Corporate Greed and Pathology

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Corporate rewards for failure
February 01, 2008
DAVID OLIVE
The unlamented World Weekly News, a sensationalist supermarket tab that expired last year, was
home to pseudonymous columnist Ed Anger. When he was in top form over a particular outrage,
the WWN's house curmudgeon pronounced himself to be "pig-biting mad."
We should all be pig-biting mad at the stupendous rewards for failure granted to the authors of
the global credit crunch, which originated with the predatory U.S. lending practices in 2003 that
triggered a bubble in U.S. house values that finally burst last year.
The epic U.S. housing collapse has already cost global banks and brokerages, including our very
own Canadian Imperial Bank of Commerce, more than $135 billion (U.S.) in writedowns on
soured loans. By some estimates, the losses will reach as much as $800 billion by the time all the
ticking time bombs of precarious loans are accounted for. That sum is bigger than the economic
output of all but the world's largest nations.
Worse, between 500,000 and two million Americans will lose their homes to foreclosure over the
next year or so. Worse still, the global credit system is in semi-paralysis. Big losers on so-called
"subprime loans" ranging from giant Swiss bank UBS AG to the second biggest French bank,
Société Générale SA – yes, the one that also dropped more than $7 billion last week due to the
fraudulent actions of a single trader – are unwilling to lend until they can get some sense of the
enormity of their potential losses.
That and the simultaneous deflation of U.S. house values – which have plummeted as much as 40
per cent in Florida, California, Michigan and other hard-hit states – accounts for a U.S. downturn
that many economists already are describing as a full-blown recession. Banks don't want to lend,
and consumers with negative home equity are no longer able to spend. The implications are
global, affecting Canada and every other nation that relies on exports to the world's largest
consumer market.
For their roles as abettors in this calamity – one of the biggest systemic failures in financial
history – only a handful of CEOs have lost their jobs. Among them, the CEOs of Merrill Lynch &
Co., America's largest brokerage, and Citigroup Inc., the top bank, left with parting gifts of $161
million and $68 million, respectively.
Then there's Angelo Mozilo, founder and CEO of Countrywide Financial Corp. Mozilo's firm was not
only the largest and most aggressive marketer of "subprime loans" but an inspiration to smaller
fry emulating Countrywide's model of pocketing upfront fees from low-income Americans, often
with no collateral or down payment to offer, and sweet-talking them into buying homes they
couldn't afford at initially low "teaser" rates that are now "resetting" at usurious rates.
Mozilo has unloaded more than $400 million worth of Countrywide stock over the past three
years, much of it last year as signs of the historic crash began appearing on the horizon.
Meanwhile, on Wall Street, investment banks that joined the commercial banks as enablers in this
colossal misallocation of capital are paying record bonuses to employees for fear of losing talent
to rivals.
TheStar.com - columnists - Corporate rewards for failure Page 1 of 2
http://www.thestar.com/printArticle/299415 2/1/2008
Morgan Stanley, whose subprime losses have forced it to seek $5 billion in bailout aid from a
Chinese state investment fund, just paid $16.6 million in total employee compensation last year –
an 18 per cent increase over 2006.
If the world was a Frank Capra movie, the architects of this horror story would forfeit not only
their golden parachutes but the annual salary and bonuses they earned in the halcyon years
when malodorous financial strategy was immensely profitable, before it became one of the
greatest business fiascos of all time.
There will, of course, be no such satisfying ending. But do remember Mozilo's name the next time
someone tells you that executive compensation in the corporate sector is based on "pay for
performance." Warren Buffett once noted that the absurd compensation for mere caretaker CEOs
was "a reward for the passage of time."
At least a competent caretaker doesn't let the building burn down. In this case, corporate
stewards are getting an obscene reward for putting greed ahead of prudence. The lesson won't be
lost on future masters of the universe tempted to perpetrate reckless endangerment.
dolive@thestar.ca
TheStar.com - columnists - Corporate rewards for failure Page 2 of 2
http://www.thestar.com/printArticle/299415 2/1/2008

[admin]

OK, I was wrong. There is some enforcement of white collar crime in Canada. On this earth it comes from the United States Justice Dept and the SEC, and in the alfterlife.............see below:


Fewer confessions and new sins
By David Willey
BBC News, Rome


The Vatican has brought up to date the traditional seven deadly sins by adding seven modern mortal sins it claims are becoming prevalent in what it calls an era of "unstoppable globalisation".

Those newly risking eternal punishment include drug pushers, the obscenely wealthy, and scientists who manipulate human genes. So "thou shalt not carry out morally dubious scientific experiments" or "thou shalt not pollute the earth" might one day be added to the Ten Commandments.


MODERN EVILS
Environmental pollution
Genetic manipulation
Accumulating excessive wealth
Inflicting poverty
Drug trafficking and consumption
Morally debatable experiments
Violation of fundamental rights of human nature


The Catechism of the Catholic Church states that "immediately after death the souls of those who die in a state of mortal sin descend into Hell".

[admin]

http://www.people.hbs.edu/mbazerman/bou ... cality.htm

Bounded Ethicality by Prof. Max H. Bazerman, Harvard Business School

In contrast to the search for the few “bad apples”, my colleagues and I argue that the majority of unethical events occur as the result of ordinary and predictable psychological processes. As a result, even good people engage in unethical behavior, without their own awareness, on a regular basis. This argument is developed and documented in much of my recent work. The following is a partial list of recent work that develops this idea:


Tenbrunsel, A.E., Diekmann, K.A., Wade-Benzoni, K.A., &. Bazerman, M.H. Why We Aren’t as Ethical as We Think We Are: A Temporal Explanation. In B.M. Staw and A. Brief (Eds.), Research in Organizational Behavior, in press.

Moore, D.A., Tetlock, P.E., Tanlu, L., & Bazerman, M.H. Conflicts of Interest and the Case of Auditor Independence: Moral Seduction and Strategic Issue Cycling. Academy of Management Review, 2006 31(1), 1-20.

Caruso, E., Epley, N., & Bazerman, M.H. The Costs and Benefits of Undoing Egocentrism Responsibility Assessments in Groups. Journal of Personality and Social Psychology, 2006, 91(5), 857-871.

Epley, N., Caruso, E., & Bazerman, M.H. When Perspective Taking Increases Taking: Reactive Egoism in Social Interaction. Journal of Personality and Social Psychology, 2006, 91(5), 872-889.

Bazerman, M.H., Moore, D.A., Tetlock, P.E., & Tanlu, L. Reports of solving the conflicts of interest in auditing are highly exaggerated. Academy of Management Review, 2006, 31(1), 1-7.

Caruso, E.M., Epley, N., & Bazerman, M.H. The Good, the Bad, and the Ugly of Perspective Taking in Groups. In Mannix, E., Neale, M.A., & Tenbrunsel, A.E. Research on Managing Groups and Teams. Elsevier, 2006.

Chugh, D, Bazerman, M.H., & Banaji, M.R. Bounded Ethicality as a Psychological Barrier to Recognizing Conflicts of Interest. To appear in Moore, D., Cain, D., Loewenstein, G., &

Bazerman, M.H (Eds.). Conflicts of Interest: Problems and Solutions from Law, Medicine and Organizational Settings. London: Cambridge University Press, 2005.

Moore, D., Cain, D., Loewenstein, G., & Bazerman, M.H (Eds.). Conflicts of Interest: Problems and Solutions from Law, Medicine and Organizational Settings. London: Cambridge University Press, 2005.

Bazerman, M.H., & Banaji, M.R. The Social Psychology of Ordinary Unethical Behavior. Social Justice Research, 2004, 17, 111-115. (intro to special issue on the topic of bounded ethicality).

Banaji, M.R., Bazerman, M.H., & Chugh, D. How (Un)ethical are you? Harvard Business Review, December, 2003.

Bazerman, M.H., Loewenstein, G, & Moore, D.A. Why Good Accountants Do Bad Audits. Harvard Business Review, November, 2002.

Bazerman, M.H., & Loewenstein, G. Taking the Bias out of Bean Counting. Harvard Business Review, January, 2001, page 28.

[admin]

It is March 17, 2008, and Conrad Black's lawyers are pleading for the court to throw out convictions against Conrad based on variations of the "can you prove intent" theme.

They state that "..............there is simply no way and rational juror could find...........that defendants contemplated (or carried out) a scheme to misappropriate money................"

I find this interesting reasoning for a few reasons. One is that the argument that releases far too many white collar criminals from responsibility for their actions and their damages does not refelect the interests of society. Even in a recent hockey game I listened to someome tried to argue against a penalty due to an accidental stick infraction..........the decision was that whether intentional or not, the player is still responsible for his stick. Why can we not recognize the same due process towards responsible action with respect to financial crime?

Also, for the lawyers to comment about whether or not the sceme was "carried out" seems a bit unusual, since I thought the understanding was that the cheques were cashed and the money spent by the defendants. It seems as if it was indeed carried out.

Conrad Black's crimes, when measured against the dollar value of normal property crimes in Canada (from Justice Canada) add up to the same amount of damages done by this one man, that would ordinarily take between 150 and 1500 burglars, car thieves, crack addicts to do as much damage as he is reported to have done. (depending on which dollar value he is believed to have absconded with, $6 mil or some say $60 mil)

Do we give special treatment to someone who can do the damage of literally hundreds of criminals? If we do, we put our society on a slippery slope where crime does indeed pay, and that is one step toward the breakdown in an orderly society.

[admin]

David Callahan's book, "THE CHEATING CULTURE: Why More Americans are Doing Wrong to Get Ahead", suggests that people have two moral compasses. One to know the difference between right and wrong and another that wants to get ahead at any cost. "Good people placed in a situation where there is a lot of incentive to cheat and not a lot of percieved punishment if they get caught".

"We live in a winner take all society in which those at the top receive astonomical compensation, so they are willing to take risks."

"The logical culmination of the trend is Thirld World type of corruption where everyone is cheating and cheaters assume everyone else is cheating.

(advocate comments........I am inexperienced with many of the industries out there. I am also inexperienced but convinced that the pharmacuetical industry is almost overcome by this problem. My experience is entirely with financial services (investments) and I have to say that the proof is in. The cheating, and abusing of clients is so widespread and rampant as to be accepted by the vast majority, including those responsible for policing the industry, and pointing out the abuse. They have become so rewarded for going with the flow, that it will be a slow, painful process for the entire truth to come out.)

[admin]

To get away with investment crime in Canada and elsewhere is easy. Simply claim that there was "an unknown degree of risk" once anything you sell explodes in a customer's face. Take no responsibility for poor manufacture, for misrepresentation, for false ratings, for smoke and mirror guarantees that you may have promised but failed to provide when push came to shove. Let your clients eat the losses. Never the product manufacturer. Chaulk it up to market risk, and basically you will never be punished, no matter how pre-meditated your investment product was to fail.

You get better protection when buying chinese made goods in a Wall Mart store than you will get buying financial products in Canada.

see http://www.youtube.com:80/watch?v=eIhpxKyBDcw

for a top rated and not salary biased analyst say that the ABCP products were designed to explode, while the salary biased TD bank economist tells the story of an inknown degree of risk.

[admin]

Interview with Dr. Robert D. Hare and Dr. Paul Babiak

These Men Know 'Snakes in Suits': Identifying Psychopathic Fraudsters

By Dick Carozza

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From the July/August 2008 issue of Fraud Magazine

Not all psychopaths become fraudsters, but some fraudsters are psychopaths. A fraud examiner's job is to help deter fraud by discretely noticing those employees who might be exhibiting psychopathic tendencies. Psychologists Robert D. Hare, Ph.D., and Paul Babiak, Ph.D., experts in psychopath studies, explain how these aberrant characters can infect organizations and provide ways to deal with them.

Sam strode into the lobby of Bacme Manufacturing. Impeccably dressed in a tailored suit, carrying a burnished leather briefcase, he smiled at the receptionist. "Hello. I'm Sam Smithson, here to see Mr. Tolliver for my second interview." "Yes, Mr. Smithson. Mr. Tolliver is ready to see you." Eyes turned as Sam walked up the stairs.

"Sam! So good to see you!" "It's great to be here again, Mr. Tolliver!" During the national economic downturn, Bacme was suffering and needed a few "white knights." Sam had the requisite resume, leadership qualities, and enthusiastic spirit the company needed to boost morale and the bottom line as a vice president.

Unfortunately, Mr. Tolliver didn't know that Sam was a textbook psychopath. Behind his smile and relaxed manner, he was dishonest, devious, and manipulative. He pretended to be an empathetic listener, but most of the time he had only one person on his mind.

Within a year, Sam had ingratiated himself to staffers who could benefit him: top executives but also the "informal leaders" - middle managers and administrative assistants who got the real work done. Soon he was controlling vast areas of the company and began embezzling funds. By the time the corporation realized it was missing millions of dollars, smiling Sam, "the white knight," was on to the next corporation.


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Not all psychopaths become fraudsters, but some fraudsters are psychopaths. A fraud examiner's job is to help deter fraud by discretely noticing those employees who might be exhibiting psychopathic tendencies.

Robert D. Hare, Ph.D. and Paul Babiak, Ph.D., authors of "Snakes in Suits: When Psychopaths Go to Work" (www.SnakesInSuits.com and available in the ACFE Bookstore), have been studying psychopaths and their effects for years. Babiak is an industrial and organizational psychologist and president of HRBackOffice, an executive coaching and consulting firm specializing in management development and succession planning (www.HRBackOffice.com). Hare, the creator of the standard tool for diagnosing psychopathy and author of "Without Conscience: The Disturbing World of the Psychopaths Among us," is an emeritus professor of psychology at the University of British Columbia and president of Darkstone Research Group, a forensic research and consulting firm (>www.hare.org).

"Psychopaths invest energy in creating and maintaining a façade that facilitates their careers," said Hare. "During the hiring process they convince decision makers of their unique talents and abilities - albeit based upon lies and distortion.

"Executives are always looking for the best and brightest … but there are not that many from which to choose," Hare said. "As times goes on, the psychopath will continue to manage this positive reputation for as long as it is useful to him or her. … Executives view themselves as good judges of people, and few want to be told that they were wrong about something as basic as honesty and integrity. This aspect of human nature works in favor of the psychopath."

Hare will be a keynote speaker at the 19th Annual ACFE Fraud Conference & Exhibition in Boston in July. He spoke to Fraud Magazine from his home in Vancouver, B.C., and Babiak from his home in Dutchess County, N.Y.

Do you believe that most fraudsters are psychopaths or do they just exhibit anti-social behavior?

Hare: There are many reasons why people engage in fraudulent behavior, some related to economic necessity, cultural, social, and peer pressures, special circumstances, opportunities, and so forth. Many of these people are small-time criminals just "doing their job," and their victims are relatively few in number. Much more problematic are fraudsters whose activities reflect a virulent mix of personality traits and behaviors including grandiosity; sense of entitlement; a propensity to lie, deceive, cheat, and manipulate; a lack of empathy and remorse; an inability to develop deep emotional and social connections with others; and the view that others are merely resources to be exploited - callously and without regret. These white-collar psychopaths often are heavily involved in obscenely lucrative scams of every sort. They lead lavish lifestyles while their victims lose their life savings, their dignity, and their health - a financial death penalty as one law enforcement officer put it. The public and the courts have difficulty in appreciating the enormity of the damage done by these social predators, and because their crimes often do not involve direct physical violence, they may receive comparatively light fines and sentences, and early parole. The money obtained from their depredations is seldom recovered, leaving the victims and the public bewildered and convinced that crime certainly does pay when committed by those whose charm, egocentricity, and deception disguise a flabby conscience.

You've designed the "Psychopathy Checklist - Revised" (PCL-R), the standard tool for diagnosing psychopathy. Can you briefly describe its methodology and how it differs from other forms of measurement?

Hare: The PCL-R is a 20-item clinical construct rating scale for the assessment of psychopathy in forensic populations. Qualified professionals use interview and detailed file/collateral information to score each item on 3-point scales (0, 1, 2) according to the extent to which an individual matches explicit criteria for the item. The resulting total scores can vary from 0 to 40 and reflect the extent to which the individual matches the "prototypical psychopath." One derivative of the PCL-R, the Psychopathy Checklist: Screening Version (PCL: SV), often is used in community and civil psychiatric research on psychopathy. It has 12 items, with total scores that can vary from 0 to 24. The items in each instrument are grouped into the same four factors or dimensions, each of which contributes to the measurement of psychopathy. For example, the items in the PCL: SV dimensions are: Interpersonal (Superficial, Grandiose, Deceitful); Affective (Lacks remorse, Lacks empathy, Doesn't accept responsibility for own behavior); Lifestyle (Impulsive, Lacks goals, Irresponsibility); Antisocial (Poor behavioral controls, Adolescent antisocial behavior, Adult antisocial behavior). The PCL-R and the PCL: SV are strongly related to one another, both conceptually and empirically and have much the same psychometric, explanatory, and predictive properties. Because of their demonstrated reliability and validity, they are widely used in basic and applied research on psychopathy and for clinical and forensic evaluations.

The personality disorder measured by the PCL-R is similar to antisocial personality disorder (ASPD), described in the American Psychiatric Association's DSM-IV. The difference is that the PCL-R places considerable emphasis on the interpersonal and affective traits associated with psychopathy, whereas ASPD is defined more by antisocial behaviors. As a result, ASPD fails to capture the traditional construct of psychopathy and is much more prevalent in community and forensic populations than is psychopathy.

Self-report personality inventories also are used for the assessment of psychopathic traits and behaviors. The information provided by these instruments reflects the individual's self-understanding and evaluation, what he or she is willing to disclose to others, and impression management. It may be difficult to obtain accurate self-reports of affective experiences associated with psychopathic tendencies. Further, self-report measures of psychopathy are only moderately correlated with the PCL-R and its derivatives. Nonetheless, they provide useful information from the individual's perspective, and contribute to our understanding of the psychopathy construct, particularly in the general population. One derivative of the PCL-R is the B-Scan or Business Integrity Scan, which includes both a self-report version and a supervisor's rating version. We developed the scan out of our experiences with, and research on, the lack of integrity and honesty of corporate psychopaths. Although not a clinical measure of psychopathy, it is designed to tap into the behaviors, attitudes and judgments relevant to ethical business practices (www.B-Scan.com/).

You've written that many people, after reading or hearing you speak, begin wondering if their bosses and co-workers are psychopaths - or even themselves! I imagine all of us exhibit psychopathic traits at various times, but what are the prevailing characteristics that you believe a person must exhibit to actually be diagnosed as a psychopath? How do you distinguish a psychopath from a difficult person?

Hare: Television constantly describes the symptoms associated with an endless list of diseases, some real, some contrived. The viewer may have one of the symptoms of disease X, say a sore throat, and worry that he or she has the disease. But this symptom is shared by scores of conditions other than disease X, and sometimes a sore throat is simply a sore throat. What people don't take into account is that a given disease or medical condition is defined and diagnosed by a set of symptoms, a syndrome, and that one or two of the defining symptoms may be of little diagnostic value. One symptom does not a disease make, nor does being impulsive, egocentric, irresponsible, and so forth make someone a psychopath; difficult, perhaps, but not psychopathic.

Psychopathy is defined by having a heavy dose of the features that comprise the disorder. How heavy? Like blood pressure, the construct measured by the PCL-R and PCL: SV is dimensional. The threshold for "high blood pressure" or for a label of "hypertensive" is somewhat arbitrary, but typically falls in a range where there is increased risk to the individual's health. The threshold for "psychopathy" also is somewhat arbitrary, but generally is set rather high, at a level where the individual's manipulative, callous, egocentric, predatory, irresponsible, and remorseless behaviors begin to infringe upon the rights and safety of others. For example, researchers often adopt a PCL: SV score of 18 (out of 24) for "probable psychopathy," and a score of 13 for "possible psychopathy." To put this into context, the average PCL: SV score is less than 3 for samples from the general population, and around 13 for samples from forensic populations. Most of those in the general population receive a PCL: SV score of 0 or 1. So, even those who appear to exhibit a few psychopathic features would fall well below thresholds for possible or probable psychopathy. This does not mean that such individuals are saint-like; they could still be very "difficult" for reasons other than psychopathy. Their values, beliefs, or personal style may not be appealing to us, but they may be honest, have integrity, experience emotions at a real level, and contribute to the success of the organization. These "difficult" people also can make sincere efforts to moderate their attitudes and behaviors so as to fit more comfortably into the corporate culture or social norms of their work group. Psychopaths, on the other hand, lack integrity, are dishonest and manipulative, and do not experience deep-seated emotions. They may go through the motions of change in order to achieve their goals, but it will be little more than play-acting. Like Iago in Shakespeare's Othello, psychopaths can be "good" or "bad," depending on what is likely to work best at the time.

What do psychopaths want? What are their motivations?

Hare: They want many of the same basic things that the rest of us want, but, in addition, have an inordinate need for power, prestige, wealth, and so forth. They differ from most of us in terms of how much they "need," their sense of entitlement to whatever they want, and the means with which they are willing to achieve their ends. They also differ dramatically from others in the communal nature of their needs and goals. That is, the sense of altruism, concern for the welfare of family, friends, and society, and the social rules, expectations, and reciprocity that guide most people are irrelevant to psychopaths. They operate according to their own self-serving principle: look out for number 1, no matter what the cost to others, and without guilt or remorse.

Do psychopaths feel emotions and respond to emotions in others?

Hare: The emotional life of psychopaths lacks the range and depth found in most individuals. It often is described as shallow and barren, consisting mostly of "proto-emotions," somewhat primitive responses associated with their own needs and experiences. Their displays of anger, hostility, envy, and response to frustration are likely to be much more intense and genuine than their feelings of empathy, love, shame, and sorrow. While at times they may appear cold and unemotional, they are prone to dramatic, shallow, and short-lived displays of feeling. They are able to mimic emotions rather convincingly, but an astute observer may be left with the impression that they are play-acting and that little is going on below the surface. This, of course, raises an interesting question. If their own emotional life is relatively barren how are they so adept at "reading" and responding to the emotions of other people? The answer seems to be that they have learned that what others describe as a given emotional state is reflected in a distinct pattern of verbal cues and body language. Psychopaths are able to use this information to intuit an emotional state that they don't really understand. In this sense, they are like a color-blind person who "recognizes" color because of the context in which it occurs (the red light is at the top of the traffic signal) and therefore gives the appearance of color perception. However, no amount of training and practice will allow the color-blind person to really understand color or the psychopath to really understand the emotional life of others, except in a vague intellectual, inferential sense. To put it simply, they don't know how you feel, nor do they much care.

You've written that some researchers have said that psychopaths "know the words but not the music." What does that mean?

Hare: It means that psychopaths understand the denotative, dictionary meanings of words but do not fully appreciate their connotative, emotional meaning. Their language is only "word deep," lacking in emotional coloring. Saying "I love you" or "I'm truly sorry" has about as much emotional meaning as saying "have a nice day." This lack of emotional depth in language is part of their more general poverty of affect as described by clinicians and observed in neuroimaging studies.

What are the differences between psychopaths, sociopaths, and those with narcissistic personality or histrionic personality disorders?

Hare: The terms psychopathy and sociopathy refer to related but not identical conditions. Psychopaths have a pattern of personality traits and behaviors not readily understood in terms of social or environmental factors. They are described as without conscience and incapable of empathy, guilt, or loyalty to anyone but themselves. Sociopathy is not a formal psychiatric condition. It refers to a pattern of attitudes, values, and behaviors that is considered antisocial and criminal by society at large, but seen as normal or necessary by the subculture or social environment in which it developed. Sociopaths may have a well-developed conscience and a normal capacity for empathy, guilt, and loyalty, but their sense of right and wrong is based on the norms and expectations of their subculture or group. Many criminals might be described as sociopaths. Narcissistic and histrionic personality disorders are described in DSM-IV, and their differences from psychopathy are outlined in "Snakes in Suits." Briefly, narcissistic personality disorder involves an excessive need for admiration, a sense of superiority and entitlement, and a lack of empathy. It does not necessarily include the lifestyle and antisocial features of psychopathy, outlined earlier. Histrionic personality disorder is defined by excessive and overly dramatic emotionality, attention-seeking, and a strong need for approval. It lacks the lifestyle and antisocial features of psychopathy.

Do we have research that indicates that a person is a psychopath because of genetics, the environment, or both? If it's partially environmental, what could happen to a person so he or she develops into a psychopath?

Hare: All personality traits are the result of genetic-environmental interactions. Recent research in behavioral genetics indicates that callous-unemotional traits and antisocial tendencies, likely precursors to the dimensions of psychopathy described earlier, are highly heritable. There is no evidence that psychopathy can result solely from social or environmental influences. This doesn't mean that some people are destined to become psychopaths, only that the process of socialization is much more difficult for those with early indications of the precursors of the disorder.

Do male and female psychopaths practice their deceptions in different ways? If so, how?

Hare: There are many clinical accounts of female psychopaths but relatively little empirical research. The available evidence suggests that male and female psychopaths share similar interpersonal and affective features, including egocentricity, deceptiveness, shallow emotions, and lack of empathy. All will make maximum use of their physical attributes to deceive and manipulate others, but female psychopaths may be less prone than males to use overt, direct physical aggression to attain their ends. The term femme fatale comes to mind.

What are some ways that companies can screen out psychopaths during the interview and background check processes? This has to be extremely hard because psychopaths exhibit all the right qualities (and fake the rest) when companies are vetting them for jobs.

Babiak: Psychopaths make great first impressions and have extremely effective interviewing skills, so relying on employment interviews alone when making hiring decisions can lead an organization to make the wrong choice. The risk is increased by the use of untrained or inadequately trained interviewers who are unaware of the psychopath's skill at lying and deception, and therefore don't take the necessary extra steps to verify all information collected.

Improving one's chances of detecting psychopathic lying during the employment process requires verification of all details presented (knowledge, experience, expertise), and exploring and challenging discrepancies. Psychopaths talk a good game on a surface level, and will use technical jargon and glib, superficial charm to convince the interviewer of their experience and expertise. As much as possible, résumé data should be checked before the interview. Then, by using structured interviewing techniques and multiple interviewers from different functions and levels in the organization, inconsistencies can be explored further and details drilled down.

It is critical that all interviewers get together to share their findings and impressions before an offer is made. During this important meeting, the discrepancies noted and possible deceptions will be uncovered. Relying on a group decision removes the psychopath's advantage in manipulating just one interviewer successfully.

Can you talk briefly about the "three personalities" that are within all of us?

Babiak: Deep down we all have a private experience of ourselves, our personality, which consists of our needs, values, emotions and so forth. This self-perception includes things we know about ourselves that we are comfortable sharing, other characteristics we wish to keep private, and even some parts that are unknown even to us. This is our inner or private personality. When we deal with others, though, we tend to limit the presentation of our personality to those things we like, are socially acceptable, and can positively influence those around us. This is our persona, or public self. We wear this mask in public. The third point of view of the personality is our reputation among those who know or interact with us; that is, our attributed personality.

In a business world, where "perception is reality," this last view of our personality - our reputation - is the most important. It influences how others will treat us and how decisions are made about us, and can ultimately foster or derail our careers. Unfortunately, many people are unaware of or discount this view of themselves. Sometimes it is only upon receipt of hard data, often in the form of "360-degree" feedback given during training programs, that they learn how others really perceive them.

The psychopath operates on the surface level, presenting a mask or persona that is in keeping with the expectations of the organization and its members. Typically, this mask is: "I am the ideal employee and leader." The psychopath invests considerable effort creating and managing this façade through impression management techniques. Those who have power and authority will be shown only this mask - that is, the façade of an employee who is honest, productive, caring, with leadership potential, and so forth - and will integrate it into their evaluation of the psychopath - in effect, the psychopath's reputation. Those who are of little value to the psychopath will not receive such careful impression management, and may come to see the psychopath for who he or she really is. Unfortunately, however, they are often in positions least likely to influence the thinking of those in power.

In a nutshell, how do psychopaths judge the personalities of others?

Babiak: Psychopaths often come across as good psychologists, but in reality they are just more observant of others and are motivated to take advantage of the traits, characteristics, and personal situations of those around them. Psychopaths use the same three-part personality model to build strong relationships with others. They initially present a charming, charismatic mask, persona, which is often quite likeable. When they want to deepen the relationship (because the target has something they want), they first convince the target that they truly like him or her (that is, like his or her own persona or outward self). Then, they convince the target that they are more similar than different in many ways (including at the deep psychological level). Thirdly, they convince the target that they fully understand and accept the target's own true, private, and inner personality (the one with all of its secrets), and, therefore, because of this acceptance, they can be trusted. Finally, they convince the target that they (the psychopaths) are the ideal friend, partner, coworker, and so forth; this forms the "psychopathic bond." This bond is quite seductive, as few people reach this level of psychological intimacy with others in the work environment. Once this bond is formed, it is very difficult for the target to see the truth about the psychopath as he or she continues to be manipulated.

In business situations, do psychopaths target particular individuals? If so, what kinds of persons?

Babiak: Psychopaths are always on the lookout for individuals of whom they can take advantage. We often correctly assume that they target those with high status and power in the organization, but they also identify those with subtle, informal power in the organization. For example, many secretaries control access to their principals whom a psychopath will want to influence. Middle-level managers control the flow of materials, information, and processes that might prove useful to a psychopath. Individual contributors in professional positions (for example, those in IT, finance, and auditing), despite the lack of authority over staff, have great amounts of influence over information and other resources useful to the corporate psychopath. Any person with perceived utility to the psychopath will be targeted.

I know this is complex, but how are psychopaths able to manipulate people within an organization to be, as you call them, "pawns," and "patrons"?

Babiak: This model evolved out of our observations of how the "psychopathic drama" unfolds. It captures the theatrical nature of the psychopaths' view of organizational life. Psychopaths see themselves as the writers, directors, and producers of the dramas that are their lives - on and off their jobs; other people only exist to fulfill the supporting roles required of them - the pawns, and patrons.

Psychopaths form bonds with many people in the organization; that is, psychopathic bonds, not real ones. The psychopath views as pawns those who have the power, status, or access to desired resources, to be used until their utility is gone, and then dispensed with or even sacrificed. Patrons are those key power holders whom the psychopath relies upon for protection and defense when things get uncomfortable, much like the "mentors" or "godfathers" who exist in many large companies to assist high potentials negotiate their way through the political minefields to the top.

In addition, there is the patsy - a former pawn or patron whose organizational power and influence has been effectively neutralized by the psychopath. Finally, there are the organizational police, those in control positions such as accounting, HR, IT, and security who are in the best position to unseat the psychopath, but who often are not listened to by those in power, and who have already been trapped in the psychopathic bond. The psychopath prefers to avoid the organizational police (they tend to have ethical and professional values which are anathema to the psychopath), but having one in his or her vest pocket can be invaluable.

It makes sense that psychopaths would try to influence recognized top managers, but how do they manipulate and use "informal leaders," those who wield influence but might not be high on the organizational chart?

Babiak: While formal power holders are credited with leading their organizations, it is often a group of informal leaders who gets things done on a day-to-day basis. Unfortunately, in many companies, these informal leaders are the unsung heroes - and feel as such. What better person to convince that they have value and a friend in high places, as the psychopath moves up, than these individuals? They are the perfect targets from the up-and-coming psychopath's point of view.

How can a person avoid becoming ensnared in a one-sided relationship with a psychopath?

Babiak: Knowledge certainly is power in this case. It is important to learn as much as one can about psychopaths - their traits and characteristics, and how they operate. Furthermore, one should learn more about oneself, particularly those things that would make one attractive to a psychopath. These can include power and control of resources (formal and informal), as well as any psychological or emotional weak spots or hot buttons that can be used to unduly influence you. Psychopaths don't operate in a social vacuum, and those with whom they have worked or interacted can be valuable sources of information.

You've written that once psychopaths are within an organization, they revert to their natural three-phase behavior pattern - assessment, manipulation, and abandonment. Can you briefly describe those three steps? Can you also describe the ascension phase?

Babiak: In society, psychopaths exhibit a fairly consistent pattern of behavior. They identify targets (assessment phase), use them (manipulation phase), and dispense with them when their utility is used up (abandonment phase). In organizations, the abandonment phase is difficult to manage, as the psychopath cannot just move on, in the physical sense. This can lead to confrontations with former pawns who now feel like patsies. But the psychopath has already prepared for this, having spread disparaging information about these individuals - that is, "poisoned the water" - among those in positions of power. Those who ultimately confront a corporate psychopath often come to find themselves on the chopping block.

In some cases, psychopaths see opportunities to move up in the power hierarchies by unseating those who have mentored or protected them, their patrons, in the ultimate acts of betrayal. This form of ascension can be particularly rewarding to a psychopath who has played both the patron and other members of the organization.

Are most corporate and organizational psychopaths loners or do they sometimes team up with other psychopaths to pull off fraud schemes?

Babiak: Most of the individuals we have met have been "loners" in the sense of only thinking of themselves; however, they do surround themselves with supporters and followers to facilitate their activities. To the degree that the psychopath can get these naïve supporters to believe that their actions are consistent with their own personal values, the game remains in play.

Occasionally, two psychopaths may work as a team in the same organization, at least for short periods. Inevitably, there will be a falling out: two stars is one too many. In one case, two corporate psychopaths worked in the same company but were in different divisions and rarely interacted. Historically, there may have been instances of psychopaths working together. One wonders who was "more" psychopathic: Joseph Stalin or his henchman, Lavrentiy Beria, chief of the secret police.

Have the Internet and other technological developments aided psychopaths?

Hare: Immeasurably! The Internet and technology have given psychopaths and other predators access to a virtually unlimited pool of potential victims. They can promote phony stocks, circulate crooked investment schemes, siphon off bank accounts, commit identity theft, and so forth, all with little risk to themselves. They also can promote themselves by constructing fake or greatly embellished Web sites and credentials in order to lure unsuspecting victims. In a very real sense, the Internet and associated technology represent a paradise on earth for fraudsters, with even better things to come.

The business world of the 1980s and 1990s went through startling changes after decades of relative stability in culture and procedures. And now we're in an economic slowdown or possible recession. Have these changes helped or hindered psychopaths in organizations?

Babiak: While economic slowdowns can lead to layoffs and plant closings, there is still the need for seasoned, experienced leaders who have the wherewithal to meet the challenge of recovery and turnaround. These individuals are rare. What a perfect scenario for the psychopath to enter as the "solution," replete with the skills (faked), abilities (faked), and background (faked) necessary to take over and makes things right.

There is also greater access to higher education in general than before, as well as questionable online degrees that can be bought and used by psychopaths to pad their résumés. Losing one's job no longer bears the stigma - or provokes as much concern - as it once did; layoffs and plant closings have left many truly stellar executives with gaps in their employment histories. Economic conditions can be a convenient explanation for short tenures listed on the resume. While a psychopath would be expected to blame the former boss's personality or colleagues' underhandedness for losing his or her job, a really clever one can feign some sadness at having to leave "a great job at a great company" due to economic conditions.

You've written that organizations have become more "psychopath friendly." What do you mean by that?

Babiak: The change of organizational structures from large and bureaucratic to lean, mean, and flat has inadvertently made companies more attractive to psychopaths (fewer rules) and, at the same time, easier to negotiate (faster progression). There is more opportunity for a motivated psychopath to stand out amongst his or her peers, less hoops to jump through, and shorter distances to the top. Changes in work values among employees have also facilitated entry by psychopaths. Many companies, initially puzzled by the demands of "younger" workers for large sign-on bonuses and promotions at least every two years, are beginning to accept this as part of a new work style that needs to be accommodated in some way. A young psychopath would fit in quite nicely in this culture.

You've written that you doubt that psychopathic individuals would be very successful in a highly structured traditional bureaucracy. Why is that?

Babiak: Bureaucracies, by design, are rule-bound structures. They are the result of a stage of organizational development in which companies attempt to systematize their operations in pursuit of consistency, quality, and productivity. An unfortunate outcome also is that they can become quite boring, slow to respond, and intolerant of creativity and innovation.

During the 1980s and 1990s, the speed required of businesses to maintain their positions, and perhaps grow market share, increased. This put a tremendous strain on organizational systems - the bureaucracy - as well as on employees and managers - the culture. The mantra became "do more, better, faster with less" - a difficult task, at best. In response to accelerated market demands, organizations began to jettison parts of their bureaucracy - policies and procedures - in the nterest of speed. Entire levels of management were eliminated under the theory that communications would improve from top to bottom. Systems once thought to be helpful were eliminated or "reengineered" away. By eliminating those policies and procedures that could help uncover psychopathic behavior - formal performance appraisals are a good example - and systems that help prevent their hiring - structured employment practices - it became much easier for someone with psychopathic tendencies to slip in and look successful.

Unfortunately, this is where the psychopath has an advantage; these new structures are always in a state of flux and never reach the "ideal" state. We call them "transitional organizations" because the transitioning never ends. This frustrates and confuses those who have grown accustomed to the stability that large organizations used to provide. Being a thrill seeker by nature, the psychopath relishes the chaos. On a practical level, a constantly changing work environment provides the psychopath an endless source of new coworkers to target and many opportunities to move from project to project when boredom sets in.

Can you talk about how psychopathic fraudsters use affinity groups (religious, political, or social entities in which all members share common values or beliefs) to pull off their schemes?

Hare: We refer to these schemes as affinity fraud. They rely on the fact that members of an affinity group typically are very trusting of others who profess to share their values, beliefs, and interests. Those who are most adept at perpetrating affinity fraud are psychopaths who gain entry into the group by developing an acquaintance with a member who then introduces the fraudster as "one of us." The result is a "fox in the henhouse," with predictable results. Religious groups, are particularly vulnerable; belief in the inherent goodness of others and uncritical acceptance of professions of faith are tailor-made for an enterprising psychopath. Sadly, even after being victimized, many members of a group will refuse to face the truth, continuing to believe that the scamster is basically good at heart or that there must be a reason why he or she took advantage of the group. Even sophisticated members of financial and business groups - such as investment clubs - often are no match for the charm and seduction of a good-looking, well-dressed, and apparently well-connected psychopath. A suspicious view of newcomers might help but is no guarantee of immunity to infiltration by someone intent on doing the group harm. Even organizations that by their very nature are extremely cynical and suspicious - such as intelligence agencies and criminal gangs - cannot protect themselves completely from those who misrepresent their credentials, connections, and intentions.

Joseph Wells, the founder and chairman of the ACFE, has concentrated on teaching not just about fraudsters' actions but their psychological motivations and aberrations. How can a group like ours aid its members in spotting possible psychopaths and prevent them from transforming their behaviors into crimes?

Babiak: Increasing the professional standards and training of fraud examiners is a good foundation. Knowledge about the nature of psychopaths and of the strategies and tactics they use is important. Even so, it can be very difficult to spot them without detailed information from a variety of sources about their behavior and manipulations especially if you are the one being targeted. It is also important for examiners to understand themselves and how their own personality traits and vulnerabilities may play into the hands of a psychopath. A confidential "hot line" could be made available to members who have suspicions and need coaching and advice on how to proceed.

Are most psychopaths in organizations exposed or do they remain or go on to greater positions?

Babiak: With one exception, all of the psychopaths that we have studied are still in positions of authority in their companies. In some cases, they have risen within the ranks, and in others, they have solid positions from which they continue to use their organizations for personal gain. The one psychopath we studied who was fired ended up leaving with a sizeable financial package and a company car. He was hired by a competitor at a significantly greater salary. Unfortunately, in their effort to rid themselves of problems and to avoid embarrassment in front of corporate or financial communities, some organizations will cover up their messes and even write favorable letters of recommendation thus facilitating psychopaths' devious journeys up corporate ladders.

Since the publication of "Snakes in Suits," we have received an increased number of calls from executives, entrepreneurs, and principals who now suspect that someone on their staff - or even an equity partner - is a corporate psychopath. We see that awareness of the problem has increased, as has the willingness to take action to remove or otherwise deal with the problem person.

How does a fraud examiner identify possible psychopaths after they're hired? I imagine it's a sensitive issue to put the psychopath label on anybody, but how should a fraud examiner proceed to prevent a possible fraud or should they even try? Is it ever possible to discern the potential for fraud in a suspected psychopath?

Babiak: In business situations, it is rarely useful to label someone a psychopath; organizations can only respond to the overt behaviors of fraudsters and others. Suspecting that a client (or even a coworker) has psychopathic traits can help sensitize an examiner to search out and investigate subtle forms of lying and deceit. If the client is highly psychopathic, the odds are that some form of corporate misbehavior, perhaps fraud, is underway, but hidden from view. If inconsistencies and improprieties begin to surface, it is important that the examiner's focus remain on the facts of each case, as the psychopath will try to distract him or her through flattery, misdirection, questioning the examiner's competence or authority to investigate, and so forth.

What steps lead to the confrontation of a psychopath and how is it carried out? Can a psychopath ever be rehabilitated?

Hare: Like anyone suspected of corporate misbehavior or fraud, confrontation of a suspected psychopath should occur after all the facts have been obtained, verified, digested, and interpreted, and in accordance with corporate policies and due process. In addition, however, it is important to anticipate the potential reactions of the psychopath, which may include "plausible" indignation and denial, diffusion of blame and responsibility, appeals to a "higher" authority, verbal abuse, and threats of litigation. In such cases, it is essential to ensure that the case against the individual is factually and legally sound and to "stand one's ground."

A somewhat different tactic sometimes employed by those accused of misbehavior is to admit it, claim that the behavior was out of character, and solemnly pledge to change. However, when dealing with a suspected psychopath such tactics should be treated with a healthy dose of skepticism. There is little evidence that psychopaths can be, or even believe that they should be, rehabilitated. Their behavior reflects a well-established, stable personality structure. Most people have some insight into the motivations for their own behavior, and will accept that changes need to be made in order to be a good corporate citizen. Unfortunately, psychopaths already are aware of their own motivations, see little wrong with them, and do not believe they need to change. However, if they think that "rehabilitation" can serve their own selfish, pragmatic ends, then they are quite capable of playing the game, portraying themselves as a "saved" or "redeemed" sinner.


Publisher
Association of Certified Fraud Examiners
The Gregor Building · 716 West Avenue
Austin, TX 78701-2727 USA
Tel: (800) 245-3321(U.S. and Canada)
Tel.: +1 (512) 478-9070 (other)
www.acfe.com · dcarozza@acfe.com

Purpose
Fraud Magazine is a 72-page, four-color magazine published bi-monthly by the Association of Certified Fraud Examiners (ACFE) as a service to its members and others interested in the deterrence and detection of fraud and white-collar crime. Articles published in Fraud Magazine cover a variety of topics related to white-collar crime, including forensic accounting; fraud investigation techniques; white-collar crime statutes, legislation, and regulatory issues; computer and management information systems abuse; and industry-specific concerns such as insurance, healthcare, and financial institution fraud.


--------------------------------------------------------------------------------

Dick Carozza is editor-in-chief of Fraud Magazine. His e-mail address is: dcarozza@ACFE.com.

[admin]

Justice in Canada Lesson: Before Committing a Crime, Be Sure to Incorporate.


Since a corporation is nothing but an artificial legal person incapable of anything on its own, who were the real people in these corporations that oversaw these illegal activities? Was it some overzealous warehouse employee or was it orchestrated further up the food chain? Why is nothing being done to prosecute the real people who committed these crimes? What about all the people in the food chain who personally benefitted from these illegal actions through salaries, bonuses and other payments?

Are we not demonstrating yet again that petty criminals and bank robbers should look to the corporate model and the Canadian "justice" system and incorporate themselves???

That way, if they get caught, it is only their corporate structure that will get fined and they will get to keep the ill-gotten gains scott-free. A future announcement would be "Bank Robbers Incorporated was today fined $10 million..." I mean if the corporate model works so well for the huge illegal activities, why should it not be copied and used by people will smaller scale ambitions?

This decision along with the ABCP legal decision amongst others, demonstrates that doing illegal things in this country does pay---as long as you are conduct your nefarious activities within an artificial corporate structure.

Another great lesson has just been served for the benefit of today's students and tomorrow's leaders.

Thanks to all of you for showing the way and for doing nothing about it!


Best wishes.
Jim MacDonald MBA

[admin]

Should Purdy Crawford be stripped of his OC too? !!

Does Purdy Crawford deserve to be stripped of his Order of Canada too? !!
à la Alan Eagleson, Conrad Black, David Ahenakew, etc.?

----- Original Message -----


Subject: Purdy Crawford was CEO of Imasco, when Imperial Tobacco Conducted
the Illegal Tobacco Smuggling that it Admitted Today
The RCMP made the following announcement today, July 31, 2008, concerning admission of guilt by Imperial Tobacco on illegal tobacco smuggling during 1989-1994. Purdy Crawford was the CEO of Imasco during 1985-1995, which covers the 1989-1994 time period when Imperial Tobacco, a wholly owned subsidiary of Imasco, conducted the illegal activity of tobacco smuggling for the purpose of avoiding the payment of Canadian tobacco taxes. Purdy Crawford is now employed at Oslers LLP and he is the Chairperson of the Pan Canadian Committee, who are the applicants for the ABCP CCAA Restructuring Plan, being administered at the Ontario Superior Court of Justice.
From attached RCMP Media Release dated July 31, 2008:

""The guilty pleas, from Imperial Tobacco Canada Limited (ITCL) and Rothmans Benson & Hedges (RBH), are the culmination of more than eight years of investigative work by RCMP Customs and Excise sections in Ontario and Québec. As part of agreed statements of fact, the two companies admitted to “aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act and its amendments and Ministerial regulations.”

As a result, the two companies have paid the largest fines ever levied in Canada; ITCL has paid a $200-million fine and RBH $100-million.""

"The material time of the charges involved illegal activity between the years of 1989-1994. Then, the contraband tobacco market in Canada involved product being produced in Canada, and shipped to locations in the US near the Canada/US border. From there, it was distributed to smugglers or black market distributors who brought it back into Canada for further illegal distribution."

[admin]

http://www.guardian.co.uk/business/2008 ... es-banking

The Guardian October 17 2008

Top Wall Street bankers to receive $70bn pay deals

Simon Bowers

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40.4bn), a substantial proportion of which is expected to be paid in bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup will pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted widespread criticism. The government cash has been poured in on the condition that excessive executive pay will be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased today when Germany's Deutsche Bank said many of its leading traders would join chief executive Josef Ackermann in waiving millions of euro in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and - most controversially - bonuses appear to bear no relation to the heavy losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year; Merrill Lynch and Morgan Stanley have fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week Morgan Stanley's $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP MorganChase $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the amount accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of September by 3% to $3.7bn.

Days before it collapsed into bankruptcy protection a month ago Lehman Brothers revealed $6.12bn of staff pay plans in its corporate filings. These payouts, the bank insisted, were justified despite net revenue collapsing from $14.9bn to a net outgoing of $64m. None of the banks the Guardian contacted wished to comment on the record about their pay plans.

Behind the scenes, one source said: "For a normal person the salaries are very high and the bonuses seem even higher. But in this world you get a top bonus for top performance, a medium bonus for mediocre performance and a much smaller bonus if you don't do so well."

Many critics of the investment banking model have questioned why firms continues to siphon off billions of dollars of bank earnings into annual bonus pools rather than using the funds to shore up the capital position of the crisis-stricken institutions. One banking source said: "That's a fair enough question - and it may well be that by the end of the year the banks start [to] review the situation."

Much of the anger about investment banking bonuses has focused on boardroom executives such as former Lehman boss Dick Fuld, who was paid $485m in salary, bonuses and options between 2000 and 2007. Last year Merrill Lynch chairman Stan O'Neal retired after announcing losses of $8bn, taking a final pay deal worth $161m. Citigroup boss Chuck Prince left last year with a $38m in bonuses, shares and options after multibillion-dollar write-downs.

In Britain, Bob Diamond, Barclays president, is one of the few investment bankers whose pay is made public. Last year he received a salary of £250,000, but his total pay, including bonuses, reached £36m.

One London-based banking source, who worked for a US bank, said many in the City were expecting star traders to see little reduction in their bonuses.

"The real 'rain-makers' will not notice an impact. It will be the more middle-ranking people who will be really hit."

[admin]

Weekend Edition
October 17 / 20, 2008
The Charmed Lives of the Crony Capitalists



How the Banksters are Making a Killing Off the Bailout

By Pam Martens, CounterPunch

October 17 / 20, 2008.

It's going to take about 20 years to repair the damage from the huge rip off created under the guise of "free market" capitalism.

Today, we hand our 8 year olds a $13 trillion national debt while our Congress hands Wall Street banksters the national purse without so much as a hearing to determine the cause of the collapse.

Worse still, the money is doled out to the very same individuals who leveraged their institutions to casino status.

Americans are correctly outraged at the spectacle of crashing stock and bond markets around the globe while watching the poster boys of crony capitalism march up the granite steps of the US Treasury building in their Armani shoes and heist a fresh $125 Billion.

Henry Paulson's, $700 billion bailout plan to buy up distressed mortgage assets has spun off its own $250 billion subsidiary plan to inject $125 billion into 9 of the biggest commercial and investment banks in the country. Another $125 may go to smaller regional banks and thrifts, assuming they sign on to the deal.

And what will taxpayers get for their investment as the public recoils in revulsion at what they have done to our financial system? A paltry 5% dividend, exactly half of what Warren Buffett received for his recent investment in General Electric, a company that actually makes something real, like jet engines and light bulbs.

Now we learn from the U.S. Treasury web site that it has hired the law firm of Simpson, Thacher & Bartlett to represent our taxpayer interests going forward at a cost to us of $300,000 for six months work. But we're not allowed to know their hourly rate; that has been blacked out on the Treasury's contract.

The Treasury has named specific lawyers it wants to work for us. Two of those are Lee A. Meyerson and David Eisenberg. Mr. Meyerson has been a central player in facilitating the bank consolidations that have led to the present train wreck, including building JPMorgan Chase from the body parts of Chemical Bank, Chase Manhattan and Bank One.

Mr. Eisenberg has played a central role in the proliferation of the credit derivatives blowing up on the books of the Frankenbanks created by Mr. Meyerson.

Here's what the Simpson, Thacher & Bartlett web site says about its relationships and Mr. Eisenberg's work:


"The Firm's practice benefits from established relationships with all of the major investment banks. Mr. Eisenberg is responsible for creating the asset-backed practice at the firm and has represented clients involved in the structuring of the first asset-backed commercial paper program, the first public offering of credit card-backed securities by a bank and the first offering of asset-backed securities supported by dealer floor plan loansMr. Eisenberg represents JPMorgan Chase Bank, as issuer, in its ongoing program of public offerings of its credit card receivables backed notes. In addition Mr. Eisenberg represented JPMorgan Chase Bank in connection with the issuance of notes backed by commercial loans and in connection with its offerings of Leveraged Notes for Credit Exposure, a credit derivative product. Mr. Eisenberg has also represented underwriters, issuers and sponsors of modeled index catastrophe bonds. Mr. Eisenberg has represented sellers and buyers of credit protection in connection with synthetic securitizations of consumer loans, commercial loans and high yield bonds."

This is an unconscionable conflict of interest given that JPMorgan Chase is receiving $25 billion of taxpayer funds under this bailout and that the program is very likely to be buying the very toxic waste for which Mr. Eisenberg wrote legal opinions and assisted in proliferating.

Most Americans do not understand the incestuous relationship between the U.S. Treasury and this band of financial marauders who busted the entire financial system with insane levels of leveraged derivatives.

The bulk of the $125 billion will be dispersed among Uncle Sam's own brokers, or Primary Dealers. Without these firms, the U.S. Government would have no means of financing its own funding needs.

Treasury, therefore, has an obvious conflict of interest in keeping these firms alive, even when they are the walking dead. Here's how much of the $125 Billion the Fed's Primary Dealers will collect: Citigroup, $25 Billion; JPMorgan Chase & Co., $25 Billion; Bank of America and its soon to be acquired brokerage, Merrill Lynch, $25 Billion; Goldman Sachs, $10 Billion; Morgan Stanley, $10 Billion. In other words, of the first $125 billion outlay from the emergency bailout fund, 76% is going to shore up Uncle Sam's brokers and $300,000 is going to retain one of Wall Street's favorite law firms.

In 1988 there were 46 primary dealers. In June 2008 there were 20, in no small part as a result of the mergers facilitated by Simpson, Thacher & Bartlett. In rapid succession since July, three more have disappeared from bad bets: Countrywide (shotgun marriage with Bank of America); Lehman Brothers, bankrupt; Bear, Stearns (shotgun marriage with J.P. Morgan Securities). That leaves 17 and that number will drop to 16 when Merrill Lynch is folded into Bank of America. (The rest of the 16 are not getting part of the $125 billion are foreign banks.)

In addition to the repeal of the depression era, investor protection legislation known as the Glass Steagall Act, the removal of credit default swaps from regulation by the Commodity Futures Modernization Act of 2000, various U.S. Supreme Court decisions upholding Wall Street's ability to run its own private justice system shrouded in darkness, there was one more key regulatory change that set the stage for this train wreck.

January 22, 1992 the Federal Reserve announced that its New York region would "discontinue the 'dealer surveillance' now exercised through regular on-site inspection visits by Federal Reserve surveillance staff."

In other words, the Federal Reserve amazingly dropped inspections. Who was at the helm of the Federal Reserve when this nutty decision was made: the same man who lobbied for the repeal of the Glass Steagall Act that ushered in the merger of depositor banks with casino investment banks and brokerages; the same man who lobbied for the passage of the Commodity Futures Modernization Act of 2000 to allow for unregulated derivatives markets. The man, of course, is Alan Greenspan former Chairman of the Federal Reserve.

Pam Martens worked on Wall Street for 21 years; she has no security position, long or short, in any company mentioned in this article. She writes on public interest issues from New Hampshire. She can be reached at pamk741@aol.com

[admin]

Wall Street's 'Disaster Capitalism for Dummies'

14 reasons Main Street loses while Wall Street sinks democracy

By Paul B. Farrell
MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, we're dummies. You. Me. All 300 million of us. Clueless. We should be ashamed. We're obsessed about the slogans and rituals of "democracy," distracted by the campaign, polls, debates, rhetoric, half-truths and outright lies. McCain? Obama? Sorry to pop your bubble folks, but it no longer matters who's president.

Why? The real "game changer" already happened. Democracy has been replaced by Wall Street's new "disaster capitalism." That's the big game-changer historians will remember about 2008, masterminded by Wall Street's ultimate "Trojan Horse," Hank Paulson. Imagine:

Greed, arrogance and incompetence create a massive bubble, cost trillions, and
still Wall Street comes out smelling like roses, richer and more powerful!
Yes, we're idiots: While distracted by the "illusion of democracy" in the endless campaign, Congress surrendered the powers we entrusted to it with very little fight. Congress simply handed over voting power and the keys to trillions in the Treasury to Wall Street's new "Disaster Capitalists" who now control "democracy."
Why did this happen? We're in denial, clueless wimps, that's why. We let it happen. In one generation America has been transformed from a democracy into a strange new form of government, "Disaster Capitalism." Here's how it happened:

■ Three decades of influence peddling in Washington has built an army of 42,000 special-interest lobbyists representing corporations and the wealthy. Today these lobbyists manipulate America's 537 elected officials with massive campaign contributions that fund candidates who vote their agenda.

■ This historic buildup accelerated under Reaganomics and went into hyperspeed under Bushonomics, both totally committed to a new disaster capitalism run privately by Wall Street and Corporate America. No-bid contracts in wars and hurricanes. A housing-credit bubble -- while secretly planning for a meltdown.

■ Finally, the coup de grace: Along came the housing-credit crisis, as planned. Press and public saw a negative, a crisis. Disaster capitalists saw a huge opportunity. Yes, opportunity for big bucks and control of America. Millions of homeowners and marginal banks suffered huge losses. Taxpayers stuck with trillions in debt. But giant banks emerge intact, stronger, with virtual control over government and the power to use taxpayers' funds. They're laughing at us idiots!

Amazing isn't it, Wall Street's Disaster Capitalists screwed up, likely planned or let happen this meltdown and recession. Yet America's clueless taxpayers just reward them by giving the screw-ups massive bailouts, control over more than $2 trillion of tax money, and the power to clean up the mess they made. Oh yes, we are dummies!

This end game was planned for years in secret war rooms on Wall Street, in Corporate America, in Washington and the Forbes 400. Democracy is too cumbersome. It had to be marginalized for Disaster Capitalism to take over. Reagan, Bush and Paulson were Wall Street's "Trojan Horses."

Naomi Klein summarizes the game in "Shock Doctrine: the Rise of Disaster Capitalism." This "new economy" generates enormous profits feeding off other peoples' misery: Wars, terror attacks, natural catastrophes, poverty, trade sanctions, subprime housing meltdowns and all kinds of economic, financial and political disasters. Natural (Katrina) or manmade (Iraq), either way "disaster capitalism" creates fortunes.

So you, me and the other 300 million better get out of denial. America is no longer a democracy. Voting is irrelevant. Best case scenario: We're a plutocracy, a government ruled by the wealthy, the richest 1%, the Forbes 400, the influential wealthy elite, while the other 99% are their "servants." Meanwhile, the inflation-adjusted income of wage-earners has declined for three decades.

Worst case scenario: America's no democracy and as a result of the meltdown and the surrender of our power to Wall Street's new Disaster Capitalism we are morphing into what one WWII dictator called "corporatism," a "merger of state and corporate power," kind of like what's going on now with Goldman Sachs' ex-boss as de facto president.

Wolves in sheep's clothing

Yes, a strong charge. But like a lot of our readers, I don't like what's happening to America. I'm a patriot. I volunteered for the Marines. Served four years. Volunteered for Korea. I don't like how our freedoms, rights and value system are being subverted in the name of greed, arrogance, self-righteous intolerance and other false gods.

We know for the last eight years disaster capitalists ignored obvious warnings of a coming meltdown. They apparently planned it. They road the bull, got very rich. Now they have the ultimate disaster capitalist weapons, trillions in tax money, virtual control of government.

That's why I fear we're on the edge of a dangerous line between Wall Street's version of disaster capitalism and a toxic "merger of state and corporate power." The wolf is in sheep's clothing. Wall Street pretends we're a democracy. Yet America more closely resembles the kind of "corporatism" that Laurence W. Britt wrote about five years ago in Free Inquiry magazine.

We adapted his historical analysis of 14 key traits for today's discussion. Notice how they have a huge impact your investments and retirement:

1. Wall Street rich get first priority

Think "bailout." Wall Street's greedy con game spins out of control globally. Millions of homeowners misled, lose. Who gets hundreds of billions first? Wall Street's con men.

2. National security obsession

Think of the expansion of executive powers in the name of national security: Preemptive wars, wiretapping private citizens, Gitmo, torture; driven by a dark wealthy neocon elite.

3. Superpower with massive military

Think of our $3 trillion Iraq/Afghan War. Disaster capitalists love the thrill of military power. We outspend all nations, over half the federal budget to strut before the world.

4. Extreme nationalism

Signs are everywhere: Flags, lapel pins, "support the troops" slogans, all to get huge military budgets passed. Challenge them and you're un-American and unpatriotic.

5. Rally the masses by scapegoating enemies

Think "axis of evil," mushroom clouds, "Islamofascists," more terrorist attacks on the homeland. Propaganda creates "enemies" in the public's mind and distracts from real issues.

6. Corruption and cronyism

Think earmarks, no-bid defense contracts, paid mercenaries outnumbering military in Iraq, superlobbyist Jack Abramoff, biofuels, bridge to nowhere, millions donated to campaigns.

7. Obsession with crime

Think of prison-building as just another investment opportunity, rather than focusing on reforming our criminal justice system. Stoke irrational fear of criminals and extremists.

8. Labor and low wages

Think corporate earnings versus the wages paid to workers. No "trickling down," leaves more for tricklers: Rich insiders, stockholders. Wages dropping as CEO salaries skyrocket.

9. Contempt for human rights

Think of abuses of habeas corpus, loss of right to trial, bogus charges, plus "demonizing" the victims, all in the name of national defense and homeland security.

10. Mass media manipulation

Think of leaking false information, Joseph Wilson, Valerie Plame, Scooter Libby, Colin Powell's United Nation's testimony, Condoleezza Rice's mushroom clouds, WMDs, all to suppress the truth.

11. Obsession with sexism

Think of paternalism, antigays, antiabortion, subordinate women -- then codify the system as the law of the land reinforcing a male-dominated society, punish violators.

12. Disdain for intellectuals

Think of conservative intellectuals Francis Fukuyama and Bill Buckley. Contrast them to Sarah Palin and Joe Sixpack conservatism, Bush's funding cuts for arts and science education.

13. Religion in government

Think of all the faith-based programs versus antiscience in drug approvals, creationism vs. evolution, Ten Commandments enshrined in public buildings, public money to churches.

14. Fraudulent elections

Think of police and prosecutorial intimidation and threats to voters, challenging minority voters, ballots disappearing, party election officials committing outright fraud.

Yes, officially America is still a democracy. We have enough signs and rituals to support that illusion. But the truth is America has become a plutocracy run by and for the wealthy. And since Wall Street's Disaster Capitalism coup de grace, we are rapidly morphing into a dangerous new government.

[admin]

the article below, is a good explanationof how people get on the slippery slope of doing wrong.
Read also the book , "THE LUCIFER EFFECT", author's name Zimbardo, for a complete explanation of why good people do bad things.

The slippery slope to doing wrong

Editor's letter
Investment Executive trade mag for the financial industry

By Tessa Wilmott



Harvin C. Moore III made a very persuasive case. The gentle-spoken Texan recounted the path he took from running a large development company and a savings and loan operation to serving time in a federal prison.

In the end, the reason for his downfall was simple, really. He made a mistake in judgment.

Now, many of us make mistakes in judgment. Hopefully, they’re little ones — like thinking the new puppy didn’t really mean it when she asked to go outside. And the messes we clean up are small ones.

But in Moore’s case, he allowed himself to think that what he was doing was OK in the circumstances — that the circumstances led him into a grey area in which right and wrong blended, that he may be doing the wrong thing but for the right reason.

But when Moore spoke to the Institute of Advanced Financial Planners’ 2008 symposium in Regina at the end of September, he made it clear that there is no grey area when it comes to ethics. Right is right; wrong is always wrong.

Moore’s troubles date back to the 1980s, when the real estate development market died in Texas. And it stayed dead. That jeopardized Moore’s development company and its ability to repay its loans. But Moore was also co-owner of an S&L. Essentially, the S&L made loans that carried conditions, that some of the money came back to Moore’s development company so he could pay off its loans and stave off bankruptcy.

It was illegal — and unethical. Moore was found out and convicted of bank fraud. He did two years. He also lost his wife, his businesses and his ability to practise law.

A sad story — but I didn’t feel sorry for Moore. He wasn’t there asking for anyone’s pity.
He was there to remind people of how easy it is to get off track, that the path to wrongdoing is a slippery slope and you can convince yourself step by step that your conduct is OK in the circumstances.
He referred to humans’ unerring ability to justify wrongdoing. Everyone is doing it. (Unfortunately, in the S&L scandal, everyone was.) Or the ability to convince yourself that a particular course of action or decision is best because you will save other people from being hurt. It isn’t about you; it’s about them.

Moore also talked about the “little” laws we break every day and our ability to negotiate our way around the ethical questions. It’s OK, for example, to speed on the freeway. You’re breaking the law, but everybody does it.

(I admit I speed — but it’s better for traffic flow if I keep up with the other speeders; it’s the slow drivers who are dangerous. I don’t, however, talk on my cellphone while driving, as do so many idiots when they’re on the road. Now, that is dangerous!

How is that for self-justification?)

So, much of what Moore said struck a chord, and it certainly has application for advisors. If you can pick and choose the laws you obey, what’s to stop you from selling a product your client may not need because you need to generate some commissions. Your need is greater. And, really, it is a good product. It’s not like you’re putting the client into some dog. And it’s just this once.

Or how about that product with the very attractive commission structure (think: Portus). That would really diversify your client’s portfolio. You’re really doing it for your client.

It is a slippery slope. But don’t kid yourself. As Moore made very clear, there is no grey zone when it comes to right and wrong. Handling other people’s money is a grave responsibility. There is no room for unethical behaviour; only for clear heads.

— TESSA WILMOTT, EDITOR-IN-CHIEF

[admin]

Peter Puck's last stand
In 2002, former Oilers owner Peter Pocklington moved to California, leaving bailouts and ill will in his wake. To Canadians, he disappeared. For unwitting new partners in the U.S., a golden entrepreneur seemed to have swept into town

BRENT JANG
From Friday's Globe and Mail
December 23, 2008 at 7:00 AM EST
Outside the exclusive condo, two "foo dog" sculptures protected the front door. The symbols of good fortune and wisdom are known in Asia for guarding the gates of heaven. But they couldn't halt what was about to transpire on a sweltering July day in Indian Wells, a resort town in the California desert. Three U.S. marshals waited patiently at the third-floor entrance, expecting Peter Pocklington to answer the door.

But Pocklington was in the shower. His wife, Eva, and a maid heard the knocking and went to see why anyone would bother them at 10:30 a.m. during a heat wave. Shown some documents, the women let the marshals walk into the expansive condo. It overlooked a private 18-hole golf course—just one of the accoutrements of the Vintage Club, a gated community where the Pocklingtons rubbed shoulders with the likes of Bill Gates.

Emerging wet-haired, the 66-year-old Pocklington was handed a copy of a court order that allowed the marshals to seize valuable artwork from the condo. Minutes later, one of the marshals motioned to others to come inside. Naomi Balcombe and four people supporting her quest for justice marched in. If Pocklington wasn't going to make good on the purchase of Balcombe's company, she, thanks to the court order, would be reimbursed another way—with his prized possessions. Six specialty movers followed her.

For Balcombe, a 34-year-old entrepreneur, the raid was a dream come true. "I had to pinch myself," she remembered later. For Pocklington, it was a day of reckoning. He'd used the trappings of wealth and his high-profile past in Canada to impress potential business partners in the United States. But Balcombe and others who had been seduced, and then disappointed, were now turning against him. Even the Alberta government was after him about some unfinished business.


Peter Pocklington was shocked when artwork and other possessions—even a bust of Pocklington himself—were seized from his California condo (Justin Fantl)


Balcombe heard an angry Pocklington talking loudly on the phone, informing his lawyer about the raid. Neatly arranged in a row on a wall behind Pocklington's ornate desk were five Andy Warhol prints of Mick Jagger. On the floor beneath the desk, there was a life-sized bronze head of Pocklington himself. Before the day was over, the movers packed and crated 56 works of art, including the Warhols, the bust and the impotent foo dogs.

This was only the first of three raids that would turn Pocklington's world upside down. When it was over, much of the condo was as bare as Whoville in the wake of the Grinch. Pocklington has refused to let the dramatic events defeat him, countering that the art and most other goods were unfairly taken because they belong not to him but to Eva. "They took everything that they could get their hands on, and it'll all come back," he says with trademark defiance during one in a series of short interviews. "In the U.S., in some cases, it's a bit of a police state. It's sickening. California seems the worst in the country. They have so many lawyers per square inch, and they're all just trolling. It's sad."

Balcombe's bold move opened the gates for dozens of other creditors. "Mr. Pocklington has been successful dodging creditors throughout the world and is extremely sophisticated in this regard," lawyers for Balcombe argued in U.S. District Court in the application to seize assets. "He is comfortable deceiving people and ignoring the law." Pocklington, however, denies any wrongdoing. None of the allegations has been proven in court.

Peter Hugh Pocklington slipped off Canadians' radar screen in 2000, when he left Edmonton, seemingly reduced to nothing—stripped of his assets by angry creditors, and with little to show for having owned the National Hockey League's Edmonton Oilers. Yet the hard-nosed entrepreneur, born and raised in London, Ontario, once controlled a sprawling business empire.

A Grade 12 dropout, Pocklington started out as a car salesman in Southern Ontario. In 1971, 30 years old, he arrived in Edmonton and opened a Ford dealership. He soon used his profit from car sales to diversify into other interests, including financial services, real estate and the Oilers. He signed Wayne Gretzky in 1978 in a deal with Vancouver businessman Nelson Skalbania. Gretzky was then a skinny 17-year-old, but his prodigious skills were already dazzling hockey fans across Canada. The Oilers, in the World Hockey Association at the time, joined the NHL one year later.

The '80s were the prime of the man who became known as Peter Puck. But if the decade showed how business success can open doors leading as far as the highest office in the country, it also revealed the downside of being in the public eye.

In the spring of 1982, during an intruder's botched attempt to kidnap Eva, Pocklington was taken hostage at gunpoint for 11 hours in his mansion in Edmonton. He suffered a wound from a police bullet during the incident. Eva managed to escape unscathed, and two servants were released unharmed.

Pocklington endured a particularly turbulent year in 1983, first because the federal Department of Insurance placed his Fidelity Trust Co. on probation. Fidelity, which boasted former U.S. president Gerald Ford as a special consultant, was ailing because of bad real estate loans. The company's ultimate collapse resulted in the federal government's Canada Deposit Insurance Corp.'s bailing out depositors to the tune of $359 million.

In the summer, Pocklington ran for the federal Progressive Conservative leadership. The arriviste faced long odds against a field of party heavyweights, all of whom were comparative moderates. In statements made prior to the campaign and in its wake, Pocklington made clear his contempt for the civil service ("rules, regulations and bureaucratic control"), Crown corporations (an "abomination"), the Liberals ("a socialist party"), the press ("80% socialist") and organized labour ("scrap the unions").

Pocklington ran on a platform that emphasized a flat tax of 20%, a proposal that would lighten the tax burden on the rich. Pocklington and future finance minister Michael Wilson withdrew after the first ballot, both throwing their support to Brian Mulroney, the eventual winner. But during the campaign, Wilson had clashed with the maverick from Edmonton. "I'm fighting against a Pocklington who says, 'I'm going to fire the whole civil service,'" Wilson complained.

Finally, the year showed the public one more layer to Pocklington besides controversial businessman and aspiring politician—new-age enthusiast. In the fall, a Supreme Court of Ontario jury dismissed a $7-million claim against Pocklington by a psychic, Rita Burns, who alleged that he had failed to pay for advice on personal and business issues. "There have been a lot of snickers already, but the people I care about will understand," Pocklington said. He once told an interviewer that he leaves his body for nocturnal trips to foreign locales like the Pyramids. Although he would later explain that those remarks were exaggerated, he was steadfast in his belief in destiny.

As the decade progressed, Pocklington collected enemies like kids collect hockey cards. In 1986, two years after the Oilers won their first Stanley Cup, Pocklington brought in replacement workers during an ugly strike at his Gainers Inc. meat-packing plant in Edmonton. Union leaders never forgave him for the use of strikebreakers.

The six-month strike was a turning point for the industry, placing pressure on Canadian producers to narrow the wage gap between its workers and lower-paid ones in the United States. The strike also led to a boycott from which the company couldn't recover. (After three ownership changes, Maple Leaf Foods decided to close the meat packer for good amid a strike in 1997.)

Then came the infamous trade on Aug. 9, 1988. Pocklington will forever be vilified by Oilers fans as the man who sold Gretzky to the Los Angeles Kings for $18 million. It turned out to be the beginning of the end for Pocklington's grip over the Oilers.

Over the next 10 years, even as his corporate debts steadily grew, the Pocklingtons avidly pursued their hobbies as collectors. Eva favoured Buddhas, designer handbags, jewellery and Inuit carvings, while her husband accumulated art, Cuban cigars and wine. Some 40 Renoir sketches covered the walls of their home, while Pocklington's office was graced by the Group of Seven.

The fine fabric of Pocklington's life began unravelling in 1998, when Alberta Treasury Branches, a savings institution owned by the province, forced Pocklington to sell the Oilers, alleging that $100 million in loans to Pocklington had gone awry. The next year, he placed his main holding company, Pocklington Financial Corp., into bankruptcy, clearing the way for creditors to pick away at his crumbling empire. Other holdings that slipped away included a Triple-A baseball team in Edmonton and Canbra Foods Ltd., a margarine company based in Lethbridge. Alberta Treasury Branches seized Canbra and sold it for $64 million. Pocklington was also forced to relinquish his private jet, the Group of Seven paintings and even his $750,000 wine collection.

Pocklington performed good works, too, helping to organize charity golf tournaments and backing fundraising dinners for Junior Achievement, a group teaching teens about business. But he left Edmonton without accolades for his charitable work or for bringing five Stanley Cup championships to the city. Instead, critics labelled him as Peter Porker. Gainers, his hog-slaughtering operation, cost the Alberta government $209 million in bailout expenses. This pattern of acquisition, financial trouble, and legal fallout would later become familiar to U.S. creditors.

After three decades in Edmonton, the Pocklingtons moved to a Toronto condo, where they resided for two years. In 2002, they settled year-round in their winter getaway in Indian Wells.

Pocklington started charming Naomi Balcombe over the phone in early 2005. In May of that year, she found herself sitting in his condo, poring over his purchase offer for her firm, Ageless Foundation Inc., a manufacturer and distributor of nutritional supplements such as amino acids, plant extracts and vitamins. She had launched Ageless in her home state of Florida in her early 20s, after graduating in biology from Florida Atlantic University in 1997.

Balcombe's breath was taken away by the California condo, inside and out. The retractable ceiling seemed to bring the blue sky right into the room. The condo's contents were themselves overwhelming to the eye—a brimming mash-up of art gallery and souvenir shop.

Pocklington went for a workout with his personal trainer to give Balcombe time to read his preliminary takeover offer. She was impressed. What's more, Pocklington was also in the midst of acquiring control of a larger firm in her sector. Founded in 1926, Naturade Inc. sold soy-based protein foods and arthritis pain products, bringing in $14 million in 2004. (All currency is in U.S. dollars from here on in, except as noted.)

The Pocklingtons asked Balcombe to join them for dinner. The wine flowed, and Balcombe felt she was in on a terrific business deal. In closing the transaction in August, Pocklington gave his personal guarantee on a promissory note from Naturade.

But the sale of Ageless quickly soured: Pocklington wouldn't pay. Balcombe, having witnessed his wealth, refused to believe he couldn't come up with the money. She filed suit against Pocklington and one of his holding companies in late 2005. Sixteen months later, a Miami judge awarded her $806,475.

Although the judgment had been relatively speedy, Balcombe's case did not move ahead quickly. But in the spring of 2008, Balcombe got a call from California entrepreneur Donald Courtney, who said he'd come across her name in legal filings. Courtney wanted to see if he could gather ammunition to help his friend, Toru Kamatari, who was also sparring with Pocklington.

Kamatari founded Sonartec Inc., a maker of high-end golf clubs, in 1999 and built it up for nearly eight years, even garnering an endorsement for the company's clubs from pro golfer Nick Price. Like Balcombe, Kamatari found himself at Pocklington's condo, awestruck as he considered a purchase offer in late 2006. Kamatari was smitten by tales of Pocklington's colourful career as an entrepreneur back in Canada, capped by a two-decade stretch as owner of the Oilers. The Vintage Club address by itself blew Kamatari away. "I was on his balcony, and he pointed in the direction of Bill Gates's house. I saw the pictures of Gerald Ford and the Bushes. Pocklington drove a nice BMW. I trusted him."

The Japanese-born Kamatari, 44, has regretted the meeting ever since. He filed a breach-of-contract lawsuit in February, 2008, alleging Pocklington didn't live up to his end of a deal to acquire Sonartec. Kamatari has despaired so much that he can't even enjoy a round of the game that was his passion: Pocklington not only didn't pay him for Sonartec, but it fell apart on his watch. The firm had $4.5 million in revenue in 2006, but within a year of taking control, Pocklington set the wheels in motion to place it into Chapter 7 of the U.S. Bankruptcy Code—in other words, destined for liquidation rather than attempted resuscitation (which Chapter 11 provides for). Kamatari is now listed in U.S. Bankruptcy Court as one of 110 Sonartec creditors who are owed a total of $4 million by Pocklington and his corporate entities. Kamatari and a business partner from Japan, Hidetsugu Koyama, claim that they are each owed more than $1 million. "Toru's life dream disappeared when he lost Sonartec," his friend Courtney says.

By the time he called Balcombe, Courtney had noticed common threads in three other disputes with Pocklington besides his friend Kamatari's. As with Sonartec, Pocklington had been accused in court documents of having fraudulently gained control of firms, and of then having misappropriated assets and dodged creditors. Apart from Balcombe's company, the other cases were Naturade and another golf equipment firm, GolfGear International Inc. In 2007 in Nevada, Pocklington placed GolfGear into Chapter 7; the company's unsecured creditors are allegedly owed more than $1 million. As for Naturade, Pocklington ended up losing it to Redux Holdings Inc. in a messy legal dispute that left Naturade in bankruptcy protection for nearly 15 months, finally emerging in November, 2007.

After their conversation, Courtney introduced Kamatari's California lawyers to Balcombe. "Don was the orchestra leader," Balcombe says. "He put Toru and me together, and then we worked with the lawyers." Kamatari's lawsuit against Pocklington has stalled. But Kamatari's lawyers took on Balcombe's case separately, and successfully had her $806,475 Florida court judgment registered in California in July, 2008. In a pleasant surprise for Balcombe, a U.S. District judge in California then granted a court order to seize dozens of Pocklington's prized assets, allowing her lawyers to take temporary custody of the belongings.

A posse of creditors took note. Apart from more than $2 million owed on mortgages from Palm Desert National Bank and Washington Mutual Inc., Pocklington allegedly owes money on a BMW auto lease ($73,000) and revolving lines of credit at Bank of America ($18,634) and Citibank ($7,800).

Balcombe names one of Pocklington's holding companies, Bahamas-based Quincy Investments Corp., as a defendant in her lawsuit, but Quincy was dissolved in mid-2007. A new Bahamian entity, Dempsey Investments Corp., acquired Quincy's assets. Pocklington submits that he was being altruistic in creating Dempsey, an entity

that is overseen by trustees for the benefit of 50 charities and his 12 grandchildren. (Pocklington and Eva have one son from their marriage, as well as three and two children, respectively, from their first marriages.) Pocklington emphasizes in court filings that "I do not control, manage or derive a benefit from Dempsey Investment Corp. and all control of this entity is handled by the trustees of the trust, of which I am not a trustee or beneficiary." He denies that Quincy and Dempsey have ever been "my alter egos."

Balcombe's lawyers aren't swayed, alleging in court filings that Pocklington "is a professional con man who bilks people and entities, and then uses offshore (Bahamian) entities to hide the assets taken."

Pocklington counters that he got sold a bill of goods by Balcombe's Ageless, saying bitterly that "the high hopes for her company when we bought it turned out to be half of what we expected it to be. Welcome to the U.S." As for Kamatari's company, Pocklington says, "I'm not interested in fighting lawsuits with people who have no interest in settling anything. It's just mean-spirited."

Kamatari thinks back to how he was influenced by Pocklington's own "authorized website," which portrays him as civic-minded, serving on the board of directors of the Betty Ford Center, providers of drug and alcohol rehabilitation services. On the site, Pocklington also expresses his admiration for entrepreneurs, proclaiming that "small businesses are what made America great and will continue to make America great." Pocklington wrote that "businesses fail for a number of reasons, including under-capitalization, no vision by the owner/founder, lack of product and not spending 48 hours a day on making it successful. Business is tough! You have to be dedicated."

The sprawling, intensely private Vintage Club is a vacation home to billionaires such as Philip Anschutz, Roger Penske and Cargill MacMillan Jr. The Vintage made headlines in 2000 for having reprimanded Bill Gates for wearing a T-shirt on a practice tee, attire deemed too casual under club rules. If the place is a bit formal, residents appreciate how security staff protect the entrance like a border crossing. Outsiders who drive along the grand paving-stone entrance can view two cascading waterfalls, but are turned away from the community.

A California process server discovered just how hard it can be to get in. Acting on behalf of yet another aggrieved company, Protein Ingredient Technologies Inc., the server made a dozen unsuccessful attempts to contact Pocklington in the summer of 2006. Vintage security rejected a request from the process server to stake out the condo. Protein claims that it suffered $221,206 in damages after Pocklington failed to live up to a distribution deal. After Pocklington didn't pay Protein as he had pledged to do in a settlement agreement, a California judge awarded the company a $50,000 judgment against him in 2007.

In the summer of 2008, after doggedly clearing legal hurdles and persuading Vintage Club security of the validity of her court order, Balcombe could hardly believe that she was finally at Pocklington's doorstep. After walking in, she saw the place anew. It was a sort of time capsule of selectively preserved memories, staged to impress visitors like herself. Dozens of framed photographs arrayed on ornate furniture told a tale of an entrepreneur who once associated with a who's who of the sports, political and entertainment worlds. In one photo, Gretzky is the proud Oilers captain giving Pocklington a hug. In another, superstar tenor Luciano Pavarotti puts his arm around a beaming Pocklington. Former U.S. presidents George H. W. Bush and Gerald Ford pose with Pocklington on a golf course. No fewer than five former U.S. presidents and first ladies beam from autographed photos.

When Balcombe showed up, neither Pocklington nor his wife recognized her at first. Pocklington could do nothing to prevent the seizure. So he tried to keep his emotions in check, even playing a game of solitaire on his computer at one point. Looking back, he reflects, "That's the way life is—you deal with it and carry on." Pocklington has threatened that he will seek a $5-million judgment, alleging that the goods were seized wrongfully.

The 56 items taken in the first raid included an estimated $1 million in paintings, sculptures and other art. In the two additional seizures that followed over the next two weeks, authorities carted off another 190 items. The haul was polyglot: two hockey sticks autographed by Gretzky, numerous Buddha statues, Inuit soapstone carvings, two sculptures by French artist Antoniucci Volti, Christofle silverware, pieces of the Berlin Wall, a set of Rosenthal white china plates, a cannon round fired in the 21-gun salute at President Ford's funeral in 2007.

To the Pocklingtons, it seemed as if nothing was safe from the authorities—not even their safe. During the second raid, a locksmith spent 30 minutes removing the safe's door. The movers also went through the condo's garage, taking a motorized golf cart and a set of high-end golf clubs from Pocklington's storage unit. "I know that he was angry," Balcombe says. "When the movers were loading the golf cart, he started cursing and freaking out." The agitated entrepreneur managed to retrieve a handful of his Cohiba Cuban cigars from the golf cart, "and then stomped off," she adds.

The movers even rifled through Eva's walk-in closet, seizing a long list of luxury possessions. Hermès purses. A collection of Louis Vuitton bags and notebooks. Yves Saint Laurent evening gowns. Chanel shoes. "The bags and purses alone could be worth a lot," Balcombe says.

But her right to take them is being contested. Eva's lawyers say in filings in U.S. District Court that the vast majority of assets seized belong to her. They state that Eva has her own property trust, and allege that Balcombe and her lawyers acted "carelessly, recklessly" by seizing the possessions. Balcombe's lawyers counter that under California law, assets claimed by Eva are either jointly owned with Pocklington or simply owned by him. But Eva, 66, is wondering in particular why her closet was targeted. In court filings, her lawyers emphasize the "nature of many of the items seized, which included women's evening gowns, women's shoes, women's handbags and lifelong heirlooms gifted to Eva Pocklington by her family, which heralded from the Canadian Arctic." (Eva was raised in Yellowknife.) "Unless they're saying Peter Pocklington is a cross-dresser, I don't think a handbag is the personal property of a man," Pocklington's lawyer, Michael Lusby, says. "There's no way that you can reasonably assume that her evening dresses were his property."

For years, Pocklington has lived by guidelines dubbed "Peter's Laws of Business" on his website, including, "If you can't win, change the rules! If you can't change the rules, ignore them!" Lusby agrees that it's a dog-eat-dog world when it comes to doing deals, whether big or small. "Hard business deals rest essentially on taking advantage of somebody. You buy something because you feel it's worth more than what somebody else is selling it for." Lusby notes that Balcombe and Kamatari signed deals, knowing what they were getting into: "We aren't talking about consumers and little old ladies. We're talking about sophisticated businesspeople who understand the risks."

Days after the third and final raid, Pocklington declared personal bankruptcy. In U.S. Bankruptcy Court, Pocklington's personal liabilities are listed at $19.7 million. In his declaration, Pocklington claimed that his net worth totalled just $2,900: $200 in his wallet, a $500 watch, a $500 set of golf clubs, $300 of clothing and shoes, $450 in appliances and furnishings, $450 worth of personal goods seized and $500 worth of memorabilia, trophies and art. But lawyers for Balcombe argue in U.S. District Court that Pocklington is far from a pauper—that he has vastly understated his personal assets in California and is also hiding money in the Bahamas. They wonder what happened to his valuable hockey memorabilia, notably five Stanley Cup rings.

The bankruptcy was, of course, a red flag to creditors. They want the seized assets to be sold to the highest bidder, so they can recover at least a portion of what they are owed. "Peter Pocklington has systematically looted several companies and willfully breached his contractual promises to both the plaintiff/judgment creditor here and several other companies and entities, including the government of Alberta," wrote Balcombe's lawyers.

Having bailed out Gainers and absorbed bad loans to the Oilers and other Pocklington businesses, the Alberta government was not unhappy to see Pocklington leave the province. As for the losses, he was considered a cold case. But lately the government has picked up the trail. Belying the notion that Pocklington had few assets when he left the province, a multitude of valuables were moved to California from Edmonton. Indeed, an estimated three-quarters of the condo's contents were moved down from Canada.

Alberta is trying to recover $12 million (Canadian) from Pocklington for defaulting on loans to Gainers. In Alberta Court of Queen's Bench in 2007, a judge granted an order to award the government's original claim of $2 million (Canadian), plus $10 million (Canadian) in accumulated interest over the years.

Pocklington dismisses Alberta's efforts. "Oh boy, I don't know where to start on that crock of crap," he says. "You can't win in an Alberta court anyway, if you're me." He questions the validity of Alberta's base claim of $2 million, and also, "How the hell do you get to that much interest? It's just ridiculous. Life is too short to continue this kind of quarrel." He also argues that he never received the $2 million in the first place, saying the funds were paid to Gainers as part of the strike settlement. "No good deed goes unpunished."

But the quarrel has since grown bigger. In late November, Balcombe joined forces with Kamatari and the Alberta government to file a bombshell complaint against Pocklington in U.S. Bankruptcy Court. Their lawyers allege that Pocklington listed his net worth at $20 million in obtaining a life insurance policy within the past five years, a far cry from his claim of having $2,900 to his name. The lawyers also allege that Pocklington receives $50,000 a month through Dempsey, the Bahamian holding company that he claims not to benefit from.

"Pocklington has been able to hide funds coming into his possession from various fraudulent schemes, and simultaneously wire funds to Mrs. Pocklington on a monthly basis in sufficient sums to support his lavish lifestyle," according to the filing, which asks the court to deny Pocklington's application to have his personal debts discharged. The complaint also requests that the court deny his separate moves to be discharged as a debtor to Ageless, Sonartec and the Alberta government. "Pocklington not only siphons the assets of companies he fraudulently acquires into the offshore entities, as well as any monies he raises from investors in these companies, but he also uses them to fund a lavish lifestyle, while avoiding taxes and judgments." Adding to the pressure, the Nevada bankruptcy trustee in the GolfGear dispute has asked the court to reject Pocklington's moves to have his GolfGear debts discharged.

Balcombe realizes that there will likely be many more months of legal manoeuvring by creditors to obtain their share of the spoils from the raids. She began her lawsuit against Pocklington in a quest to recoup the money that she lost in selling Ageless. Now, the legal process is out of her hands. She has resigned herself to seeing only a small portion of any proceeds, but hopes to see Pocklington get his just deserts. "I was basically conned by Peter, but I'm a private person. I don't want to get any more involved in his world," she says.

Pocklington's Vintage Club condo now sits empty, but doesn't appear to have much equity value. There's a $1.3-million mortgage on it with Washington Mutual, the failed savings and loan giant that was sold last fall to JP Morgan Chase. There are also two other mortgages listed in court, held by Palm Desert National Bank, totalling nearly $1.1 million.

In early 2008, Pocklington listed the condo for sale for $2.35 million. Facing the sharp downturn in California's real estate market, the unit remained unsold through late 2008. According to lending documents, Pocklington's mortgage obligations to Washington Mutual alone are $7,109 a month, but he hasn't made a payment since August. Washington Mutual, a secured creditor, said in a court filing that a suggested relisting price for the condo could be $1.295 million—a price chop of 45%.

Pocklington has been a Vintage member since 1990. He originally bought the condo that year, gifted it in Alberta to Eva in 1996, registered that change in California in 1998, and then transferred it again to various corporations over the years, the latest owner being Dempsey Investments Corp., according to mortgage documents.

The Pocklingtons vacated last fall, deciding instead to rent half of a bungalow duplex in nearby Palm Desert. Their new address, Lakes Country Club, doesn't have the cachet of the Vintage, but it nonetheless offers a private setting on a 27-hole golf course, with 24-hour security patrolling the entrance gate. The disparity is better captured by golf fees: While the Vintage commands $350,000 in initiation fees and $28,200 in annual dues, the Lakes charges $10,000 and $4,920.

How long the couple intend to live at the Lakes is unclear. Pocklington says that he misses "the civility" of Canada, but on his website, he makes his allegiance clear. "I love the United States, and I fully intend to become a United States citizen. I like the wide-open attitude of Americans. Americans generally praise success." Just how Pocklington can declare himself a success at this point is unclear. His personal bankruptcy filing is scheduled to go to court in February. He's also dealing with the liquidation case of Sonartec.

Pocklington has his own version of events, though he doesn't wish to go into detail. He says he will tell the behind-the-scenes story about his past business dealings in Canada, including the Oilers and the Gainers controversy, in a book that he's co-writing with an Edmonton journalist. Pocklington doesn't view Balcombe as the victim; rather, it's he who has been wronged.

Indeed, Pocklington is unfazed by all his troubles, saying his legal squabbles are "quite frankly, nobody's business. This is all bullshit. They can say whatever the hell they want and I really don't care." He says he isn't ready to give up his passion for business, even though the legal battles are wearing on him. "I'm in the middle of three more things. But I am so sick and tired with dealing with the American court system. It's just crazy." Asked about whether it's tempting to spend more time golfing, he replies: "Not interested in that."

Pocklington, who's now 67, is trying to keep things in perspective. Having hundreds of familiar and valuable possessions seized isn't driving him to distraction, he insists.

"I don't want to get involved in the public again. You never win. It's 'he said, you said.' I don't really give a shit what people say any more. I really don't care. You can write whatever the hell you want. Thirty or 40 years from now, who gives a shit," he says. "With all the shit that I've been through in my life, I don't really mind. I'm not a bitter person. People who are bitter end up having heart attacks. That's why I'm healthy at my age. I don't internalize things."

[admin]

Peter Puck's last stand
In 2002, former Oilers owner Peter Pocklington moved to California, leaving bailouts and ill will in his wake. To Canadians, he disappeared. For unwitting new partners in the U.S., a golden entrepreneur seemed to have swept into town

BRENT JANG
From Friday's Globe and Mail
December 23, 2008 at 7:00 AM EST
Outside the exclusive condo, two "foo dog" sculptures protected the front door. The symbols of good fortune and wisdom are known in Asia for guarding the gates of heaven. But they couldn't halt what was about to transpire on a sweltering July day in Indian Wells, a resort town in the California desert. Three U.S. marshals waited patiently at the third-floor entrance, expecting Peter Pocklington to answer the door.

But Pocklington was in the shower. His wife, Eva, and a maid heard the knocking and went to see why anyone would bother them at 10:30 a.m. during a heat wave. Shown some documents, the women let the marshals walk into the expansive condo. It overlooked a private 18-hole golf course—just one of the accoutrements of the Vintage Club, a gated community where the Pocklingtons rubbed shoulders with the likes of Bill Gates.

Emerging wet-haired, the 66-year-old Pocklington was handed a copy of a court order that allowed the marshals to seize valuable artwork from the condo. Minutes later, one of the marshals motioned to others to come inside. Naomi Balcombe and four people supporting her quest for justice marched in. If Pocklington wasn't going to make good on the purchase of Balcombe's company, she, thanks to the court order, would be reimbursed another way—with his prized possessions. Six specialty movers followed her.

For Balcombe, a 34-year-old entrepreneur, the raid was a dream come true. "I had to pinch myself," she remembered later. For Pocklington, it was a day of reckoning. He'd used the trappings of wealth and his high-profile past in Canada to impress potential business partners in the United States. But Balcombe and others who had been seduced, and then disappointed, were now turning against him. Even the Alberta government was after him about some unfinished business.


Peter Pocklington was shocked when artwork and other possessions—even a bust of Pocklington himself—were seized from his California condo (Justin Fantl)


Balcombe heard an angry Pocklington talking loudly on the phone, informing his lawyer about the raid. Neatly arranged in a row on a wall behind Pocklington's ornate desk were five Andy Warhol prints of Mick Jagger. On the floor beneath the desk, there was a life-sized bronze head of Pocklington himself. Before the day was over, the movers packed and crated 56 works of art, including the Warhols, the bust and the impotent foo dogs.

This was only the first of three raids that would turn Pocklington's world upside down. When it was over, much of the condo was as bare as Whoville in the wake of the Grinch. Pocklington has refused to let the dramatic events defeat him, countering that the art and most other goods were unfairly taken because they belong not to him but to Eva. "They took everything that they could get their hands on, and it'll all come back," he says with trademark defiance during one in a series of short interviews. "In the U.S., in some cases, it's a bit of a police state. It's sickening. California seems the worst in the country. They have so many lawyers per square inch, and they're all just trolling. It's sad."

Balcombe's bold move opened the gates for dozens of other creditors. "Mr. Pocklington has been successful dodging creditors throughout the world and is extremely sophisticated in this regard," lawyers for Balcombe argued in U.S. District Court in the application to seize assets. "He is comfortable deceiving people and ignoring the law." Pocklington, however, denies any wrongdoing. None of the allegations has been proven in court.

Peter Hugh Pocklington slipped off Canadians' radar screen in 2000, when he left Edmonton, seemingly reduced to nothing—stripped of his assets by angry creditors, and with little to show for having owned the National Hockey League's Edmonton Oilers. Yet the hard-nosed entrepreneur, born and raised in London, Ontario, once controlled a sprawling business empire.

A Grade 12 dropout, Pocklington started out as a car salesman in Southern Ontario. In 1971, 30 years old, he arrived in Edmonton and opened a Ford dealership. He soon used his profit from car sales to diversify into other interests, including financial services, real estate and the Oilers. He signed Wayne Gretzky in 1978 in a deal with Vancouver businessman Nelson Skalbania. Gretzky was then a skinny 17-year-old, but his prodigious skills were already dazzling hockey fans across Canada. The Oilers, in the World Hockey Association at the time, joined the NHL one year later.

The '80s were the prime of the man who became known as Peter Puck. But if the decade showed how business success can open doors leading as far as the highest office in the country, it also revealed the downside of being in the public eye.

In the spring of 1982, during an intruder's botched attempt to kidnap Eva, Pocklington was taken hostage at gunpoint for 11 hours in his mansion in Edmonton. He suffered a wound from a police bullet during the incident. Eva managed to escape unscathed, and two servants were released unharmed.

Pocklington endured a particularly turbulent year in 1983, first because the federal Department of Insurance placed his Fidelity Trust Co. on probation. Fidelity, which boasted former U.S. president Gerald Ford as a special consultant, was ailing because of bad real estate loans. The company's ultimate collapse resulted in the federal government's Canada Deposit Insurance Corp.'s bailing out depositors to the tune of $359 million.

In the summer, Pocklington ran for the federal Progressive Conservative leadership. The arriviste faced long odds against a field of party heavyweights, all of whom were comparative moderates. In statements made prior to the campaign and in its wake, Pocklington made clear his contempt for the civil service ("rules, regulations and bureaucratic control"), Crown corporations (an "abomination"), the Liberals ("a socialist party"), the press ("80% socialist") and organized labour ("scrap the unions").

Pocklington ran on a platform that emphasized a flat tax of 20%, a proposal that would lighten the tax burden on the rich. Pocklington and future finance minister Michael Wilson withdrew after the first ballot, both throwing their support to Brian Mulroney, the eventual winner. But during the campaign, Wilson had clashed with the maverick from Edmonton. "I'm fighting against a Pocklington who says, 'I'm going to fire the whole civil service,'" Wilson complained.

Finally, the year showed the public one more layer to Pocklington besides controversial businessman and aspiring politician—new-age enthusiast. In the fall, a Supreme Court of Ontario jury dismissed a $7-million claim against Pocklington by a psychic, Rita Burns, who alleged that he had failed to pay for advice on personal and business issues. "There have been a lot of snickers already, but the people I care about will understand," Pocklington said. He once told an interviewer that he leaves his body for nocturnal trips to foreign locales like the Pyramids. Although he would later explain that those remarks were exaggerated, he was steadfast in his belief in destiny.

As the decade progressed, Pocklington collected enemies like kids collect hockey cards. In 1986, two years after the Oilers won their first Stanley Cup, Pocklington brought in replacement workers during an ugly strike at his Gainers Inc. meat-packing plant in Edmonton. Union leaders never forgave him for the use of strikebreakers.

The six-month strike was a turning point for the industry, placing pressure on Canadian producers to narrow the wage gap between its workers and lower-paid ones in the United States. The strike also led to a boycott from which the company couldn't recover. (After three ownership changes, Maple Leaf Foods decided to close the meat packer for good amid a strike in 1997.)

Then came the infamous trade on Aug. 9, 1988. Pocklington will forever be vilified by Oilers fans as the man who sold Gretzky to the Los Angeles Kings for $18 million. It turned out to be the beginning of the end for Pocklington's grip over the Oilers.

Over the next 10 years, even as his corporate debts steadily grew, the Pocklingtons avidly pursued their hobbies as collectors. Eva favoured Buddhas, designer handbags, jewellery and Inuit carvings, while her husband accumulated art, Cuban cigars and wine. Some 40 Renoir sketches covered the walls of their home, while Pocklington's office was graced by the Group of Seven.

The fine fabric of Pocklington's life began unravelling in 1998, when Alberta Treasury Branches, a savings institution owned by the province, forced Pocklington to sell the Oilers, alleging that $100 million in loans to Pocklington had gone awry. The next year, he placed his main holding company, Pocklington Financial Corp., into bankruptcy, clearing the way for creditors to pick away at his crumbling empire. Other holdings that slipped away included a Triple-A baseball team in Edmonton and Canbra Foods Ltd., a margarine company based in Lethbridge. Alberta Treasury Branches seized Canbra and sold it for $64 million. Pocklington was also forced to relinquish his private jet, the Group of Seven paintings and even his $750,000 wine collection.

Pocklington performed good works, too, helping to organize charity golf tournaments and backing fundraising dinners for Junior Achievement, a group teaching teens about business. But he left Edmonton without accolades for his charitable work or for bringing five Stanley Cup championships to the city. Instead, critics labelled him as Peter Porker. Gainers, his hog-slaughtering operation, cost the Alberta government $209 million in bailout expenses. This pattern of acquisition, financial trouble, and legal fallout would later become familiar to U.S. creditors.

After three decades in Edmonton, the Pocklingtons moved to a Toronto condo, where they resided for two years. In 2002, they settled year-round in their winter getaway in Indian Wells.

Pocklington started charming Naomi Balcombe over the phone in early 2005. In May of that year, she found herself sitting in his condo, poring over his purchase offer for her firm, Ageless Foundation Inc., a manufacturer and distributor of nutritional supplements such as amino acids, plant extracts and vitamins. She had launched Ageless in her home state of Florida in her early 20s, after graduating in biology from Florida Atlantic University in 1997.

Balcombe's breath was taken away by the California condo, inside and out. The retractable ceiling seemed to bring the blue sky right into the room. The condo's contents were themselves overwhelming to the eye—a brimming mash-up of art gallery and souvenir shop.

Pocklington went for a workout with his personal trainer to give Balcombe time to read his preliminary takeover offer. She was impressed. What's more, Pocklington was also in the midst of acquiring control of a larger firm in her sector. Founded in 1926, Naturade Inc. sold soy-based protein foods and arthritis pain products, bringing in $14 million in 2004. (All currency is in U.S. dollars from here on in, except as noted.)

The Pocklingtons asked Balcombe to join them for dinner. The wine flowed, and Balcombe felt she was in on a terrific business deal. In closing the transaction in August, Pocklington gave his personal guarantee on a promissory note from Naturade.

But the sale of Ageless quickly soured: Pocklington wouldn't pay. Balcombe, having witnessed his wealth, refused to believe he couldn't come up with the money. She filed suit against Pocklington and one of his holding companies in late 2005. Sixteen months later, a Miami judge awarded her $806,475.

Although the judgment had been relatively speedy, Balcombe's case did not move ahead quickly. But in the spring of 2008, Balcombe got a call from California entrepreneur Donald Courtney, who said he'd come across her name in legal filings. Courtney wanted to see if he could gather ammunition to help his friend, Toru Kamatari, who was also sparring with Pocklington.

Kamatari founded Sonartec Inc., a maker of high-end golf clubs, in 1999 and built it up for nearly eight years, even garnering an endorsement for the company's clubs from pro golfer Nick Price. Like Balcombe, Kamatari found himself at Pocklington's condo, awestruck as he considered a purchase offer in late 2006. Kamatari was smitten by tales of Pocklington's colourful career as an entrepreneur back in Canada, capped by a two-decade stretch as owner of the Oilers. The Vintage Club address by itself blew Kamatari away. "I was on his balcony, and he pointed in the direction of Bill Gates's house. I saw the pictures of Gerald Ford and the Bushes. Pocklington drove a nice BMW. I trusted him."

The Japanese-born Kamatari, 44, has regretted the meeting ever since. He filed a breach-of-contract lawsuit in February, 2008, alleging Pocklington didn't live up to his end of a deal to acquire Sonartec. Kamatari has despaired so much that he can't even enjoy a round of the game that was his passion: Pocklington not only didn't pay him for Sonartec, but it fell apart on his watch. The firm had $4.5 million in revenue in 2006, but within a year of taking control, Pocklington set the wheels in motion to place it into Chapter 7 of the U.S. Bankruptcy Code—in other words, destined for liquidation rather than attempted resuscitation (which Chapter 11 provides for). Kamatari is now listed in U.S. Bankruptcy Court as one of 110 Sonartec creditors who are owed a total of $4 million by Pocklington and his corporate entities. Kamatari and a business partner from Japan, Hidetsugu Koyama, claim that they are each owed more than $1 million. "Toru's life dream disappeared when he lost Sonartec," his friend Courtney says.

By the time he called Balcombe, Courtney had noticed common threads in three other disputes with Pocklington besides his friend Kamatari's. As with Sonartec, Pocklington had been accused in court documents of having fraudulently gained control of firms, and of then having misappropriated assets and dodged creditors. Apart from Balcombe's company, the other cases were Naturade and another golf equipment firm, GolfGear International Inc. In 2007 in Nevada, Pocklington placed GolfGear into Chapter 7; the company's unsecured creditors are allegedly owed more than $1 million. As for Naturade, Pocklington ended up losing it to Redux Holdings Inc. in a messy legal dispute that left Naturade in bankruptcy protection for nearly 15 months, finally emerging in November, 2007.

After their conversation, Courtney introduced Kamatari's California lawyers to Balcombe. "Don was the orchestra leader," Balcombe says. "He put Toru and me together, and then we worked with the lawyers." Kamatari's lawsuit against Pocklington has stalled. But Kamatari's lawyers took on Balcombe's case separately, and successfully had her $806,475 Florida court judgment registered in California in July, 2008. In a pleasant surprise for Balcombe, a U.S. District judge in California then granted a court order to seize dozens of Pocklington's prized assets, allowing her lawyers to take temporary custody of the belongings.

A posse of creditors took note. Apart from more than $2 million owed on mortgages from Palm Desert National Bank and Washington Mutual Inc., Pocklington allegedly owes money on a BMW auto lease ($73,000) and revolving lines of credit at Bank of America ($18,634) and Citibank ($7,800).

Balcombe names one of Pocklington's holding companies, Bahamas-based Quincy Investments Corp., as a defendant in her lawsuit, but Quincy was dissolved in mid-2007. A new Bahamian entity, Dempsey Investments Corp., acquired Quincy's assets. Pocklington submits that he was being altruistic in creating Dempsey, an entity

that is overseen by trustees for the benefit of 50 charities and his 12 grandchildren. (Pocklington and Eva have one son from their marriage, as well as three and two children, respectively, from their first marriages.) Pocklington emphasizes in court filings that "I do not control, manage or derive a benefit from Dempsey Investment Corp. and all control of this entity is handled by the trustees of the trust, of which I am not a trustee or beneficiary." He denies that Quincy and Dempsey have ever been "my alter egos."

Balcombe's lawyers aren't swayed, alleging in court filings that Pocklington "is a professional con man who bilks people and entities, and then uses offshore (Bahamian) entities to hide the assets taken."

Pocklington counters that he got sold a bill of goods by Balcombe's Ageless, saying bitterly that "the high hopes for her company when we bought it turned out to be half of what we expected it to be. Welcome to the U.S." As for Kamatari's company, Pocklington says, "I'm not interested in fighting lawsuits with people who have no interest in settling anything. It's just mean-spirited."

Kamatari thinks back to how he was influenced by Pocklington's own "authorized website," which portrays him as civic-minded, serving on the board of directors of the Betty Ford Center, providers of drug and alcohol rehabilitation services. On the site, Pocklington also expresses his admiration for entrepreneurs, proclaiming that "small businesses are what made America great and will continue to make America great." Pocklington wrote that "businesses fail for a number of reasons, including under-capitalization, no vision by the owner/founder, lack of product and not spending 48 hours a day on making it successful. Business is tough! You have to be dedicated."

The sprawling, intensely private Vintage Club is a vacation home to billionaires such as Philip Anschutz, Roger Penske and Cargill MacMillan Jr. The Vintage made headlines in 2000 for having reprimanded Bill Gates for wearing a T-shirt on a practice tee, attire deemed too casual under club rules. If the place is a bit formal, residents appreciate how security staff protect the entrance like a border crossing. Outsiders who drive along the grand paving-stone entrance can view two cascading waterfalls, but are turned away from the community.

A California process server discovered just how hard it can be to get in. Acting on behalf of yet another aggrieved company, Protein Ingredient Technologies Inc., the server made a dozen unsuccessful attempts to contact Pocklington in the summer of 2006. Vintage security rejected a request from the process server to stake out the condo. Protein claims that it suffered $221,206 in damages after Pocklington failed to live up to a distribution deal. After Pocklington didn't pay Protein as he had pledged to do in a settlement agreement, a California judge awarded the company a $50,000 judgment against him in 2007.

In the summer of 2008, after doggedly clearing legal hurdles and persuading Vintage Club security of the validity of her court order, Balcombe could hardly believe that she was finally at Pocklington's doorstep. After walking in, she saw the place anew. It was a sort of time capsule of selectively preserved memories, staged to impress visitors like herself. Dozens of framed photographs arrayed on ornate furniture told a tale of an entrepreneur who once associated with a who's who of the sports, political and entertainment worlds. In one photo, Gretzky is the proud Oilers captain giving Pocklington a hug. In another, superstar tenor Luciano Pavarotti puts his arm around a beaming Pocklington. Former U.S. presidents George H. W. Bush and Gerald Ford pose with Pocklington on a golf course. No fewer than five former U.S. presidents and first ladies beam from autographed photos.

When Balcombe showed up, neither Pocklington nor his wife recognized her at first. Pocklington could do nothing to prevent the seizure. So he tried to keep his emotions in check, even playing a game of solitaire on his computer at one point. Looking back, he reflects, "That's the way life is—you deal with it and carry on." Pocklington has threatened that he will seek a $5-million judgment, alleging that the goods were seized wrongfully.

The 56 items taken in the first raid included an estimated $1 million in paintings, sculptures and other art. In the two additional seizures that followed over the next two weeks, authorities carted off another 190 items. The haul was polyglot: two hockey sticks autographed by Gretzky, numerous Buddha statues, Inuit soapstone carvings, two sculptures by French artist Antoniucci Volti, Christofle silverware, pieces of the Berlin Wall, a set of Rosenthal white china plates, a cannon round fired in the 21-gun salute at President Ford's funeral in 2007.

To the Pocklingtons, it seemed as if nothing was safe from the authorities—not even their safe. During the second raid, a locksmith spent 30 minutes removing the safe's door. The movers also went through the condo's garage, taking a motorized golf cart and a set of high-end golf clubs from Pocklington's storage unit. "I know that he was angry," Balcombe says. "When the movers were loading the golf cart, he started cursing and freaking out." The agitated entrepreneur managed to retrieve a handful of his Cohiba Cuban cigars from the golf cart, "and then stomped off," she adds.

The movers even rifled through Eva's walk-in closet, seizing a long list of luxury possessions. Hermès purses. A collection of Louis Vuitton bags and notebooks. Yves Saint Laurent evening gowns. Chanel shoes. "The bags and purses alone could be worth a lot," Balcombe says.

But her right to take them is being contested. Eva's lawyers say in filings in U.S. District Court that the vast majority of assets seized belong to her. They state that Eva has her own property trust, and allege that Balcombe and her lawyers acted "carelessly, recklessly" by seizing the possessions. Balcombe's lawyers counter that under California law, assets claimed by Eva are either jointly owned with Pocklington or simply owned by him. But Eva, 66, is wondering in particular why her closet was targeted. In court filings, her lawyers emphasize the "nature of many of the items seized, which included women's evening gowns, women's shoes, women's handbags and lifelong heirlooms gifted to Eva Pocklington by her family, which heralded from the Canadian Arctic." (Eva was raised in Yellowknife.) "Unless they're saying Peter Pocklington is a cross-dresser, I don't think a handbag is the personal property of a man," Pocklington's lawyer, Michael Lusby, says. "There's no way that you can reasonably assume that her evening dresses were his property."

For years, Pocklington has lived by guidelines dubbed "Peter's Laws of Business" on his website, including, "If you can't win, change the rules! If you can't change the rules, ignore them!" Lusby agrees that it's a dog-eat-dog world when it comes to doing deals, whether big or small. "Hard business deals rest essentially on taking advantage of somebody. You buy something because you feel it's worth more than what somebody else is selling it for." Lusby notes that Balcombe and Kamatari signed deals, knowing what they were getting into: "We aren't talking about consumers and little old ladies. We're talking about sophisticated businesspeople who understand the risks."

Days after the third and final raid, Pocklington declared personal bankruptcy. In U.S. Bankruptcy Court, Pocklington's personal liabilities are listed at $19.7 million. In his declaration, Pocklington claimed that his net worth totalled just $2,900: $200 in his wallet, a $500 watch, a $500 set of golf clubs, $300 of clothing and shoes, $450 in appliances and furnishings, $450 worth of personal goods seized and $500 worth of memorabilia, trophies and art. But lawyers for Balcombe argue in U.S. District Court that Pocklington is far from a pauper—that he has vastly understated his personal assets in California and is also hiding money in the Bahamas. They wonder what happened to his valuable hockey memorabilia, notably five Stanley Cup rings.

The bankruptcy was, of course, a red flag to creditors. They want the seized assets to be sold to the highest bidder, so they can recover at least a portion of what they are owed. "Peter Pocklington has systematically looted several companies and willfully breached his contractual promises to both the plaintiff/judgment creditor here and several other companies and entities, including the government of Alberta," wrote Balcombe's lawyers.

Having bailed out Gainers and absorbed bad loans to the Oilers and other Pocklington businesses, the Alberta government was not unhappy to see Pocklington leave the province. As for the losses, he was considered a cold case. But lately the government has picked up the trail. Belying the notion that Pocklington had few assets when he left the province, a multitude of valuables were moved to California from Edmonton. Indeed, an estimated three-quarters of the condo's contents were moved down from Canada.

Alberta is trying to recover $12 million (Canadian) from Pocklington for defaulting on loans to Gainers. In Alberta Court of Queen's Bench in 2007, a judge granted an order to award the government's original claim of $2 million (Canadian), plus $10 million (Canadian) in accumulated interest over the years.

Pocklington dismisses Alberta's efforts. "Oh boy, I don't know where to start on that crock of crap," he says. "You can't win in an Alberta court anyway, if you're me." He questions the validity of Alberta's base claim of $2 million, and also, "How the hell do you get to that much interest? It's just ridiculous. Life is too short to continue this kind of quarrel." He also argues that he never received the $2 million in the first place, saying the funds were paid to Gainers as part of the strike settlement. "No good deed goes unpunished."

But the quarrel has since grown bigger. In late November, Balcombe joined forces with Kamatari and the Alberta government to file a bombshell complaint against Pocklington in U.S. Bankruptcy Court. Their lawyers allege that Pocklington listed his net worth at $20 million in obtaining a life insurance policy within the past five years, a far cry from his claim of having $2,900 to his name. The lawyers also allege that Pocklington receives $50,000 a month through Dempsey, the Bahamian holding company that he claims not to benefit from.

"Pocklington has been able to hide funds coming into his possession from various fraudulent schemes, and simultaneously wire funds to Mrs. Pocklington on a monthly basis in sufficient sums to support his lavish lifestyle," according to the filing, which asks the court to deny Pocklington's application to have his personal debts discharged. The complaint also requests that the court deny his separate moves to be discharged as a debtor to Ageless, Sonartec and the Alberta government. "Pocklington not only siphons the assets of companies he fraudulently acquires into the offshore entities, as well as any monies he raises from investors in these companies, but he also uses them to fund a lavish lifestyle, while avoiding taxes and judgments." Adding to the pressure, the Nevada bankruptcy trustee in the GolfGear dispute has asked the court to reject Pocklington's moves to have his GolfGear debts discharged.

Balcombe realizes that there will likely be many more months of legal manoeuvring by creditors to obtain their share of the spoils from the raids. She began her lawsuit against Pocklington in a quest to recoup the money that she lost in selling Ageless. Now, the legal process is out of her hands. She has resigned herself to seeing only a small portion of any proceeds, but hopes to see Pocklington get his just deserts. "I was basically conned by Peter, but I'm a private person. I don't want to get any more involved in his world," she says.

Pocklington's Vintage Club condo now sits empty, but doesn't appear to have much equity value. There's a $1.3-million mortgage on it with Washington Mutual, the failed savings and loan giant that was sold last fall to JP Morgan Chase. There are also two other mortgages listed in court, held by Palm Desert National Bank, totalling nearly $1.1 million.

In early 2008, Pocklington listed the condo for sale for $2.35 million. Facing the sharp downturn in California's real estate market, the unit remained unsold through late 2008. According to lending documents, Pocklington's mortgage obligations to Washington Mutual alone are $7,109 a month, but he hasn't made a payment since August. Washington Mutual, a secured creditor, said in a court filing that a suggested relisting price for the condo could be $1.295 million—a price chop of 45%.

Pocklington has been a Vintage member since 1990. He originally bought the condo that year, gifted it in Alberta to Eva in 1996, registered that change in California in 1998, and then transferred it again to various corporations over the years, the latest owner being Dempsey Investments Corp., according to mortgage documents.

The Pocklingtons vacated last fall, deciding instead to rent half of a bungalow duplex in nearby Palm Desert. Their new address, Lakes Country Club, doesn't have the cachet of the Vintage, but it nonetheless offers a private setting on a 27-hole golf course, with 24-hour security patrolling the entrance gate. The disparity is better captured by golf fees: While the Vintage commands $350,000 in initiation fees and $28,200 in annual dues, the Lakes charges $10,000 and $4,920.

How long the couple intend to live at the Lakes is unclear. Pocklington says that he misses "the civility" of Canada, but on his website, he makes his allegiance clear. "I love the United States, and I fully intend to become a United States citizen. I like the wide-open attitude of Americans. Americans generally praise success." Just how Pocklington can declare himself a success at this point is unclear. His personal bankruptcy filing is scheduled to go to court in February. He's also dealing with the liquidation case of Sonartec.

Pocklington has his own version of events, though he doesn't wish to go into detail. He says he will tell the behind-the-scenes story about his past business dealings in Canada, including the Oilers and the Gainers controversy, in a book that he's co-writing with an Edmonton journalist. Pocklington doesn't view Balcombe as the victim; rather, it's he who has been wronged.

Indeed, Pocklington is unfazed by all his troubles, saying his legal squabbles are "quite frankly, nobody's business. This is all bullshit. They can say whatever the hell they want and I really don't care." He says he isn't ready to give up his passion for business, even though the legal battles are wearing on him. "I'm in the middle of three more things. But I am so sick and tired with dealing with the American court system. It's just crazy." Asked about whether it's tempting to spend more time golfing, he replies: "Not interested in that."

Pocklington, who's now 67, is trying to keep things in perspective. Having hundreds of familiar and valuable possessions seized isn't driving him to distraction, he insists.

"I don't want to get involved in the public again. You never win. It's 'he said, you said.' I don't really give a shit what people say any more. I really don't care. You can write whatever the hell you want. Thirty or 40 years from now, who gives a shit," he says. "With all the shit that I've been through in my life, I don't really mind. I'm not a bitter person. People who are bitter end up having heart attacks. That's why I'm healthy at my age. I don't internalize things."