. I actually had the opportunity to go up and visit him at Soledad and to question him about what happened and why, and how intervention might have helped protect other children.

So of course, this is an isolated incident right? I mean you have a Catholic church and you have Kaiser Permanente, a prominent hospital. The heads of the hospital are good people in other circumstances, but we’re not talking about one or two or three or four or five. We’re talking about over a 20-year period countless individuals who forgot to check into that voice and reasoned that there is some moral basis upon which to ignore and to essentially participate, active participants, in the sexual abuse of countless more children.

So now we go forward. Academia. what do we got? The entire gymnastics program in the United States decimated and gone. $540 million paid out by Michigan State. Those individuals that were protecting Nasser are all gone, all lost their jobs, at the height of their careers, at the top of the academic ladder because they didn’t make the right choice. They were doing what they were told to do. They’re all gone.

Baylor University, Penn State University and now USC where I represent several victims. At USC, there were several issues, but you had a doctor in the 1990s in the healthcare program who particularly liked Asian women. He would sexually abuse, sexually harass, engage in completely inappropriate conduct. There were nurses, there were doctors, there were administrators, there were teachers, there were heads of departments, and there was the the president of the university. All co-conspirators participating, in feeding him more and more and more young women whose lives have been seriously and significantly impacted and always will be.

They didn’t do anything wrong. It’s not their fault, yet they carry guilt with them forever. Because people that know better, people that teach us about morals, people that teach us about ethics, people that teach us about the right way of doing things failed that test. And now at the height of his career, he’s a disgraced former president and out of a job.

Defeating the Iraqi Oil Embargo

So, how many people going into oil and gas or the energy area? anybody? I am going to dump on you anyhow.

What is this? This is a check. This is a check from the Palestinian Investment Bank. Why do I have a check from the Palestinian Investment Bank up in front of me? This is a check that was paid, I think it was in 2004, to the families of a martyr suicide bomber who killed several people in a suicide bombing in Israel. What does that got to do with business? Saddam Hussein had upped the ante from what had previously been paid, and there’s a scale that exist as to how much will be paid for each limb is taken in a suicide bombing and ultimately for deaths. And in order to incentivize, he increased the amount and ultimately $25,000 was the amount.

The International Community obviously at some point in time clamped down on Saddam Hussein and they had the Embargo on Iraq and people could no longer trade with the Saudis. And it had a significant impact because during the period of time from 1997 until 2001 there were very few suicide bombings in the Middle East.

Then something happened. The impact was horrific in terms of humanitarian impact on the people of Iraq. Children, women, families, health, food. And so the United Nations decided to establish a food for oil program. The basis of the program is that all contracts with the Saudi government had to be approved by the United Nations and the United Nations Council.

There were penalties for those that circumvented those rules. There was a flaw in the system. And that was Saddam Hussein said, “OK, but I need to approve the contracts. I need to approve them and the Iraqi oil ministry needs to approve them.” All contracts.

And so what he did in order to circumvent the rules was he started to charge a surcharge. And it was well known. It was caught very early on. And so the surcharge began to develop for him a war chest. And as that war chest grew he began to pay for additional suicide bombings and that war chest continue from 2001 all the way up to about 2005 when ultimately the United Nations got a hold of it.

But they put out memos to all oil companies saying you cannot buy unless you come through us. And that was the way to ensure there wasn’t a surcharge. The way Saddam did it was he went through the Russians and the Turks and a couple of other groups of individuals and entities around the world and he would tell them what that surcharge was. And then they would take and they would sell to U.S. companies or other companies around the world in order to circumvent the rules. And that’s how they overcame the system. And so as a result Saddam amassed $1.8 billion, most of it held in the Bank of Jordan.

Here are the names and the lists of checks. I am involved in several human rights and terrorism cases. This is one of the terrorism cases that I’m involved in. I actually was going to show you a video, because we actually have video of Saddam’s people at bazaars in the Middle East handing out the checks almost like Vanna White – do you know who Vanna White is? Here’s the check number the date of the check the amount of the check who was the beneficiary’s name, the martyr’s name, the residential area and the extra information about it.

So why am I talking to you about that? Chevron. The oil that comes out of Iraq is particularly adept for their refineries. And so Chevron began buying oil through these intermediaries despite international law, despite U.S. law despite all of the warnings that they were given, they were buying oil from brass companies that never bought oil in their entire existence. And they actually were caught on tape where one point in time one of the traders is on the phone with one of these intermediaries from Russia and they, by mistake, the intermediary gave the price of the surcharge. And then he was asked, “Well, do we pay the lower price for the surcharge price?” “It’s okay. Just go ahead and pay the surcharge price.”

And so Chevron made millions and millions and millions of dollars during the time that the United States had determined that it was illegal to trade with Saddam Hussein and that money from the Russians, into the bank of Jordan, into the bank of Palestine, into the homes of the martyrs who took the lives of a number of people.

Corporate America: You’re that trader. What are you going to do? How do you say no? What’s your answer going to be, because you’re going to face this, trust me. Maybe not all at this level, but you’re going to face things are distasteful. You’re going to have to make choices, and if you make the wrong choices, I or somebody else is likely to ask you some tough questions. And in this circumstance, final judgment, they paid a nominal fine of $30 million. The trader is no longer working at Chevron. He did his duty, but he’s gone.

Coopers & Lybrand Auditing Scandal

So now I want to talk about accounting. Coopers & Lybrand Accounting. There’s a requirement in accounting that if the company you’re working with has SEC requirements that there are certain things that you have to do in certain barometers. I’m not going to bore you with all the details of it, but you have to meet certain requirements.

So there’s a company called First Pension. First Pension was into trustees in the sale and resale of secondary interest and third-level trustees. And they had the pensions of 300 and some odd people, their entire life savings. And what they were doing is they were taking it and investing it, but things start to go south. And so what they began to do is to take money from one entity. They created another entity. They put it over there and when the audit was coming, they put enough money to pass the audit and then bring it back out to a related entity. There’s a related entity analysis you have to do as an accountant, and they were actually done and they actually noted the related nature of these transactions and the fact that without the transaction they would be an SEC reporting requirement. But do you think anybody from Coopers & Lybrand actually reported it? No.

And so in 1984, Coopers & Lybrand began, seeing and understanding completely in their audits, the lies the theft, the fraud, the Ponzi scheme that existed. And rather than reporting it rather than refusing to do the audit, they stamped OK, OK, OK. They did it in ’84, ’85, ’86, ’87, ’88, all the way up to 1993, when the primary wrongdoers were finally indicted and imprisoned.

I had the auditor on the stand. “Why did you change this number from a negative, meaning a reporting responsibility, to a positive?”

“I don’t know.”

“Well where your where your records?”

“I don’t know.”

Turned out that they had destroyed all the records when we filed the lawsuit associated with this particular audit. There’s penalties for destroying records during a lawsuit.

During the middle of the trial, there was an expert from another major accounting firm. He takes the stand and he’s testifying. I say, “You know, we didn’t get those documents that he’s talking about.” So I asked the judge at a break. I said, “Judge can you order him to turn over the documents that we were supposed to be provided with?” And he says, “Sure Mr. Coyote,” – name is not really coyote but it related to animals. “Mr. Coyote, you know at lunch go get your computer and bring it over want to see it.” “Okay.”  Lunch, he comes back, you’ve got a judge order, you think he brought it over, right? No. He forgot it, and then he got sick and he went home.

So he brings it the next morning and I have a computer expert with me. We take it we look at it. We see that he has destroyed on his hard drive a significant number of documents. And of course the other side said, “Oh, no, he never did that.”

So they bring in this guy from Houston literally the same day on a private plane with a whole bunch of Apple computers and they’re all colored differently. This is when they had the big screens that were all like football helmets, all these multiple colored things. They wheel the computers into this this the conference room and they check the computer and they wheel it back out. He gets back on a plane and they leave, and the next thing we know is there’s a criminal lawyer here on behalf of Mr. Coyote who’s going to defend him against the possible criminal charges he’s about to face.

So now you have an auditor’s lost his job. An expert who’s disgraced himself and lost his job. You have a jury that has spent seven months with us going through all these documents in Orange County, conservative area. At the end of the case 19 separate counts of fraud, malicious conduct, punitive damages. Decisions that you make.

Enron and Energy Fraud

Finally, one of the corporate people we were talking about earlier, Enron. So right after the Coopers & Lybrand case, I began looking at the energy crisis in California. The Governor and the Attorney General, everybody was saying, “Oh there’s nothing we can do, there’s nothing happening.” And I and the other lawyer who was working on that of the case, we began Morning, noon, and night, reviewing thousands and thousands and thousands of thousands of documents. It was very clear what was happening. There was manipulation, an intentional manipulation of the entire process, which was causing the blackouts. And Enron which was on the front cover of Worth magazine as the darling. This was the Wall Street darling. This is how you wanted to run your corporation, went from nothing to billions of dollars’ worth of net worth.

All based on fraud, all based on Ponzi schemes and what they did in California was they engaged in these processes in the “Death Star.”

You may not know so much about the reference to the two atomic bombs that were dropped on populations. And then “Ricochet” is where they were engaged in manipulation, where they take energy send it outside of California, you know at a lower price, that was capped, and then they would bring it back in a high price.

What they were doing with with “Death Star” is that the in California you have two transmission lines that goes to three transmission lines that goes back down to one transmission line in a really populated area. And so it creates congestion. So what Enron says is, “OK, we don’t actually have any energy but we’re going to post energy anyhow, because the ISO is going to have to pay us a premium above and beyond the actual cost of energy for us to take it off.” So they would take phantom energy, putting it on and making millions and millions of dollars.

And what did Skilling tell his Traders? Skilling was a bad guy. He just got out of prison. He’s on house arrest, He’s got a bracelet on his ankle. Not what he expected back then but anyhow, Skilling, bad guy. One thing he said to everybody is, “15 percent of everybody that works for me gets fired, no matter what every year. I don’t care whether they’re doing their job correctly or not, they’re fired.” Secondly, he said, “If you can’t trade in California, I don’t care. If you can’t trade in California, if you can’t manipulate that market, if it’s a problem for you, you shouldn’t be here. Go get another job. You can trade pork bellies on the Chicago Exchange.”

Millions upon millions upon millions of dollars gone. Janitors who worked for that company and invested all of their money because that’s what Skilling and Lay told them to do. As Skilling and lay were taking money out they were telling all these janitors and all these low-level workers to put all their money back in. They lost everything. California lost billions of dollars. And so when we sued them, we where ultimately able to get those companies to renegotiate their contracts and we were able to recoup somewhere in the neighborhood of $4.5-$6 billion back to California.

So how would you like to go home and show this picture to your wife or to your kids? He lost his moral compass and those people that work for him didn’t have the courage to stand up. They couldn’t find their voice.

Truth in Organic Labeling

Now I want to bring it to a local flavor. I’ve represented some individuals who had bought herbs from Herb Time. Herb Time was one of the largest herb producers and distributors in the country, and they had a hundred acres that was dedicated to growing USDA-certified organic herbs, and they had 500 acres that were for conventional F=farms. When Supply lagged behind demand, what do you think Herb Time did?

Well, there was a case out of Aurora Dairy here in Colorado where a judge said, “You know what? If it’s USDA and it’s been stamped that’s preempted then there’s nothing anybody can do about it. You can’t bring a lawsuit. You can’t fix the problem. It’s USDA’s problem.” And so everyone around the country refused to take cases and bring lawsuits to try to correct behavior based upon that decision.

We looked at it and I thought the decision was poorly reasoned. I thought it was poorly written and I thought it was interpreted incorrectly. And so we brought a lawsuit on behalf of people that have purchased from Herb Time, because what we found out was this: They would take herbs from the farm in Ventura, which is the 500 acres, they would truck them down to Orange County, which was a 100-acre farm, and they would just mix them together. You know, no big deal just put them together and send them out as though they were all organic. Even though these were laced with pesticides, these were allegedly organic.

And it is interesting thing. I got a knock on my door at the office one day and here comes the entire USDA enforcement division because they saw this lawsuit that we filed. The entire division! Now how many people have seen Good Morning Vietnam? Anybody? OK So in Good Morning Vietnam, there are these two great characters, there are twin brothers and they are the ones that are censoring the information going out right? If you remember when Robin Williams is about ready to grab and go out because he’s pissed off at what just happened and talk on the air, these two brothers are trying to censor what he is supposed to do.

So the entire USDA enforcement division wears these two guys, I am gonna call them Billy and Bob. And they look like the two characters out of Good Morning Vietnam. And they sat down in my office and they say, “We need your help. We’re it.”

I said, “Well, what do you mean you’re it?”

“We’re it for the entire United States.” Really? “For Organics, doesn’t matter whether it’s meat, fish, herbs milk, we’re it. We’re the entire enforcement division.”

So I provided them with the information that they needed and whether or not they were able to do anything, I don’t know but herb time is now out of business. What did we do? We brought the lawsuit. This is Aurora Dairy – that was my pun by the way, local flavor. And the California Supreme Court and Quesada versus Herb Time. It took us 10 years to bring this case. We were in federal court, knocked out of federal court, in state court, knocked out of state court, back in state court.

The judge Karl West is a, I like to kid him about this decision because, when he threw us out, he had something funny to say, and so now I get the upper hand and the upper laugh. But as the court said, to buyers and sellers alike, labels matter. They serve as markers for a host of tangible and intangible qualities, consumers may come to associate with a particular source or method of production as misrepresentations of labeling undermined this significant function, preventing consumers from correctly identifying the goods and services. They carry the attributes they desire while also hampering honest producers attempts to differentiate their merchandise from the competition.

Making Moral Choices

What’s best for shareholders? Does ethics and ethos matter? think about it. If the person at Kaiser was sitting at home and they saw Peter Fisher begin to sexually abuse their child, would have had the same result? In every one of these circumstances, if you take it out from the umbrella of the corporation and you put your name on it, and you think  about as you look at that picture on your desk, instead looking at the newsreels. Because when we think about what’s happening when we think about the worst, “Oh my God, I’m going to lose my job. I lose my health benefits. What am I going to do? I have to support my family.” Those are all legitimate concerns and fears.

But also play through the end game. The CNN ticker that says you’ve been in prison for fraud because that VW computer person, he’s in jail. Not the people who forced him to do it. Time and time and time again, you’re going to be faced with these decisions. And so, you know, I’ve had an incredible life and I love every aspect of what I do. I look at you. I look at my son’s Raymond and Matthew, and I know that you are the greatest generation. You will do great things in this world. The opportunities, the intelligence, the ethos that you carry with you right now is just above and beyond anything that my generation or any generation before me has faced or ever seen.

And so understand the tremendous opportunities that you have at your hand and the incredible things that you will do. And when you’re on top, don’t get too enamored with that, and when you hit bottom, don’t let it take away your heart. Because you will bounce back from both of those, highs and from those lows. As you go forward in life make those moral choices. Make those ethical choices and always go back to find your anchor. Because your anchor will never steer you wrong.

Thank you very much.