Guest commentary: Florida institutions carry a smell of ethical lapses

There’s a nasty ring of corruption around Florida’s white collar these days. It’s so obvious and we wear this shirt so often, we must like the fashion.

The former chair of the Republican Party of Florida has been indicted for fraud, theft and money laundering. A former speaker of the house is about to stand trial on grand theft charges. Florida has perhaps the most high-profile securities fraud cases in the nation, including well-connected lawyer Scott Rothstein and Art Nadel, the disgraced Sarasota money manager. For the last four years, Florida has ranked number one in the nation for mortgage fraud.

From the halls of the Legislature to the board rooms of major corporations to the back offices of subprime mortgage mills, Florida is in the midst of an unprecedented and pervasive ethical crisis. The question is why?

Over 50 years ago, sociologist Donald Cressney coined the term “fraud triangle.” In order for organizational fraud to occur, three factors needed to be present — motive, opportunity and rationalization. This same theory can easily explain why white collar crime is a boom industry in Florida today.

Money is clearly the motivation. But why does Florida present such a ripe environment for fraud? Let’s break it down into the four primary sectors where the fraud occurs: politics, financial services, health care and real estate.

In politics, it is Florida’s often chided pay-to-play culture and a weak state Commission on Ethics which has limited power to regulate state and local public officers.

Florida is home to a high number of Medicare and Medicaid beneficiaries participating in an antiquated method of reimbursement that works on the honor system and lacks effective internal controls when honor doesn’t suffice.

Ponzi schemes thrive in a state where the wealthy flock to limit their income tax burden. Maybe it’s too much sun, but otherwise savvy “qualified” investors fall prey to scammers, and regulatory agencies seem incapable of keeping pace.

Finally, Florida’s real estate boom created a frenzy of mortgage fraud and the subsequent failure of many lending institutions. There was clearly a lack of self-control, but regulatory agencies that might have protected amateur investors and shut down the scammers were nowhere to be seen.

Regulatory reforms and law enforcement initiatives are by their very nature reactive measures that fail to address the core issue — we allow these ethical breaches to occur because we rationalize them away.

As long as our culture permits the rationalization of misconduct, there will be those individuals willing to exploit the current opportunities to satisfy their insatiable greed and ego. The Greek philosopher Epictetus said that “prevention is better than cure,” illustrating that the only way to effectively combat the current white collar crime crisis in Florida is to address our own ethical lapses. Ethics is the foundation of all law, and when ethical misconduct is tolerated it simply escalates from intent to criminal conduct. We must sweat the small stuff and create a culture of integrity. It’s up to us to decide not to wear the stain of ethical failure.

Latour “LT” Lafferty heads the White Collar Crime, Government Investigations and Regulatory Compliance Practice at the law firm of Fowler White Boggs. A former federal prosecutor, he also served as a Florida commissioner on ethics.

© 2010 Naples Daily News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Comments » 5

greathornedlizard writes:

OMG! This guy knows about Collier County!

Marielena writes:

This "ethical crisis" is also known as corruption and abuse-- and is the reason why the Florida Legislature allows a "taxation without representation" tyranny--like the "Special District" government we have in Ave Maria: "A Town Without a Vote--Now and Forever" http://www.naplesnews.com/news/2009/m...

Marielena Montesino de Stuart
Ave Maria, Florida

Marielena writes:

AVE MARIA, FLORIDA...

A TOWN WHERE FREE SPEECH CAN BE CHILLED,

AND FREEDOM OF MOVEMENT CAN BE CONTROLLED. . .

“Paul Roney, a member of the Ave Maria Town Government Board, and Monaghan’s Chief Financial Officer at AMU [Ave Maria University] admitted on March 2nd, 2010, on the AMSCD public town government meeting record, that he “reported” a resident to the Ave Maria University’s administration, which resulted in the university threatening the resident with arrest for stepping on campus. As a result of this “reporting”, the resident was also banned from over 900 acres of campus property, for nearly three months.

Why?
Because the resident asked questions during a town government meeting held on November 3rd, 2009, concerning compliance of Florida statutes. Questions which were deemed “disruptive.” Questions regarding laws and town government matters– which had absolutely nothing to do with Ave Maria University, a private corporation.

The Naples Daily News wrote:

“Ave Maria’s founders already had decided how the town northeast of Naples would be ruled. They would have the power to control the town forever. This power, some say, is so great, it might be unconstitutional.”

Where in America, other than in Ave Maria, does a citizen attend a local town government meeting–then goes home to find that they are banned from entering the entire campus and property of their local college or university, because of questions they asked about compliance of government statutes? A university campus which has been consistently promoted as part of the benefit of buying a home in this town.

This kind of “control over freedom of movement”–of ”turning people in” and ”reporting” by government agents, is only found in fascist and communist systems– and indeed, in the Town of Ave Maria.”

This terrible situation inside Ave Maria is the result of the corruption in the halls of the Florida Legislature-- a corruption very well described by former federal prosecutor, Latour Lafferty in his commentary "http://www.naplesnews.com/news/2010/j...

It's time that the citizens of Florida demand a clean-up of the Florida Legislature.

Marielena Montesino de Stuart
Ave Maria, Florida

Panther309 writes:

Marielena,

What, specifically, is the corruption in the legislature that you say resulted in the situation in Ave Maria?

Marielena writes:

CORRUPTION:

Former federal prosecutor, L. Lafferty has clearly addressed the corruption in Florida:

"There’s a nasty ring of corruption around Florida’s white collar these days. It’s so obvious and we wear this shirt so often, we must like the fashion."

"From the halls of the Legislature to the board rooms of major corporations to the back offices of subprime mortgage mills, Florida is in the midst of an unprecedented and pervasive ethical crisis. The question is why?"

"Over 50 years ago, sociologist Donald Cressney coined the term “fraud triangle.” In order for organizational fraud to occur, three factors needed to be present — motive, opportunity and rationalization. This same theory can easily explain why white collar crime is a boom industry in Florida today."

"Money is clearly the motivation. But why does Florida present such a ripe environment for fraud? Let’s break it down into the four primary sectors where the fraud occurs: politics, financial services, health care and real estate."

"In politics, it is Florida’s often chided pay-to-play culture and a weak state Commission on Ethics which has limited power to regulate state and local public officers."

"Ponzi schemes thrive in a state where the wealthy flock to limit their income tax burden. Maybe it’s too much sun, but otherwise savvy “qualified” investors fall prey to scammers, and regulatory agencies seem incapable of keeping pace."

"Finally, Florida’s real estate boom created a frenzy of mortgage fraud and the subsequent failure of many lending institutions. There was clearly a lack of self-control, but regulatory agencies that might have protected amateur investors and shut down the scammers were nowhere to be seen."

"Regulatory reforms and law enforcement initiatives are by their very nature reactive measures that fail to address the core issue — we allow these ethical breaches to occur because we rationalize them away."

"As long as our culture permits the rationalization of misconduct, there will be those individuals willing to exploit the current opportunities to satisfy their insatiable greed and ego. The Greek philosopher Epictetus said that “prevention is better than cure,” illustrating that the only way to effectively combat the current white collar crime crisis in Florida is to address our own ethical lapses. Ethics is the foundation of all law, and when ethical misconduct is tolerated it simply escalates from intent to criminal conduct. We must sweat the small stuff and create a culture of integrity. It’s up to us to decide not to wear the stain of ethical failure."

For documentary evidence regarding the specially crafted law that allowed the creation of the tyrannical Ave Maria "Special District" read http://www.naplesnews.com/news/2009/m...

Marielena Montesino de Stuart
Ave Maria, Florida

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