Facebook Founder Follows Financial Superheroes to Give Away Fortunes



Billionaire Mark Zuckerberg, cocreator of Facebook,
gives away majority of his fortune



I went to a business lunch with an attorney a few months ago who was very wealthy. Not earned wealth, but epic family money. Unlike many of my friends, who would just pick up a fifteen dollar lunch check and say "you can get it next time," more for convenience than anything else, this particular attorney studied the bill intensely. She then hailed down the waiter abruptly and went over the bill in great detail. With the mistake that had been made in the bill was discovered (an extra iced tea!! Aaahhhh!), she used that as a rationalization to only tip ten percent on her soup. "That will show him to not be perfect," she must have thought. I marveled at the thrift of the attorney knowing she would never be able to spend all of the money in her many accounts and portfolios.

I've also found a different, more generous, approach to wealth by those who were suddenly wealthy. New money seems to be less of a burden. Despite earning their fortunes through tireless work or a moment of genius that resulted in a novel patent idea, I have had clients who were so generous it was inspiring. I know a professor at a major teaching hospital who is paid about one hundred million dollars a year for a medical device he invented and licenses to a major pharmaceutical company. He drives a 1985 pick up truck and worn blue jeans every day. And unlike lottery winners who are suddenly wealthy, but didn't earn the money, he gives a large portion of his earnings each year to nonprofits in San Antonio and Kerrville, Texas. He's happy with the life he had when he became remarkably wealthy and had the good sense to not change what already worked. Unlike the attorney who was not very generous to the waiter, money was not a burden to him because he had not been born with it. It is a luxury to have... and to let go of...

Bill Gates and Warren Buffett are self-made men who concluded recently they could substantially change civilizations by focusing their billions of dollars on certain humanitarian efforts. To increase the impact of "letting go of" some of their fortunes, they have invited other billionaires to dinner (it was probably pretty nice, don't you imagine? No cold cut platter I'm guessing) to discuss their goals. It conjures a vision of financial super heroes with special cash capes and cool gadgets that only gazillionaires could have made in underground "Iron Man" type labs.

From what the Wall Street Journal reported, it sounds as though the "new money" billionaires have decided that growing huge wealth into even larger wealth is not as exciting as helping millions of people live better lives. If that isn't an inspiration, I don't know what is. Here's a take on the story by Philiana Ng.

Mark Zuckerberg to Give Away FortuneFacebook founder Mark Zuckerberg has signed on to give away a portion of his fortune, the Wall Street Journal reports.

The 26-year-old is one of 16 billionaires who have agreed to join "Giving Pledge," which asks its participants to publicly commit to giving away a majority of their wealth.

Zuckerberg, who founded Facebook in his Harvard University dorm and is portrayed by Jesse Eisenberg in The Social Network, is one of the youngest billionaires in the world. According to Forbes, he is said to be worth $6.9 billion, though the Journal notes his value is theoretical.

Earlier this year, Zuckerberg donated $100 million to the Newark public school system, which was announced on The Oprah Winfrey Show.

Facebook co-founder Dustin Moskovitz, who is played by actor Joseph Mazzello in the film, has also agreed to participate.

New additions to the pledge include AOL co-founder Steve Case, Carl Icahn and Michael Milken, an ex-junk-bond king. Other billionaires who had previously signed on include Oracle founder Larry Ellison, George Lucas and New York Mayor Michael Bloomberg.

Bill Gates and Warren Buffett started Giving Pledge in order to persuade the rich to be more philanthropic. Last year, the two hosted several dinners for billionaires to discuss setting up the pledge, which then led to its official launch in June.

"I view this as a call to others who might in their 30s or 40s use some of their creativity to get involved in philanthropy earlier in life," Milken said of Giving Pledge.

Steve and wife Jean Case chose to participate because of they wanted to learn from each other. "It is less about what size of a check that you write and more about the outcome," Steve Case said. His wife noted that people who start web companies, like Zuckerberg and the founders of AOL, want "to change the world," so it was only appropriate that "they are giving back in big ways."

Former SEC Investigator (and former Ethics Follies speaker!) May Have Known of R. Allen Stanford's Ponzi Scheme

Is Spencer Barasch the man who single-handedly let alleged Ponzi schemer R. Allen Stanford (pictured left) off the hook three times, costing investors more than $7 billion? Yikes!

Mr. Barasch gave a humous talk at Ethics Follies 2008 about business ethics right here in the River City. I guess Ethics Follies was even more in touch with current ethics issues than it even realized! Who would have guessed that a guest speaker at Ethics Follies could be responsible for a $7 Billion dollar Ponzi scheme?

Or is he an honest Dallas defense attorney unfairly blamed for the failings of a government regulator? Yeah...I have no idea. He seemed like a nice guy when he was at the Empire Theatre and he understood ethics issues which relate to SEC investigations.

The Securities and Exchange Commission's Inspector General has issued a 151-page report that says he was the former. It skewers Barasch, former head of the SEC's enforcement efforts at its Fort Worth office, as a poster child for an agency critics say missed one of the biggest investor scams of our generation. Mr. Barasch and his law firm deny his culpability.

Here's an interesting quote from the Executive Summary of the SEC Inspector General's Report of Investigation on the Allen Stanford debacle:

"Finally, the OIG investigation revealed that the former head of Enforcement in Fort Worth, who played a significant role in numerous decisions by the Fort Worth office to deny investigations of Stanford, sought to represent Stanford on three separate occasions after he left the SEC, and represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so.

This former head of Enforcement in Fort Worth was responsible for: (1) in 1998, deciding to close a MUI opened regarding Stanford after the 1997 broker-dealer examination; (2) in 2002, deciding to forward the [redacted] complaint letter to the TSSB and deciding not respond to the [redacted] complaint or investigate the issues it raised; (3) in 2002, deciding not to act on the Examination staff's referral of Stanford for investigation after its investment adviser examination; (4) in 2003, participation in a decision not to investigate Stanford after receiving [Confidential Source]'s complaint letter comparing Stanford's operations to the [redacted] fraud; (5) in 2003, participating in a decision not to investigate Stanford after receiving the complaint letter from an anonymous insider alleging that Stanford was engaged in a "massive Ponzi scheme;" and (6) in 2005, informing senior Examination staff after a presentation was made on Stanford at a quarterly summit meeting that Stanford was not a matter they planned to investigate.

Yet, in June 2005, a mere two months after leaving the SEC, this former head of the Enforcement in Fort Worth e-mailed the SEC Ethics Office that he had been "approached about representing [Stanford] . . . in connection with (what appears to be) a preliminary inquiry by the Fort Worth office." He further stated, "I am not aware of any conflicts and I do not remember any matters pending on Stanford while I was at the commission."

After the SEC Ethics Office denied his request in June 2005, in September 2006, Stanford retained this former head of Enforcement in Fort Worth to assist with inquiries Stanford was receiving from regulatory authorities, including the SEC. He met with Stanford Financial Group's General Counsel in Stanford's Miami office and billed Stanford for his time. Following the meeting, he billed 6.5 hours to Stanford on October 4, 2006, for, inter alia, "review[ing] documentation received from company about SEC and NASD inquiries." On October 12, 2006, he billed Stanford 0.7 hours for a "[t]elephone conference with [Stanford Financial Group's General Counsel] regarding status of SEC and NASD matters." In late November 2006, he called his former subordinate, the Assistant Director who was working on the Stanford matter in Fort Worth, who asked him during the conversation, "[C]an you work on this?" and who in fact told him, "I'm not sure you're able to work on this." Near the time of this call, he belatedly sought permission from the SEC's Ethics Office to represent Stanford. The SEC Ethics office replied that he could not represent Stanford for the same reasons given a year earlier and he discontinued his representation.

In February 2009, immediately after the SEC sued Stanford, this same former head of Enforcement in Fort Worth contacted the SEC Ethics Office a third time about representing Stanford in connection with the SEC matter - this time to defend Stanford against the lawsuit filed by the SEC. An SEC Ethics official testified that he could not recall another occasion in which a former SEC employee contacted his office on three separate occasions trying to represent a client in the same matter. After the SEC Ethics Office informed him for a third time that he could not represent Stanford, the former head of Enforcement in Fort Worth became upset with the decision, arguing that the matter pending in 2009 "was new and was different and unrelated to the matter that had occurred before he left." When asked why he was so insistent on representing Stanford, he replied, "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines."

The OIG investigation found that the former head of Enforcement in Fort Worth's representation of Stanford appeared to violate state bar rules that prohibit a former government employee from working on matters in which that individual participated as a government employee. Accordingly, we are referring this Report of Investigation to the Commission's Ethics Counsel for referral to the Office of Bar Counsel for the District of Columbia and the Chief Disciplinary Counsel for the State Bar of Texas, the states in which he is admitted to practice law."

Boy Scouts of America's Apology Could Have Saved Millions: The Ethics of Accountability

Do you remember the lawsuit where McDonalds corporation was hit with a really large judgment when the woman spilled her hot McDonalds' coffee in her lap? It was a claim that could have been contained or handled without litigation, but arrogance and a lack of an ethical culture of accountability caused the jury to punish McDonalds and their attorneys (who were reportedly horribly arrogant in front of the jury with their cross exam of the plaintiff). Without having heard the testimony, I am speculating that a similar situaton happened with the man who sued the Boy Scouts of America (a huge organization with good lawyers). It was reported by the judge that no one with the Boy Scout's corporation had even attempted to apologize for the sexual abuse of seventeen boys by the same Boy Scouts assistant troup leader. The Boy Scouts of America was aware that the assistant troup leader had prior sexual abuse incidents in his past, but allowed him to accompany the plaintiff on the campout.

There's no doubt that there are wonderful Boy Scout troups all over the country. However, the corporation itself could probably take a lesson from some of them in taking accountability and respect. Imagine, if you will, for a second that your son was injured at a campout, and you told the company, and they came to your home to tell you how sorry they were, and even offered to pay for counseling or medical care, and perhaps some other cash for your troubles. It is highly likely the settlement would have been less than the $18M judgment. More importantly, headline news about the long history of sexual abuse in the Boy Scouts organization would have been avoided. The actual public relations cost and damage to the organization of this judgment is far in excess of the jury's punative number.

Like McDonalds, the jury is sending a message of accountability and respect. Smart corporations will anticipate the need for a program in their organization to take control of this sort of situation and find genuine remorse for individuals who are harmed or believe that they are. The full story of the historically large judgment follows.

PORTLAND, Ore. - A jury on Friday ordered the Boy Scouts of America to pay $18.5 million to a man sexually abused by a former assistant Scoutmaster in what is believed to be the largest such award against the organization.

Lawyers for Kerry Lewis had asked the jury to award at least $25 million to punish the Boy Scouts for what the jury had already agreed in the first phase of the trial was reckless and outrageous conduct.

They also noted the Boy Scouts had never apologized to Lewis, who said Friday at a news conference that the verdict shows that "big corporations can't be above the law."

Lewis added that an apology "would mean something to me, but I'm not expecting it."

The jury decided on April 13 that the Boy Scouts were negligent for allowing former assistant Scoutmaster Timur Dykes to associate with Scouts, including Lewis, after Dykes admitted to a Scouts official in 1983 that he had molested 17 boys.

The jury awarded Lewis $1.4 million in compensatory damages with that verdict and agreed the Boy Scouts of America were liable for punitive damages to be determined in the second phase of the trial that ended Thursday.

Boy Scouts officials declined to comment on details of the case because other cases are pending, but issued a statement saying it maintains a "rigorous" system to screen Scout leaders.

"The Boy Scouts of America has always stood against child abuse of any kind," it said.

The case was the first of six filed against the Boy Scouts in the same court in Oregon, with at least one other separate case pending. If mediation fails to settle the next cases, they also could go to trial.

Significant award
The amount of the damages surprised Patrick Boyle, editor of the Youth Today newspaper and author of a book about sex abuse within the Scouts.

"That's a lot of money. This is by far the biggest award against the Scouts for sex abuse, probably by several times," Boyle said.

The award is also significant, he said, because it is only against the national Boy Scouts organization and is not divided among any of its local councils or other defendants.

Kelly Clark and Paul Mones, the attorneys for Lewis, told the jury the Boy Scouts were nearly a $1 billion corporation that could well afford punitive damages intended to deter them from similar conduct in the future.

Clark and Mones said Friday after the verdict that publicity about the case also could act as a deterrent.

"They've always settled. And they're silent. No one hears because it does not see the light of day," Mones said. "What we saw here in Portland really pulled back the covers on the Boy Scouts of America, and what it did to cover up."

During the first phase of the trial, Clark and Mones introduced more than 1,000 files the Scouts kept on suspected child molesters from 1965-85 as evidence the organization should have put a sex abuse prevention program into place decades ago.

The Scouts executive now in charge of those files admitted they had never been evaluated or analyzed to help design or determine the effectiveness of a prevention program that is now in place.

A number of witnesses testified for the Scouts during the second phase of the trial that they participated in a training and prevention program since at least the late 1980s. None could say why the Scouts had not yet made the "youth protection training" program mandatory.

Punitive damages
Under Oregon law, 60 percent of the punitive damages awarded by the jury will go to the state crime victim compensation fund.

Because the Boy Scouts have settled some lawsuits out of court, it is difficult to say where the total awards imposed by the Portland jury rank with those of the past.

In a 1987 sex abuse case, an Oregon jury awarded more than $4 million to the victim, including $2 million in punitive damages against the Scouts that were thrown out when the case was appealed. A jury in San Bernardino, Calif., awarded $3.75 million to three sex abuse victims in 1991.

Boyle said from 1984 through 1992, the Scouts were sued at least 60 times for alleged sex abuse with settlements and judgments totaling more than $16 million.