Posted by: Louis Lavelle on July 11, 2011
U.S. Attorney Preet Bharara is no stranger to MBAs. His crackdown on Wall Street bad boys in the Southern District of New York bagged one of the biggest of prizes, the Galleon Group’s Raj Rajaratnam, the billionaire hedge fund manager and Wharton MBA convicted in the biggest insider trading scandal in history.
But lately he’s had his fill. In a speech made to the New York Financial Writers Association at the CUNY School of Journalism on June 6 (Bharara.pdf) and first reported by Crain’s New York Business, Bharara complained of a question he says he hears far too often from MBA students at top business schools.
Bharara has been visiting with MBA students at Wharton, Columbia, Harvard, and Stern, along with business groups, hedge funds and directors of Fortune 500 companies, to talk about ethics, personal integrity, and corporate culture. Let’s listen in:
I talk about the perils of walking the line - the line between what is legal and what is not, the line that is dangerous to get close to and criminal to cross. And I have been struck by a question I have been asked on more than one occasion. It goes something like this: “Mr. Bharara, you’ve talked about making sure you don’t cross the line and that it is dangerous to wander too close to the line. So, exactly how far from the line do you recommend people stay?”
After Long Term Capital Management, Enron, and Arthur Anderson, after WorldCom and Tyco and Adelphia, after AIG and Countrywide Financial, after the Lehman Brothers collapse and the global financial crisis, after an entire decade of financial misadventure, the most pressing question MBAs are asking is what can we get away with?
To Bharara, that’s a question that’s not worth asking. The problem is the approach - line walking - doesn’t work.
[I]f you are single-mindedly focused on walking the line, you are bound to end up afoul of regulators, and God forbid, criminal prosecutors,” he said. “Even more dangerous perhaps, you are sending a message to every other person at the firm that line-walking is a good idea. That can work for a while, but people will invariably miscalculate and bad things will invariably follow.
He equated that with someone trying to game the line between the legal drinking limit and a DUI. Spokeswoman Ellen Davis declined to elaborate any further on Bharara’s remarks.
MBA students: consider yourself warned.
—Kiah Lau Haslett