Ethics Classes--the Teachers Are White-Collar Criminals : Business: Pepperdine graduate students travel to Lompoc to learn firsthand how unbridled greed in the corporate world can lead to prison.


During his career in telemarketing and business management, the former executive was so consumed by greed that he paid little attention to anything but the bottom line. That’s why he’s doing five years now at the Federal Correctional Institute at Lompoc.

And that’s why Pepperdine University professors believe he’s uniquely qualified to give graduate business students lectures on the importance of business ethics.

Standing behind the lectern in the prison visiting room, the inmate mesmerized the 20 MBA students with tales of his own misguided business career. He may have lost his oceanfront home, his diamond-studded Rolex watch, his Mercedes and BMW, but he still has the charisma and presence that once made him a master salesman. But this time he’s pitching ethics to students, not a Ponzi scheme to unsuspecting marks.

The program at Lompoc, the only one of its kind in the country, Pepperdine professors say, brings a group of graduate business students to the prison every semester so they can learn from the mistakes made by white-collar criminals. After the numerous financial scandals of the last decade, and the profit-at-any-price approach that brought down financiers Ivan Boesky and Michael Milken, business schools nationwide now are emphasizing the importance of ethics, said Jim Martinoff, a finance professor at Pepperdine.

Many prisons have “Scared Straight” deterrent programs where young offenders meet murderers, rapists and kidnapers and learn about the brutal realities of prison life. The program at Lompoc is a variation on the theme--it’s a “Scared Straight” for yuppies.


Before the program began, the students, who had entered Lompoc with some trepidation, asked about violence at the prison. A guard explained that Lompoc--a low- to medium-security institution--is not exactly a San Quentin or Folsom.

The last weapon used in a fight, the guard said, was a tennis racket.

Still, Lompoc looked enough like a prison to intimidate a group of students from a private school in Malibu. During the last year Lompoc has been converted from a minimum-security camp--with no bars, walls or gun towers--to a prison with 12-foot fences topped with razor wire and guards with shotguns patrolling the perimeter.

And instead of just white-collar criminals, the prison now is filled with inmates who have committed more violent crimes and have longer sentences. Because Lompoc is no longer a “country club prison,” the impact on the students seemed greater.

They realized that if, one day, they become blinded by the bottom line they, too, might end up standing in a prison chow line alongside bank robbers and burglars.

The program began with the class splitting up into three discussion groups. Matt, a former telemarketing executive from Orange County who was convicted of mail fraud, led one session.

Leaning back in his chair at the head of the table, looking tan--from working at the prison dairy--and confident, he could have been an executive heading a meeting with his board of directors.

But he has a different message and a different perspective now that he makes 11 cents an hour, instead of $250,000 a year. Matt is in his early 30s, only a few years older than many of the students, and he repeatedly emphasized that they should learn from his mistakes:

* “Stay away from the gray areas,” he told them. “If it feels wrong, it probably is.”

* “Wherever you end up working, find a mentor. When you’re blinded by ambition like I was, you need someone to direct you when you’re tempted to break the law.”

* “It’s easy to start thinking everyone’s doing it so it’s probably OK. It’s easy to just follow the pack. Don’t. You could be the one who ends up doing the time.”

At a nearby table, another group of students listened to inmate John Burgess espouse a more complex message. While Matt told students to simply follow the law and “do the right thing,” Burgess, an attorney serving five years at Lompoc, emphasized that “ right is a relative term.” His message had less to do with morality than practicality.

“What’s right five years ago, may not be right today,” he said. “If you’re not aware that the business world is changing, and the laws that govern the business world are changing . . . you’re going to find yourselves in trouble.”

Burgess, who has a neatly trimmed beard and wears bifocals, still has the mien and manner of the prominent trial attorney he once was. He is a polished speaker and so urbane he refers to prison guards as the management.

When a student asked if there were other attorneys at the prison, Burgess smiled. “When I first got here, there were 23 lawyers and four judges. . . . But a lot of them don’t admit it. A lawyer is not a highly valued profession around here.”

Burgess was a well-known lecturer and author on trial law before his conviction, and students were curious how a man with his credentials ended up in prison. He told them he had committed criminal contempt because he wouldn’t reveal to a judge confidential information. It was a matter of principle, he said.

The students were aghast that Burgess was spending five years in prison for simply following his conscience. But if they had researched his past they would have learned another valuable business lesson from their day in prison: Don’t take anything at face value. Because what Burgess didn’t tell them was that in addition to contempt of court, he also pleaded guilty to bilking his clients out of $1.4 million to buy a $650,000 home and pay off credit card bills.

The third discussion group was led by Ben, who walked into the visiting room carrying a book called “Million Dollar Habits.” He embodied the old convict adage: “Nobody is guilty in prison.”

Ben, who asked that his last name not be used, would admit to doing nothing illegal except filing late tax returns for two years and “being in a business the government doesn’t like.” He made the mistake, he told the students, of running a business that the government was unfairly targeting for regulation.

A federal jury disagreed with Ben’s assessment of his mail-order business. They convicted him of bilking thousands of investors out of more than $7 million. Ben, who once gave motivational seminars to businessmen, also had been charged with falsely claiming that he had been the “attitude coach” for the Apollo astronauts.

During a 10-minute introduction to the Pepperdine students, which consisted of a litany of all of his accomplishments and awards, Ben once again claimed to have aided the Apollo astronauts. But after all the dubious claims, self-congratulatory comments and protestations of innocence, Ben squeezed in some trenchant observations about the dangers of white-collar crime.

“Friends,” Ben told the students, “you don’t have to rob a bank to get in here. You don’t have to have 15 kilos of coke. Not everyone in here is a violent criminal with loser tattooed on his forehead. . . . You can break just as many laws in the business world as you could with a gun in your hand.”

The program at Lompoc began about 18 months ago when Pepperdine professors, alarmed at the increasing number of scandals in the financial world, decided to institute an ethics program that would make a lasting impression on students. Now, some students say their visit to Lompoc was the most important experience they had during business school, Martinoff said.

Although some inmates are not entirely forthcoming about their crimes, he said, this does not diminish the program. The inmates are not coached or given a script; they have complete freedom in how they approach the students.

Before Gregg Booth entered the Pepperdine MBA program, he spent a few years in the business world where, he said, his company never addressed ethical issues.

“In industry they don’t tell you what can happen if you do something wrong or follow your boss when you shouldn’t,” Booth said. “All the emphasis is on success. But at the prison you see the flip side of the success-at-any-cost attitude. . . . And long after I leave school, that’s an image that’s going to stay with me.”