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State Street Bentley University Business Ethics and Corporate Crime

Universities in the United States don’t teach corporate crime.

Instead, they teach business ethics.

One reason — corporations increasingly are funding the ethics programs.

And the corporations want to keep the focus positive (business ethics), not negative (corporate crime).

Take the case of the Center for Business Ethics at Bentley University in Boston, Massachusetts.

You have your Bentley Center for Business Ethics Verizon Lectureship. (Verizon fined $370 million since 2010 for everything from worker health and safety violations to False Claims Act violations.)

You have your Bentley Center for Business Ethics Raytheon Lectureship. (Raytheon fined in 2013 $8 million for export control violations.)

And most prominently, since 2005, Bentley and State Street have teamed up to create a “partnership in global business ethics.”

Earlier this year, State Street paid $64 million to settle criminal charges that the company defrauded bank clients by secretly applying commissions to billions of dollars of securities trades.

State Street entered into a deferred prosecution agreement to settle the criminal charges. (State Street promised prosecutors that it would display the agreement and statement of facts “conspicuously” on the company’s web site. Instead, the company put the link to the documents at the bottom of its home page.)

The Justice Department said that State Street engaged in a “concerted effort to fleece its clients by secretly charging unwarranted commissions,” that it “fundamentally abused its clients’ trust and inflicted very real financial losses” and that “State Street cheated its customers by agreeing to charge one price for its services and then secretly charging them something else.”

Recently, two former State Street executives — Richard Boomgaardt and Edward Pennings — have plead guilty to criminal charges in connection with the case.

A third executive, Ross McLellan, has plead not guilty and is scheduled for trial October 23, 2017 in Boston.

Since 2010, State Street has paid $740 million in fines and penalties to federal authorities to settle criminal and civil charges. 

A State Street spokesperson refused to say how much State Street pays to fund the ethics program at Bentley, explaining  that because a reporter’s focus on corporate crime, it sounded as if the resulting article was going to be “negative.”

Bentley spokesperson John McElhenny refused to say how much State Street pays to fund the program.

Every year, Bentley holds a Global Business Ethics Symposium featuring a State Street executive.

The keynote speaker at this year’s symposium was Rakhi Kumar, who sits on State Street’s Corporate Responsibility Working Group.

At her keynote, Kumar didn’t mention the ongoing criminal case against State Street and its executives.

Patrick Burns of Taxpayers Against Fraud says that State Street needs to get its priorities straight.

“A lot of companies seemed confused about what to do to get on the straight and narrow path,” Burns said.  “I am not sure why.”

“We know incentives work to promote integrity, and that personal consequences work to stop fraud. And yet, if we look around, we find that whistleblowers are too often isolated, humiliated, and terminated, while the folks who design and operationalize frauds keep their jobs, promotion, bonuses, and stock options. All the incentives run the wrong way.”

“Turn those internal incentives around, and you change corporate culture overnight. It’s not complex or mysterious, but it’s not being done because, as Upton Sinclair observed, ‘It is difficult to get a man to understand something, when his salary depends on his not understanding it.’”

More articles by:

Russell Mokhiber is the editor of the Corporate Crime Reporter..

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