Mini-Madoff Scandal Scales New Linguistic Heights
R. Allen Stanford, head of Stanford International Bank, has been charged with fraud by the SEC.
Another day, another Ponzi scheme. Stanford’s take: $8 Billion. Not chump change, of course, but neither does it put him in Madoff’s league (up to $40 billion).
I think I shall call him mini-Madoff.
But the Stanford scandal has set a linguistic record—a record for creative disingenuousness. According to Securities Docket:
…one of Stanford’s own lawyers has emerged as a key figure in the matter. Bloomberg reports that last week, Thomas Sjoblom, a partner at law firm Proskauer Rose doing work for Stanford’s company’s Antigua affiliate, told authorities that he “disaffirmed” everything he had told them to date. According to his bio on his law firm’s website, Sjoblom spent nearly 20 years at the SEC, and served as an Assistant Chief Litigation Counsel in the SEC’s Division of Enforcement from 1987 to 1999.
“Disaffirmed” (italics mine). Doncha love it?
I hereby nominate “disaffirmed” as the new leader in the “Mistakes Were Made” category at the forthcoming Creative Language awards ceremony.
This is no trivial honor. It outpaces such classics as “the dog ate my homework,” “I have no recollection,” and “it depends on what the meaning of the word ‘is’ is.”
In my humble opinion, the only one that comes close was “modified, limited hangout” from the Watergate days.
It is a distant descendant of the old IBM (or was it GE?) culture that used “concur” and “dis-concur” as part of its decision-making process. But that was for standard business processes; this is for excusing $8 billion of malfeasance—clearly vaulting the term into another category altogether.
Sjoblom, a 20-year SEC employee, originally affirmed certain facts to his old employer. Enquiring minds want to know–where did he learn “disaffirm?” Was it at the feet of Stanford? Did he bring it with him from the SEC? Was he–oh, this is juicy–speaking Ponzi-talk? Or was he talking bureaucrat-speak?
And what’s to make of the syntax? Does it truly confound logic, as in "have you stopped beating your wife?" Or is it just a fancy "I lied?"
Never mind–let’s be practical. Where else can we put this word to use? After all, if you can undo a legal affirmation by using it—why, the sky’s the limit!
- That affair I had back when I was married? I’d like to disaffair it, please.
- Remember when I said I’d pick up the tab? Distab that, if you don’t mind.
- The vows we made at our marriage? Disavow them, please (oops, that one’s a real word). Yes, I know I said "I do," I’m just saying "I dis-do."
You get the idea.
Language evolves marvelously to fit the circumstances requiring description. So it is here. Double-talk is as double-talk does.
Mini-Madoff financially, perhaps. But in a league of its own in AOL—Abuse Of Language.
I think you are being a little harsh on a guy who was in a tough situation, but did the right thing.
As a lawyer (and presumably trusted advisor) Sjoblom had ethical obligations to his client. Stepping down from representation is difficult and filled with ethical and legal landmines.
Sjoblom can’t just say: " I found the operation was sham and my client was lying to regulator." That would be unethical and damaging to his client.
Clearly, he saw something was wrong. Rather than continue representing Stanford (and raking in the legal fees), he stepped down and removed himself. With the limited facts in the news, it seems he was presented with a difficult ethical choice. I think we should give him the benefit of the doubt.
Also, before we call this a mini-Madoff we need to find out how much has been lost. The $50 billion figure was a statement from Madoff. I do not think we have discovered how much is missing yet. Similary with Stanford, nobody has figured out how much is missing.
Doug,
Thanks for the thoughtful comments; you force me to be more precise and clear, never a bad thing.
I don’t mean to impugn Sjoblom’s motives–merely his use of language. "Disaffirm" strikes me as Orwellian, 1984-ish, the epitome of obscurantist. And of course I added speculation about the provenance of his linguistic choice–bureaucracies and shady schemes both being fertile ground for the use of such language.
Thanks for the chance to clarify–for all I know Sjoblom was operating in full ethical mode, and my only issue is his choice of language.
Also, I’m sure you’re right that the Madoff numbers will end up below $50B–they included fake earnings on fake earnings, etc. Still, I suspect it’ll be in the 11-digit range.
But let me pursue the question you raise. You characterize him as "lawyer (and presumably trusted advisor)." I myself would never make that presumption about a lawyer I never met. In fact, to be perfectly honest, IMHO–and I’ve met quite a few–"lawyer" is not the profession most likely to be associated with the term "trusted advisor." And a lot of the good lawyers I know would agree.
Secondly, every time I hear "ethics and compliance" joined together casually, I get a little noodgy. For example, when you say–
"Sjoblom had ethical obligations to his client. Stepping down from representation is difficult and filled with ethical and legal landmines…Sjoblom can’t just say: " I found the operation was sham and my client was lying to regulator." That would be unethical and damaging to his client.
–I immediately ask "what is wrong with this picture?"
Yes, there are ethical questions about the relationship between a lawyer and his or her client. But there is a far bigger ethical question: How does a lawyer justify the continued tacit support of a multi-billion dollar ripoff of (some, anyway) innocent investors?
The huge ethical issue facing such lawyers–and the SEC, and regulators in general–is the difference between ethics and compliance. Part of Madoff’s genius was in exploiting the gray areas between the various laws and regulations concerning compliance. Part of the maddening thing about the SEC in all these cases is that they can always explain, after the fact, how rules were followed, no rules were broken, they were always in compliance, the boxes were always checked. Harry Markopolis’ testimony before congress provides vivid examples of how a purely compliance-focused approach to enforcement virtually begs for unethical behavior–he gives great examples of how audits ought to be performed.
"Compliance" too often is taken as a surrogate for ethical behavior, and what I want to point is that when Stanford contributes millions to politicians and the SEC is fully compliant, but Stanford continues a scam for years while the SEC pursues its compliance activities–well there is an ethical issue. And it’s at least as incumbent on people like Mr. Sjoblom, who presumably has access to the info he’s affirming, to raise those ethical issues, and not just stick to the comparatively narrow area of "legal ethics." "Disaffirm" is the kind of language that reflects that moral confusion, in my view.
When you can say, as if it’s obvious, that Sjoblom "can’t just say my client was lying to the regulator," there is not just one ethical issue, there are two. And by far the larger issue is how does the legal profession square its ethics with billions in financial destruction for investors?
This is akin to the dilemma facing anti-abortion physicians, and physicians facing the Christian Scientist parents of gravely ill children. There are ethical issues, and they’re important, but they need to be seen in a larger ethical context; sometimes compliance is a distraction to such issues.
Or so it seems to me. Forgive the rant, Doug, you raise some really big issues. And I’ve subscribed to your tweet, and will to your blog as well.
Your blog, your right to rant.
Of course you are right to point out that lawyers are often not trusted advisors (speaking as a lawyer). Lawyers are often kept as arm’s length.
I do not know enough about Sjoblom’s stepping down or his situation to comment much on the situation. I am guessing that he saw something bad and wanted to get away from it. I would give him the benefit of the doubt and assume that he was trying to remove his tacit support of Stanford. He may have been kept at arm’s length and not seen the Stanford scam.
He may have been trying to save his own neck as well. Lawyers, accountants and other advisors (trusted or not) are often on the hook for lawsuits from disgruntled investors.
I agree that "dissafirm" is a weak term and has some moral confusion. I believe his ethical obligation, as a lawyer, limits his ability to make a strong statement. But I think "dissafirm" is enough to remove his support from Stanford.
Compliance versus ethics. I was not trying to equate the two and was not trying to casually joining them together. I agree wholeheartedly with you. Being ethical and being compliant are not the same thing. Complying with the law is not the same as doing the right thing. Compliance programs can be a distraction from seeing the underlying problems.
Legal ethics is a tough area. I do not think most lawyers to scammers knew that their clients were undertaking such nefarious activity. I think most lawyers would end the representation if they knew there was illegal or unethical behavior. To circle back to your earlier point, lawyers are not always trusted advisors and don’t have enough information from the clients to know what is really going on. I would expect that scammers would keep lawyers at arm’s length, giving them just enough information to move the paper.
Well, the Sjoblom story has certainly had legs.
He has now (October, 2009) resigned from Proskauer Rose and is facing suits of his own, to the general effect that he was in on this from the get-go. (More details at, for example,
http://lawshucks.com/2009/10/sjoblom-resigned-from-proskauer/
I did think something was fishy here: as I said above, "Yes, there are ethical questions about the relationship between a lawyer and his or her client. But there is a far bigger ethical question: How does a lawyer justify the continued tacit support of a multi-billion dollar ripoff of (some, anyway) innocent investors?"
Doug Cornelius above was far from the only person to assume Sjoblom did the right thing, the difficult thing. Most commentators at the time drew exactly the same conclusion: a tough call to be a whistleblower in the face of legal ethical concerns.
The question is: how’d they get it so wrong?
Why isn’t the case of a whistle-blower not obviously distinct from a case of a disgruntled co-conspirator?
What is there about legal ethics that makes it hard to distinguish evil-doing from good-doing?
My tentative answer is: the definition of legal ethics is far too abstract; we need more commonsense, in-your-face, if it looks like a duck and quacks like a duck, for gosh sakes lets talk about ducks.
Charlie –
This will be a long saga. Sjoblom worked for the SEC for 20 years. Even with the problems at the SEC, 20 years is a lot of public service. That makes me give him the benefit of the doubt.
I would imagine that continuing at the firm was very difficult for him. They were both parties to the suit. At some point, the firm will need to place the blame solely on Sjoblom to distance itself from liability. That’s hard to do when that person is a current partner in the firm.
I think the resignation was inevitable and does not change my view.
I still don’t have a sense of how much he knew or willfully ignored about the actions of Stanford. Of course he could be a disgruntled co-conspirator instead of a whistle-blower. That was always a possibility.
But lawyers rarely have much of a view into the finances and monetary shenaningans of their clients. Lawyers draft the documents and shuffle papers that may help with fraud schemes, but the fraud is more on how the money is actually moved and little in the documents. In hindsight, the documents may show some fraudulent activity.
You are right that legal ethics makes it hard to distinguish evil-doing from good-doing. In part, that is because your client may be an evil-doer.