When Mark Morze spoke at Tuck Business School yesterday, he made it a point to show that when he teaches his business ethics class at Pepperdine University or gives one of his 80 annual lectures, his goal is not to talk people out of committing crimes or to scare MBAs and future business leaders about prison.
Instead, his aim is to warn people that the worst thing that can happen is not necessarily to be involved in a fraud, but to be near a fraud, he said. According to Morze, in business, "perception is more important than reality."
A charismatic and captivating speaker, Morze drove home between jokes the danger of getting involved in lying and cheating in the real world. He reported that 90 percent of high-school students think that it is permissible to cheat and that those numbers increase through college and business school.
He explained that while these beliefs are condemnable in school, most people do not realize how great the consequences are for these actions in the real world.
Morze knows this from personal experience. He was sentenced to more than five years in prison for his part as chief financial officer in the $400 million fraud case involving ZZZZ Best Carpet Cleaning Company. Before there were Enron, Tyco and Worldcom, ZZZZ Best was the biggest corporate fraud in U.S. history.
Since serving his term at Long Poke Federal Prison, Morze now spends his time lecturing about and teaching business ethics. When people laugh at the idea of an ex-con speaking at bar association meetings and CPA conventions -- as well as being employed by the FBI and the Securities and Exchange Commission -- Morze said that he responds, "If you want to build a better hen house, ask the fox. Well, I am the fox."
After playing rugby for 11 years after college, Morze began raising money for large corporations. When he had made a name for himself, a young entrepreneurial whiz kid named Barry Minkow approached Morze about raising money for Minkow's company, ZZZZ Best Carpet Cleaning.
Minkow explained that half of the company's business was cleaning carpets and the other half involved doing insurance restorations.
Minkow claimed that because of his young age (he was 20 at the time) few banks or investors trusted him. He wanted Morze's help raising money up front to fund the company's operations.
Morze went into the business partnership assuming that ZZZZ Best was a legitimate company. Minkow had planned his scam from the beginning by making up imaginary contracts with imaginary insurance companies to fool lawyers, bankers and investors so he could create revenue.
After tricking Morze into working with him, Minkow revealed the scam piece by piece to Morze. Despite his innocent entry into the company, upon learning that ZZZZ was a fraud, Morze remained on board, a choice that he said "was the single worst decision of my life."
It was also a decision that would cost him more than five years of freedom.
Morze now puts the insider information that he learned as part of this scam to good use, helping to find and detect fraud. He said that the SEC has subpoenaed him so many times that he "practically has his own chair." He has been involved with trying to help the government sort out all of the latest fraud cases, including Enron, Tyco, Worldcom and Arthur Andersen.
Morze claimed that avoiding proximity to a fraud is just as important as avoiding involvement in one. According to Morze, when someone is involved in fraud, he or she is convicted, and there are no questions.
When people are simply near a fraud, however, often their true involvement -- or lack thereof -- is never unquestionably resolved, so a cloud of doubt follows them throughout their career.
His biggest concern about business today is that people do not understand how much more important perception is than reality -- they do not realize that everything they do has a consequence, Morze said.
Morze argued that "if the press or the public has a choice between viewing something in a positive or negative light, they will choose to view it negatively."
For this reason Morze advised people to ask themselves, "How does this look?" before doing anything that is even remotely ethically questionable.
Morze's final lesson was that perception is a hard thing to measure. "White-collar crime happens because we ignore ethics. The ethics are there, we just choose to look the other way."
Morze spoke to a crowd of about 100 people, mostly students from Tuck Business School, in Cook Auditorium on Wednesday. the second event in the "Ethics at Tuck" series. The talk was sponsored by the MBA Program Office. It followed a panel that was sponsored by Tuck's Allwin Initiative for Social Responsibility.
