Companies such as Enron, WorldCom, Adelphia, Lehman, New Century Financial, Fannie Mae, MF Global, UBS, Chase, Valeant, Volkswagen, Theranos, and GM (many of these companies that you will study) engaged in outrageous behaviors, but their journeys into the hinterlands of huckstering was one of a gradual sort. They descended gradually to their ethical and, eventually, financial collapses.

No one in these companies sat together in the initial stages of either their success or the beginning of their declines, numbers difficulties, or inability to meet the quarterlies and plotted, "You know what would be great! A gigantic fraud that we perpetuate on the shareholders, the creditors, and analysts. It will make us more money than we ever dreamed of. Fraud-that's the answer."

There is a tendency to create the comforting image in our minds that somehow those who engaged in these outrageous behaviors were misled, duped victims, or were so corrupt that they are part of only a limited number of souls who would dare tread in areas where the landmines of lies explode and the traps of fraud ensnare. We want to believe that they are so ethically different from the rest of us, cut from a different ethical fabric altogether and hence more susceptible to the temptations of fraud. A piece in the Wall Street Journal, following the collapses of Enron and WorldCom was entitled, "How Could They Have Done It?" the essence of which was the exploration of the two questions all observers posed as they watched, mouths agape, when these \(\$ 9\) billion frauds dribbled out: Where were their minds when they made these decisions? What on earth were they thinking? \({ }^{14}\)

Following Martha Stewart's indictment, a reporter called to inquire, "What is the difference between us and a Martha Stewart? Or us and a Dennis Kozlowski?" My response was very simple, "Not much." They begin as entrepreneurs with novel ideas, willing to work hard to enjoy success. They end with much of their success lost and tarnished reputations from criminal trials. How do intelligent and capable people find themselves reduced to the behaviors that find them in felony trials?

Arthur Andersen, the accounting firm that met its demise because of its certification of the fraudulent financial statements of Enron, has a history peppered with examples of the firm's absolute ethical standards that went well beyond the accounting rules. In 1915, Andersen was certifying the financial statements for a steamship company, one of its biggest clients. The financial statements were for the period through December 31, 1914. However, in February 1915, as the statements were being finalized, the company lost one of its ships in a storm. Arthur Andersen refused to certify the 1914 statements without disclosing the loss of the ship, a loss that would have a fundamental impact on income, despite the fact that it was in the next year. \({ }^{15}\) In the 1980 s, when the savings and loan industry collapsed, all of the then-Big 8 accounting firms, except for Andersen, experienced heavy losses because of their liability for audit work on the collapsed financial institutions. Andersen professionals did not think that the S\&L accounting practice of including the value of deferred taxes in earnings was sound. When its S\&L clients refused to change their accounting, under the guise of "everybody does it," Andersen resigned all of its S\&L accounts rather than put its imprimatur to financial statements it believed contained improper accounting. \({ }^{16}\) Yet, just a little over a decade later, Andersen, through David Duncan, was authorizing thousands of off-the-book-entities at Enron in order to hang on to a valuable audit and consulting client.

Apart from the organizational incentive systems and culture shifts that can affect reliance on absolute standards, there are individual lapses. The literature in ethical decision making indicates that the decline in ethical standards begins gradually and can consume those with tremendous ability and track records of success precisely because they have enjoyed so much success to that point. \({ }^{17}\) These are the individuals to whom everyone turns for problem resolution, outstanding work effort, and results. Success has been the reward for their ability. They are the "go-to" people in an organization who have always been able to find resolutions for problems and ways to remove obstacles that stand in the way of achievement and success. Hubris consumes them when they find that eventual setback or obstacle they cannot conquer. Unwilling to admit that there may not always be a legal or ethical fix, they seek ways to avoid disclosure of a downturn or that they have hit a wall. They cannot get the product out on time and still guarantee its safety. They cannot complete the job on time and still meet quality standards. They are faced with the harsh reality of their human limitations. Releasing financial statements that are something less then projections when you have been on an earnings roll is difficult because you have been on a pedestal for so long.

Yet, like the figures in Greek tragedies, we all have our walls that we hit that require an admission that the fix will take a while and we may need a little help. Every successful lawyer must face that trial when no one can pull a win from the hat. Every athlete has that game or race when victory is not theirs. How do they face this setback? Too often with steroids, falsified financials, and withheld evidence. It is not always greed that drives ruthless ambition; both fiction and biography teach that hubris spawns deceit. Pride, that inability to face the wall, as the saying teaches, goeth before a fall. Even if no money were involved, it is difficult for them to step down, even if just for a time, while at the top of their go-to game...........................

Discussion Questions 1. What would the role of adherence to your credo adultery. Has this been a downfall for any leaders of play in preventing you from losing your way?
2. Looking at the list of how leaders lose their way, develop a list of actions that would stop these problems for taking hold.

3. Give example of how leaders lose their way. Davids weakness way using his power to commit adultery. Has this been a downfall for any leaders of this era? Do some leaders have too much focus on material things stuff? Be sure to look for examples as you study the cases in the remaining units of the book.