Consequences of My Poor Management Decisions- Personal Ethics

Last week I was in California telling my story of wrongdoing, lack of personal ethics, and the consequences of my decisions as a former information technology executive.

I was invited by one of the leading ethics organizations, The Markkula Center for Applied Ethics at Santa Clara University, to speak at their quarterly gathering of corporate compliance officers, human resource executives, chief legal officers, and investor relations directors. A former federal prosecutor, Hank Shea, co-presented with me as I walked the attendees through the tale of joining a family computer networking company in 1997 as National Sales Director and six years later dissolving it completely.

In addition to presenting at The Markkula Center for Applied Ethics, I also presented at Stanford Law School and Golden Gate University Law School. One of the first key discussion points discussed was business ethics doesn’t exist without personal ethics.

I maintain that morals, principles, and values is the foundation for all behavior. It has a higher standard than legal law.

What happened with my family’s computer networking company? From 1997-early 2001 we grew from $1.5 million to $16.5 million in revenues selling mostly refurbished Cisco Systems networking equipment.

During this time, we became a Cisco VAR (value added reseller) and over a four year period from 1998-2002 sold $11 million worth of their new equipment, software licenses, and support contracts. It was impressive for a company with 17 employees.

Post Y2K, corporate spending slowed up big time and our revenues declined. Cisco’s direct sales force did not appreciate or want us to sell refurbished equipment to some of their large Fortune 500 customers.

Why you ask? Their sales representatives were not paid on refurbished equipment and they did not receive credit towards their sales quotas.

As corporate spending continued leading into the dot.com bubble and recession, tensions grew between Cisco and our small family business.

We were told by Cisco to quit selling refurbished equipment to their key accounts. As the Vice President of Sales/Marketing and responsible for driving sales, I told them to get out of my face and quit telling us how to run our business.

You could come to the conclusion in this classic Davey vs. Goliath struggle that Cisco was behaving improperly and practicing borderline poor personal ethics.

The tension continued to build and more meetings took place. We were told that our continuing practice of selling refurbished equipment would not be tolerated and we risked losing our status as a Cisco VAR.

As we never signed a contract with Cisco, we resented their threats and interference in our business. Within a six month period some of our largest accounts quit doing business with my family company.

It was clear what had taken place: Goliath flexed their muscles and asked all of these accounts to stop doing business with us and start conducting business with a short list of their preferred VAR’s.

I was outraged, incensed, and extremely angry that our hard work in carefully cultivating relationships for a number of years with key commercial customers had evaporated. We lost over 30% of our top line revenues due to these actions.

During this time, my company had purchased some seventy different support contracts directly from Cisco to support our computer lab, infrastructure, and support our customer base.

On two occasions when we had a malfunctioning part that needed replacing by Cisco supported by a valid contract, we received a newer version of the part that was worth considerably more and we sold the part immediately to our customers.

My team and I didn’t see a problem with that as we had purchased valid support contracts. You might argue without much pushback from me that not notifying Cisco of their mistakes was wrong, and represented poor personal ethics.

With declining revenues, lack of corporate spending due to a recession, and a high level of resentment and ill-will toward Cisco Systems, as Vice Present of Sales/Marketing I authorized my staff to request newer version parts that we in fact were not in possession of that had malfunctioned.

A pattern of lying and deceit began that lasted twenty months and involved 140 separate transactions. Each time we contacted Cisco, we lied about what parts we had on hand.

The newer version parts we sold immediately at significant profit margins to our customers which filled in lost revenue that had been lost. Some of those parts were worth up to $13,000 in value. I rationalized and justified my decisions to request parts from Cisco that we were not entitled to receive. Both of these behavior traits are very much key components in poor decisions and the lack of personal ethics.

What started as questionable personal ethics by me and my staff turned into illegal behavior. The activity was reported by an ex-employee to Cisco and an investigation began by the goverment.

This led to the eventual dismantling of our family business after the government raided our company with a search warrant in August 2002. Some key customers quit doing business with us and employees left under a cloud of uncertainty.

We reorganized under a new corporate entity in March 2003 unaware that a formal investigation had continued. On March 14, 2007 I was arrested and charged with two felonies: conspiracy to commit mail/wire fraud and money laundering.

Three other employees were indicted as well including my first cousin who was President of the company during the time our fraud took place. Twenty seven months later I was sent away to a federal prison camp where I served almost nine months away from my family and an additional two months in a halfway house.

What a terrible price to pay emotionally, financially, and functionally! There are take aways and lessons to be learned. The consequences for bad decisions can often be attributed to poor personal ethics.

There is no place for greed or arrogance. When you put yourself and your job first, you are already on a slippery slope.

When you combine ill will, resentments, and vengeful feelings towards others and begin rationalizing and justifying them, these darker traits of the soul are very dangerous and uncontrollable.

Think before you speak and speak before you act. When in doubt, seek out wise help before acting on any request that doesn’t feel right or something you feel must be done.

Alway strive to do the right thing!!