Maryland Consortium for Adjunct Faculty
Professional Development (MCAPD)
Ninth Annual Fall Conference
“The Heart of Engagement”
Anne Arundel Community College
October 3, 2015
The Importance of Teaching Ethics
to Students in
Community Colleges
By
Professor S. Sengamalay
MPA (Harvard), CPA (USA), FCMA, FCIS,(UK), FCA (Sri Lanka)
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Historical Episodes of Ethical Lapses
by Country’s Political Leaders
Edward Kennedy, Senator, MA
(Chappaquiddick), 1969
President Nixon (Watergate), 1972
Gary Hart, Presidential Candidate (Donna
Rice), 1987
President Clinton (Lewinsky affair), 1998
Speaker Gingrich, (violation of House Ethics
Rules), 1999
John Edward, Presidential Candidate,
(extramarital affair), 2007
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Historical Episodes of Ethical Lapses
by Country’s Political Leaders (Continued)
Eliot Spitzer, Governor, NY State, (prostitution),
2008
Mark Sanford, Governor, SC (extramarital affair),
2009
A. Schwarzenegger, Governor of California, (love
child), 2011
Anthony Weiner, Congressman, NY (sexting
scandal), 2011
Ray Nagin, Mayor of New Orleans (bribery and
corruption), 2014
Bob McDonnell, Governor of Virginia (receiving
gifts), 2014
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Record of Congress
More than Two Dozen Indicted since 1980
 “Rep. Chaka Fattah joined an ignominious – but surprisingly
large – club this past week: members of Congress indicted while
in office.”
 “Fattah stepped down as the ranking Democrat on an
Appropriations subcommittee in the wake of the indictment but
insisted that he planned to run for reelection in Pennsylvania’s
2nd Congressional District in 2016.”
 “….. Given how strongly Democratic his District is – President
Obama won it with 90 percent of the vote in 2012 - Fattah might
win no matter what happens in court. But that wouldn’t change
the fact that he is now one of the more than two dozen members
of Congress to be indicted while in office since 1980”
Source: Washington Post, Outlook Section August 2, 2015 under the title: Rep.
Chaka Fattah, for more charges than years in office (by Chris Cillizza)
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Historical Episodes of Ethical Lapses
by Country’s Corporate Leaders
 Union Carbide (Worst Industrial Disaster due
to ‘corporate negligence’), 1984
 Xerox (Accounting Fraud, re: Photocopiers),
1997 to 2000
 Enron (Accounting &Audit Fraud), Largest
Corporate Bankruptcy, 2001
 WorldCom (Accounting Fraud), Largest
Bankruptcy, 2002
 HealthSouth (Stock Fraud), 2002
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Historical Episodes of Ethical Lapses
by Country’s Corporate Leaders (Continued)
 Tyco International, (Theft of company money),
2002
 ImClone Systems (Insider Trading), 2002
 Compass Group (Bribery in UN Peacekeeping
Contract), 2005
 BP (Largest oil spill & Violation of Clean
Water Act), 2010
 Ponzi Scheme, Bernard Madoff (Investment
Fraud), 2011
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Some Notable Frauds involving Public Funds in USA
1. Medicare (Source: Washington Post – June 18, 2015)
“Government arrests 243 in largest crackdown on
health-care fraud
 In Miami, the owners of a mental-health treatment
center allegedly billed Medicare for tens of millions
of dollars’ worth of intensive therapy that actually
involved just moving people to different locations.
Some of them had dementia so severe that they
couldn’t even communicate.
 In Los Angeles, prosecutors say, one doctor
collected $23 million for more than 1,000 power
wheelchairs and other equipment his patients didn’t
need — which he often didn’t even provide.”
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Some Notable Frauds involving Public Funds in USA
1. Medicare (Continued) (Source: Washington Post – June 18, 2015)
 “And in Michigan, another physician allegedly prescribed
unnecessary narcotic painkillers in return for the use of his
patients’ IDs to generate additional false billings. When they
tried to escape the scheme, authorities say, he threatened to cut
off the medications, to which his patients were addicted.
 It turns out that the government was checking on these and
other doctors, nurses and providers of psychotherapy, home
care, drugs, physical therapy and medical equipment. In the
single largest crackdown in an eight-year campaign against
health-care fraud, the Justice Department charged 243 people
Thursday with $712 million in false billings to Medicare — the
medical insurance program for the elderly — and Medicaid,
which serves the poor.”
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Some Notable Frauds involving Public Funds in USA
2. Social Security (Source NY Times, January 7, 2014)
“Ex-NYC Police Officers, Firefighters Charged in Social Security Disability
Fraud
 The Manhattan District Attorney's office charged more than 100
people, including 80 retired New York City police and firemen,
with Social Security disability fraud Tuesday. The scheme, which
allegedly goes back to 1988, involved the filing of false mental
disability claims by as many as 1,000 people. The scofflaws made
out with hundreds of millions of dollars of ill-gotten gains.
 The perpetrators claimed they were disabled by psychiatric
disorders, leaving them unable to work. Some said the Sept. 11,
2001 terrorist attacks caused their plights. But the Internet
contains damning evidence against them.
 Photos on the web show one supposedly disabled person riding a
jet ski, another piloting helicopters and still another teaching
martial arts.”
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Some Notable Frauds involving Public Funds in USA
2. Social Security (Continued) (Source NY Times, January 7, 2014)
 “One of the accused received benefits for having a fear of
crowds, but sold cannolis in Little Italy during the San Gennaro
festival that draws more than 1 million people to the
neighborhood.
 The alleged fraudsters collected $30,000 to $50,000 per year.
 A total of 106 people are being charged, with four of them
accused of directing the scheme. That includes a lawyer, a
pension consultant and a union official for New York City
police detectives.
 The four leaders allegedly directed policemen and firemen
applying for Social Security disability insurance to fake
psychiatric illness so that they would receive undeserved
benefits, The Times reports.
 Prosecutors say the leaders told their charges to look unkempt
and act disoriented during the interviews doctors used to judge
the veracity of their applications.”
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Some Notable Frauds involving Public Funds in USA
3. Individual Income tax (Source: Detroit Free Press – March 11, 2015)
“What should real filers do when hit by tax-ID fraud?
 It's a question that's popping up now in the middle of tax season.
The con artists typically steal ID and then file fake returns in
January. Then, when the legitimate taxpayer tries to electronically
file a return, it's a no-go. The real filer's return is rejected as a
"duplicate" because a refund has been issued and the filer's Social
Security number was already used to file a 2014 return.
 The red flags to tax-related ID fraud can be shocking. One Troy
resident reported to police in early March that he received a tax
refund check in the amount of $9,832. Not so small problem? The
man had not yet filed his federal tax return. (The fraudsters in this
case likely were goofballs who were in too much of a rush, tax
experts said, because the right boxes need to be checked so the
refund is directly deposited in an account the con artist controls,
such as a prepaid card.)”
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Some Notable Frauds involving Public Funds in USA
3. Individual Income tax (Ctd.) (Source: Detroit Free Press, March 11, 2015)
 “George W. Smith, a certified public accountant
at George W. Smith & Co. in Southfield, had
clients who received letters from the Internal
Revenue Service's Integrity & Verification
Operations department about a review relating
to the use of the Earned Income Tax Credit or
business income. But the real taxpayers had not
even filed returns at the time they received the
letters.”
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Some Notable Frauds involving Public Funds in USA
4. Individual Tax Fraud (Source: Huffington Post – June 28, 2015)
“Tax Fraud: IRS Could Issue $26 Billion In Tax Refunds
To Fraudsters Over Next Five Years
 In the battle between the Internal Revenue Service
and identity thieves, the thieves are winning.
 In the next five years, the U.S. may issue as much as
$26 billion in tax refunds to fraudsters that engaged
in identity theft, according to Congressional
testimony made on Tuesday by J. Russell George, the
Treasury Department's inspector general for tax
administration. (H/t The Washington Post.)”
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Some Notable Frauds involving Public Funds in USA
4. Individual Tax Fraud (Contd.) (Source: Huffington Post – June 28, 2015)
 “This scam involves fraudsters who steal people's
identities in order to file fraudulent tax returns and
claim refunds on their behalf. Of the 2.2 million
fraudulent tax returns the IRS received in 2011,
940,000 returns were associated with identity theft,
according to George's testimony.
 This type of fraud is a growing problem for the IRS.
Over 640,000 taxpayers were affected by tax fraud in
2011, more than double the number of taxpayers
affected in 2010, according to statistics provided by
George cited by the Wall Street Journal.”
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Some Notable Frauds involving Public Funds in USA
5. Five Famous Tax Cheats (Source: Investopedia – January 24, 2010)
 “Who doesn't want to avoid taxes? Judge Billings Learned
Hand famously summed up the American tax situation, saying,
"anyone may arrange his affairs so that his taxes shall be as low
as possible ... for nobody owes any public duty to pay more than
the law demands." Avoiding taxes is one thing, but income tax
evasion is another. Tax evasion occurs when a person or
business uses illegal means to escape paying taxes, whereas tax
avoidance is the practice of using legal means in order to lower
the amount of taxes owed. These famous tax evaders found
ingenious (and illegal) ways to avoid paying up. Find out how
much they owed, and how they were caught.”
Note: Hand has been quoted more often by legal scholars and by the
Supreme Court of the US than any other lower-court judge –
Source: Wikipedia
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Some Notable Frauds involving Public Funds in USA
5. Five Famous Tax Cheats (Source: Investopedia – January 24, 2010)
1. Walter Anderson
“Anderson's case is the largest tax evasion case in
the history of the United States. This former
telecommunications executive was accused of hiding
his earnings through the use of aliases, offshore
bank accounts and shell companies. In 2006,
Anderson entered a guilty plea in which he admitted
to hiding approximately $365 million worth of
income. He was sentenced to nine years in prison,
and restitution of $200 million.”
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Some Notable Frauds involving Public Funds in USA
5. Five Famous Tax Cheats (Ctd.)- Source: Investopedia – January 24, 2010
2. Al Capone
 “This infamous mobster's name has been associated with a
variety of illegal acts including bootlegging, prostitution, and
murder. However, only one illegal act landed Al Capone in prison income tax evasion. Under Capone's watch as boss of the Chicago
Outfit, the organization generated estimated revenues of $100
million per year.
 Due to the removal of the word "lawful" from the 16th
Amendment in 1916, even income earned via illegal activities is
subject to tax. This put criminals like Capone in a bind because
they could either admit breaking the law and file proper taxes
(essentially confessing), or cheat on taxes and risk getting jailed
for evasion. In addition to paying fines and the outstanding tax
bill, Capone was sentenced to 11 years in prison.”
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Some Notable Frauds involving Public Funds in USA
5. Five Famous Tax Cheats (Contd.)- Source: Investopedia – January 24, 2010
3. Joe Francis
“The "Girls Gone Wild" creator is no stranger to controversy. In
2007, he was charged with felony tax evasion for reportedly filing
false corporate tax returns. Authorities accused Francis of filing
over $20 million worth of false business expenses in order to keep
from paying taxes. A guilty plea allowed him to escape the felony
charge.”
4. Wesley Snipes
“Federal prosecutors have accused the "Blade" star of many
offenses. Snipes allegedly hid income in offshore accounts and did
not file federal income tax returns for several years. The actor's
federal tax debt is estimated to be in the range of $12 million. In
2008, Snipes was acquitted of felony tax fraud and conspiracy
charges, but was found guilty of misdemeanor charges. Snipes was
sentenced to three years in prison and is currently out on bail while
he appeals the conviction. His accountant, Douglas P. Rosile, and
tax-protester Eddie Ray Kahn were charged as co-defendants.
Rosile was sentenced to four and a half years. Kahn was sentenced
to 10 years.”
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Some Notable Frauds, re: Public Funds in USA
5. Five Famous Tax Cheats (Contd.) - Source: Investopedia, January 24, 2010
5. Leona Helmsley
“Dubbed the "Queen of Mean," this hotel operator reportedly told
a former housekeeper, "We don't pay taxes. Only the little people
pay taxes." Helmsley and her husband, Harry, accumulated a
multi-billion dollar real estate portfolio. Despite their immense
wealth, they were accused of billing millions of dollars in personal
expenses to their business in order to escape taxes. In 1989,
Helmsley was convicted on three counts of tax evasion. She served
18 months of federal prison time. Coincidentally, she was ordered
to report to prison on income tax deadline day, April 15, 1992.”
Conclusion
“Some people go to creative lengths to save money, but there is a
clear line between creativity and breaking the law. Avoiding taxes is
legal and understandable, but tax evasion comes with tough
consequences. As we can see from the troubles of these five people,
what you may save now will not be worth what you have to pay
later.”
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A Notable Ethical Lapse
(Example from Closer to Home)
Source: The Chronicle of Higher Education – September 3, 2009
Montgomery College, in Maryland, Puts President on Leave for
Rest of His Term
 Brian K. Johnson, president of Montgomery College, has been
placed on administrative leave with pay, the chairman of the
Maryland institution's Board of Trustees said after emerging
from a four-hour closed-door meeting of the board on Thursday
night.
 The board also voted not to renew Mr. Johnson's contract,
which expires June 30, 2010. The president's current annual
base salary is $233,210. Hercules Pinkney, a former provost at the
two-year college, has been named interim president and will begin to
serve immediately.
 "We arrived at these decisions after much discussion and
deliberation," said Michael C. Lin, the board's chairman. "We take
our responsibility of oversight of the college seriously and feel this
action is in the best interest of the Montgomery College community."
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A Notable Ethical Lapse
(Example from Closer to Home (Continued)
Source: The Chronical of Higher Education – September 3, 2009 (Continued)
 The board's decision comes after more than 200 faculty members
voted no confidence in Mr. Johnson at a meeting last week. They have
accused the president, who came to the well-respected 60,000-student
college in 2007, of excessively spending college money and missing
important meetings and events.
 Between July 2007 and April 2009, Mr. Johnson spent $58,165 on
food, hotel rooms, and transportation, according to expense reports
obtained by faculty union leaders through a public-records request.
Among the expenses charged to his college credit card were a $4,051
hotel bill in Delhi, several hundred dollars for floral arrangements, a
single charge of $302 at a Borders bookstore, another single charge of
$182.42 at a CVS, and a $750 tab from Lifestyle Transportation, a
limousine service in the Boston area.
 Mr. Johnson, in a written statement this week, offered explanations
for many of the expenses. Among other things, he said that the card
“covers costs that include vehicle maintenance, gasoline, office
expenses, travel, etc.”
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Identity Theft Fraud
Some Frightening Statistics
Types of identity theft fraud and percentages of how
victims’ information was misused in 2014:
 Government Documents or Benefits Fraud – 38.7%
 Credit Card Fraud – 17.4%
 Phone or Utilities Fraud – 12.5%
 Bank Fraud – 8.2%
 Attempted Identity Theft – 4.8%
 Employment Related Fraud – 4.4%
 Other Identity Theft – 21.8%
(Source: Washington Post Digest – June 27, 2015 Quoted from Federal Trade
Commission , Insurance Institute)
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Teaching Ethics to Students
Q. “Is it possible to effectively teach students to become more
ethical business leaders?”
A. “You probably can’t take someone who is dishonest at their
core and educate that out of them. But what schools can do
is help people understand the complexities of the situation
that they’re going to go into, and you can give them a lot of
practice around such situations. That can be extremely
helpful in taking people who have a fundamentally positive
ethical behavior and helping them tap into the ethics they
have inside.”
Source: Washington Post Business Section, August 9,2015. “The secret to inspiring
the next Tim Cook” - An interview with Duke University’s Fuqua School of
Business, Bill Boulding, by journalist Lillian Cunningham.
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Ethics
A Critical Component of Fiduciary Role
The Standards of conduct by which one’s actions are
judged as:
 Right or Wrong
 Honest or Dishonest
 Fair or Not Fair
Source: Financial and Managerial Accounting by Weygandt,
Kimmel and Kieso (Textbook for Accounting)
Notes:
Being Legal does not always mean being Ethical
(Higher Bar to be cleared for Ethics)
Being truly religious contributes to ethical behavior?
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Fraud Triangle
Opportunity
Financial Pressure
Rationalization
Source: Financial and Managerial Accounting by Weygandt, Kimmel and Kieso
(Textbook for Accounting)
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Corruption
(Food for thought)
 Corruption based on Need (Inadequate compensation to
meet personal and family needs)
 Corruption based on Greed (Questionable Rationale? –
arrogance, one-upmanship - e.g. Hedge Fund Manager
Rajaratnam)
 Can only be reduced, not totally eliminated?
 Question of whether the country’s economy is strong
enough to bear the cost and still survive or even thrive?
(e.g. US, South Korea, Japan)
 US Foreign Corrupt Practices Act (Europe?)
 David Rockefeller’s Quip?
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Corruption Perception Index (CPI)
Where does USA Stand?
Transparency International 2014 CPI Ranking, out
of 175 Countries:
1. Denmark
2. New Zealand
3. Finland
4. Sweden
5. Norway
10. Canada
11. Australia
17. USA
103. Mexico
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What can Community College Educators Do?
(in the Classroom)
Incorporate Ethics into the Curriculum (all courses)
Talk of Examples (refer to good Role Models)
Share Examples of Employers’ Business Code of
Conduct given to Employees
Explore with students generational differences in
behavior (e.g. Baby Boomers vs. Generation X and
Millennials, interactions with humans vs. machines)
Talk frankly about cost of cheating in class and exams,
plagiarizing, abuse of technology, etc.,
Narrate experiences from own career and life
Plant Seeds of professionalism and integrity in students
and talk of the benefits of honesty in one’s career
Explain options available and choices to be made by
students irrespective of their chosen career path
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