White collar crime in the New York Times

I was wrong: my report

on the death of the New York Times magazine was, as they say, exaggerated. In

fact, the latest issue is the best magazine of any description I’ve read in

many months, if not longer. There are still weaknesses, of course, but the beating

heart of the New York Times magazine – the feature well – is as

strong, this week at least, as any issue of the New Yorker you might care to

mention over the past couple of years. The June

6 issue, called "Money 2004: The Moral Quandaries", would, if

there was any justice in this world, win a National Magazine Award; unfortunately,

it’s not

eligible.

There are weaknesses, of course, starting with the cover, which is a bad idea

badly executed. The photography in general could be punched up a lot, and the

Style pages in particular need a lot more imagination. ("I know –

for an issue on white-collar crime, let’s take black-and-white photos of models

in trenchcoats being escorted down courthouse steps!") And the two profiles

from new staffer Jon Gertner read like the puff-pieces one might expect from

a writer who has just jumped ship from Money magazine: they’re starry-eyed about

these men’s ideas not because the ideas are so particularly amazing, but because

the men are rich and successful.

But that’s nit-picking. The rest of the book is good, starting with a thought-provoking

essay

on the spending habits of the poor from Adrian Nicole LeBlanc, who famously

spent years following the lives of an extended family in the Bronx. One day,

she followed one family member as she did her supermarket shopping, seemingly

without any regard to saving money or maximising value:

It wasn’t that Lolli didn’t know she was poor; it was that she couldn’t

see her way to being anything but. Perhaps it was the justness of her disregard

for the future that shocked me to the core — the surrender of tiny, mitigating

hopes; perhaps I instinctively realized at that moment that the plodding strategies

that had saved me could never do enough good for her.

The essay is echoed,

66 pages later, by former New York Times restaurant critic William Grimes.

In the 1930′s, when nearly a fifth of England’s working class was on the

dole, a helpful newspaper ran an article explaining how a family could eat

a healthy diet on the approximately 30 shillings a week that the government

paid in unemployment benefits. George Orwell analyzed the shopping list and

the menus that had been calculated to the last halfpenny and admitted that

the writer had done his homework. A family could survive, just barely, on

the dole. But only a theoretical family. What the writer failed to take into

account, Orwell said, was the need to break routine, to reward oneself with

a treat, something ”a little bit ‘tasty,”’ and hang the cost.

The two pieces are talking about very different things, of course: Lolli wasn’t

treating herself in the present, really, so much as she was refusing to subject

herself to rigorous fiscal discipline for the sake of a future which she wouldn’t

have in any case. But both are interesting meditations on the uniquely fraught

nexus between food and money, and the way in which spending the latter on the

former seems to bring out the worst in a certain kind of middle-class observer,

who considers it, essentially, to be unethical.

Ethics, indeed, is the theme running through the whole issue, and it’s

addressed

directly by Rob Walker in his regular column on consumer culture. This week,

he looks at Fair Trade coffee, and asks whether its sales (30 million pounds,

roughly, in 2004) are high (up from 2 million pounds since 1999) or low (just

5% of premium coffee sales). The bigger question, of course, is whether it’s

possible to sell ethics – a question addressed at some length by Michael

Lewis, who neatly

stilettoes one Kellie McElhaney, who teaches Corporate Social Responsibility

at the Haas School of Business at the University of California, Berkeley. Her

students recommended that Birkenstock ditch most of their good works and

put all of their energy into a single very public act that connected up naturally

to footwear. They shrewdly recommended that Birkenstock sponsor walks for

causes. The cause did not matter so much as the fact that potential customers

would be walking many miles on its behalf, and, somewhere along the line,

encounter a giant sign that said birkenstock.

Lewis, as ever, is a master of the narrative journalistic form, even when there’s

really no narrative to tell. But he can certainly structure an argument: at

the beginning, you can kind of see the point when McElhaney says that "I

don’t think unprofitable corporate goodness is sustainable" – after

all, if you don’t make any money, you can’t give it away. By the end, however,

Lewis has dug deeper:

The instinct to give quietly to a pediatric AIDS foundation is second cousin

to the instinct not to use slave labor to make your shoes, or not to manipulate

your earnings. It is part of a struggle against the market’s relentless pressure

on the business executive to behave a bit too selfishly — to become one of

those corporate villains whom investors can one day profitably sue.

And one of the reasons why we find this compelling is precisely because, elsewhere

in the issue, Bruce Porter has spent 7,400 words following

Jay Jones, a common-or-garden white-collar criminal, on his way from his mansion

to the big house. There’s a slight twinge of journalistic earnestness to Porter’s

piece: we’re told that he teaches at Columbia Journalism School, and sometimes

his obvious diligence can be a little holier-than-thou, if you’ve ever done

any journalism yourself. But in one quote, from defense lawyer Benjamin Brafman,

he manages to cut to the chase of exactly what it is about white-collar jail

sentences that separates them from the majority of prison terms.

As a rule, he has noticed, the more unassailable a person’s background, the

harder it is for him to take the fall. The boiler-room shark, the Mafia interloper

in the business world — they seem capable of accepting punishment as just

a disagreeable cost of doing business. But, Brafman says, ”when a person

with an impeccable history, with no prior experience in the criminal-justice

system, suddenly finds himself under investigation or under indictment, his

world completely collapses around him. It’s much worse than being told you

have a terminal illness, because when you’re told you have a terminal illness,

everyone who loves you rallies around you, and all of your friends and family

offer support and compassion and help because they recognize they might soon

lose you. But if you’re suddenly indicted, you’re a pariah. You bring embarrassment

and shame into your home and into your extended family. You lose your business;

you lose your money; you have the possibility of going to prison. The life

support you counted on for your entire existence begins to disappear. It’s

a terrible, terrible thing. I’ve seen middle-aged people in my office grow

old in front of my eyes. And I don’t think anyone ever recovers from the experience.”

Now, that, admittedly, is a defense lawyer speaking. But we’re given the opposing

side of the story at some length, in a first-person

account by Mark Costello of nine years prosecuting white-collar criminals.

We get the full range of outcomes here: Jamie Olis, the former Dynegy director

now serving 25 years for a crime which didn’t really enrich him at all; contrasted

with the multimillion-dollar fraud, which took more than three years to fully

unravel, and which ended in a non-custodial sentence because the fraudster had

a sick son.

We know that sentences for white-collar crime are a crapshoot: the crime is

usually incredibly hard to prove, and juries don’t like to wade through the

intricacies of hugely complicated frauds. And as Costello notes, even if you’ve

been able to bring a case to court, and the defendant has been found guilty,

the sentence can often amount to little more than a slap on the wrist.

Which is why I don’t shed too many tears for Jamie Olis, or for Martha Stewart,

if and when she ever goes down. It’s not that what they did, specifically, was

deserving of whatever sentence they will receive. But someone has to

be convicted and locked up for something, or else fraudsters –

who already have more de facto impunity than virtually anybody other than third-world

dictators – will simply have no incentive whatsoever to cease committing

their crimes. Here’s Brafman again:

Other kinds of business-class fraudsters, he says, become so successful and

powerful that they can’t imagine that the laws applying to others are also

meant for them. ”I’ve met people in different professions who are simply

stunned by the suggestions that they are subject to prosecution, that they

could end up in jail and the government would have the temerity to take them

on.”

What kinds of business-class fraudsters could he be talking about? Surely CEOs

– the Ken Lays and Dennis Koslowskis and Martha Stewarts of this world,

members of the G-V classes who sail above the real world in a bubble of wealth,

power and privilege. If you can’t get them for their crimes, then by all means

get them for their cover-ups. Martha needs to do time, simply to put some fear

into her fellow CEOs.

The best piece of all in the magazine, however, doesn’t look big, it looks

small. Stephen Dubner and Steven Levitt have found an absolute gold mine in

Paul F., a trained economist who now runs a bagels-and-doughnuts service for

local offices. His business runs on the honour system: throw a buck in the box

for a bagel, or 50 cents for a doughnut. And, of course, he’s kept detailed

data on delinquency rates, which go up when the weather is bad, or Christmas

is nigh, or even when the office exceeds a certain size. There are some wonderful

results:

He says he believes that employees further up the corporate ladder cheat

more than those down below. He reached this conclusion in part after delivering

for years to one company spread out over three floors — an executive floor

on top and two lower floors with sales, service and administrative employees.

Maybe, he says, the executives stole bagels out of a sense of entitlement.

(Or maybe cheating is how they got to be executives.) His biggest surprise?

”I had idly assumed that in places where security clearance was required

for an individual to have a job, the employees would be more honest than elsewhere.

That hasn’t turned out to be true.”’

But wait! As they say, that’s not all: this issue of the New York Times magazine

also includes Augusten Burroughs overdosing

on credit cards and alcohol; a photo

essay on people fired from WorldCom; and – to top it all off –

Paul

Krugman laying into Alan Greenspan.

It’s not often I write good things about the New York Times, and I’m sure I’ll

go back to bashing it in short order. But credit where credit is due: this one

issue of the Sunday magazine is absolutely magnificent: top-notch. If the editors

can maintain this kind of quality week in and week out (which I have to say

I doubt), it will certainly be one of the best magazines in America today.

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One Response to White collar crime in the New York Times

  1. More on Freakonomics

    Felix Salmon added an interesting comment to my recent entry, a review of Freakonomics by Steven Levitt and Stephen Dubner. I thought I’d respond to it here, rather than in another commment. Here’s what Felix wrote…

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