Book reviews – Page 6 – Compliance Building

Weekend Reading: Wheelmen

There are compliance lessons to be learned in Wheelmen: Lance Armstrong, the Tour de France, and the Greatest Sports Conspiracy Ever by Reed Albergotti and Vanessa O’Connell.

Lance Armstrong was one of the best cyclists in last 20 years. But his wins were built on a foundation of illegal doping and performance enhancing drugs. It’s not about the bike; It’s all about the needle.

Reed Albergotti and Vanessa O’Connell write a devastating tale of Mr. Armstrong’s rise and meteoric crash. Wheelmen is very well-written and well-researched. We only saw Lance on his bike. The book takes us through what was happening on the team bus and hotel.

I’m cyclist and a fan of cycling races. I first came to road cycling during the rise of Mr. Armstrong. His story as a cancer-survivor coming back to win the biggest race in the world was an inspiration. I remember watching his epic battles with Ullrich, Mayo, Beloki, and himself. Lance answered all the challenges during his seven Tour de France wins in a row. His team was stacked with great riders: Hincapie, Hamilton, Landis, Eki, Heras, Leipheimer, and many others. The team was run by a Bruyneel, a master tactician.

Those great riders and those tactics were reliant on a widespread campaign of illegal doping. The United States Anti-Doping Agency has stripped Armstrong of all of his cycling wins since his recovery from cancer.

It’s clear that most of the top cyclists during the Armstrong era were also doping. There are no Tour de France winners during those years because the men next to Armstrong on the podium most years have also been implicated in doping. It begs the question of whether Armstrong was the best cyclist or merely the best doper. Or perhaps a combination of the two.

I was sadly disappointed when the charges came out against Armstrong. Given that he had faced death, I did not think he would risk his health by doing.

“Armstrong said he wouldn’t be stupid enough to take drugs after cancer. ‘I’ve been on my deathbed,’ he said.”

It was like discovering the truth about Santa Claus.

The biggest compliance failure was that the cycling organizations had no incentive to investigate Armstrong. He was bringing media attention and fans to the sport. That meant more money for cycling. If they brought down their biggest star, the racing organizers and governing bodies would have lost money.

Good compliance programs have good testing. The cycling federations had poor testing. The riders knew how to stay ahead of the tests.

Armstrong provides an insight to the workings of a sociopath. Armstrong’s interview with Oprah was the window into the mind of a pathological liar. Armstrong had been telling the lie over and over and over. He lied to the public. He lied to the press. He lied to cancer survivors. He lied under oath.

He even lied about the testing. He proclaimed that he had been tested clean over 500 times. According to the authors of Wheelmen, the true number is half of that.

Wheelmen is great book to read if you have an interest in cycling or Lance Armstrong.

Weekend Reading: The Undercover Economist Strikes Back

Financial Times columnist and bestselling author Tim Harford tries to show us that macroeconomics is not that hard in The Undercover Economist Strikes Back.

In order to fix the economy, we need to understand the economy. The book is a “practically minded poke-around under the hood of our economic system.” It’s a sequel to The Undercover Economist, which looked at microeconomics. The first book looked at the cost of coffee and other focused topics that affect an individual’s behavior.

The Undercover Economist Strikes Back tackles the world and the uncertainty of macroeconomics. These are the big forces of gross domestic product, inflation, and unemployment. Rather than a droll, laborious discussion of complex theories, Harford keeps things witty and perky.

The book is not about bashing big banks or pointing fingers at who caused the financial crisis of 2008. But he does discuss the macroeconomic forces in light of the recovery (or lack thereof) from the 2008 crisis.

He does not try to oversimplify the topics. He cautions that they are difficult to understand, difficult to calculate, and difficult to get right. He offers advice and lessons from history.

He explains the theory of currency with the extraordinary example of the rai used by the Yap islanders in Micronesia. Each rai is a stone wheel, the biggest of which is nine feet across and weighs over four tons. That will help you buy land. Smaller ones, a mere foot or two across, will buy you a pig. The islanders still use the currency even if it has sunk to the bottom of the bay while being transported in a boat. Given the small number of transactions, the islanders can just keep track who owns which stone, without having to move the big ones. But is the Yap system any crazier than the use of gold?

He tackles the thornier problem of the cause of recessions. Is it a shortage of demand or a shortage of supply? Or both? Was the 2008 recession a demand shock or a supply shock? It’s surprisingly fun to get to the answers with Harford leading the way.

I was happy to accept a review copy from the publisher.

Weekend Reading: Ingenious

In 2007, the X Prize Foundation announced that it would give $10 million to anyone who could build a safe, mass-producible car that could travel 100 miles on the energy equivalent of one gallon of gas. The challenge attracted more than one hundred teams from all over the world. Jason Fagone follows four of those teams in Ingenious: A True Story of Invention, Automotive Daring, and the Race to Revive America.

The X Prize Foundation is most famously known for its first challenge to launch a spacecraft capable of carrying three people to 100 kilometers above the earth’s surface, twice within two weeks. The XPrize is modeled on the prize that got Lindbergh to fly across the Atlantic. (He was not just an adventurer; He was flying for the Orteig Prize of $25,000.) The X Prize founder uses the “bald appeal of human greed to achieve an idealistic goal.” Like the Orteig Prize, the Space X prize had very simple rules.

The Progressive Insurance Automotive X Prize was a bit more muddled. Originally it was supposed to be a cross country race. Then it became a series of tests at the Michigan International Speedway. It had three categories: Mainstream, Alternative Tandem, and Alternative side-by-side.

Fagone looks at these four teams as the prepare for and compete for the prize.

Oliver Kuttner’s Edison2 cars get the most ink. His theme was a relentless focus on reducing weight and improving aerodynamics. He had a car for each of the three categories.

Team Illuminati was literally built in the cornfields of Illinois. The team was lead by a part-time tinkerer using electric motors.

The West Philly Hybrid X Team was mostly students from the after school program at a West Philadelphia High School. Their goal was to make existing mainstream cars more efficient. They rebuilt a Ford GT using biodiesel and a Ford Focus with a hybrid electric gas system.

Aptera chose to go with a lightweight three-wheeled coupe. This was the best funded team of the four.

The book is well-written and enjoyable to read. At times I struggled to keep track of which team was which. Eventually, Edison2 elbows the other teams out of the narrative and takes a more prominent role in the book. I think that’s because the team leader was a big robust character all by himself.

The narrative itself drags and lacks the suspense of a good climax because of the design of the competition. The tests happened over a series of weeks in June and July of 2010. The winner was announced later in September.

There are bits of the subtitle sprinkled in the book about how to revive innovation and development in America. The goal of the X Prize is encourage that kind of innovation and forward-thinking. As the prize rules got muddled for the automotive competition, so the narrative of this book got muddled.

Disclaimer: The publisher provided me with a review copy of the book.

Weekend Book Review: A Giant Cow-Tipping by Savages

The 1908s was the start of the M&A boom, glorified on the big screen by Wall Street. John Weir Close looks back at those days in A Giant Cow-Tipping by Savages.

The author is a lawyer and a journalist. He founded the M&A Journal and was an editor at The American Lawyer. His book seems to wrap more context, color and gossip around his old stories on M&A deals. The book reads like a collection of stories and lacks a coherent narrative.

You may guess from the title that Mr. Close may have warm feelings for M&A nostalgia, but has no love for the players. He dwells on their flaws. For many of the key players, those flaws were deep.

Many of the deals were deeply flawed. Bidders were fueled by fee-seeking advisers, cheap debt, and hubris. Many of the deals highlighted in the book lead to poor or disastrous results for the companies involved. The reality is that many of the mergers did not necessarily prove beneficial. The resulting company was laden with too much debt or managers who didn’t understand the business.

The book starts by painting the corporate raiders as savages who brought down the managerial elite. CEOs and boards were sitting in comfortable seats and never feared that someone would come along and try to takeover their companies. Companies were then viewed for the break up values and the savages could rip it into pieces to create more value.

The book’s title comes from a statement by Ted Turner during the AOL acquisition of Time-Warner. He didn’t understand how a publisher, trying to sell magazines for a few dollars an edition, could combine with a company trying to give that content away for free. Turner was proved right as the AOL Time Warner merger is one of the worst business combinations of all time and cost Turner a fortune.

Since the book is really collection of stories, it is uneven. Some stories and some players are more interesting than others. Mr. Close is better at eliciting an interesting story in some chapters, but not others. At many times, the lawyer side takes over and dwells on uninteresting minutiae.

If you loved the merger stories of the 1980s you’ll like the book. Otherwise it may not be a good addition for your to-read stack.

Disclosure: The publisher sent me a copy of the book to review.

What Was It Called Before Mr. Ponzi Did It?

When Bernie Madoff’s fraud was exposed it was labeled a Ponzi scheme. Madoff was not investing the money as promised. He was using new investment money to pay old promised returns. I thought it would useful to look back at the original Ponzi scheme to see if offered insight to today’s world of compliance. I just finished reading Ponzi’s Scheme: The True Story of a Financial Legend by Mitchell Zuckoff.

When Charles Ponzi sailed from Italy in 1903, his father told him that America’s streets were paved with gold. Ponzi had landed in America at the end of the Gilded Age. He thought he could earn a fortune. He looked for one one get-rich-quick scheme after another and that lead to two stints in prison before settling in Boston.

He tried setting up a international listing of import-export companies and selling advertisements. One respondent requested information and included an international reply coupon. This coupon was effectively a return stamp for foreign correspondence. Ponzi realized that he could theoretically arbitrage the difference in foreign currencies to generate big returns. It was a theoretic return because he would have to find someone to buy the coupons overseas and someone to sell them to here in the U.S. to convert the coupon back to cash.

The idea was solid enough that he could convince investors to give him money. In exchange, he promised a fifty percent return in three months. Eventually, he had investors lined up to give him money. Unlike Madoff, Ponzi carried out his scheme in the open. It was even briefly approved by Boston’s newspapers and financial sector. (If you wonder why private placements could not be advertised for decades, you need to look no further.)

Perhaps it was the wealth of media coverage that got Mr. Ponzi famous enough for the fraud that now bears his name. Of course, he couldn’t have been the first.

In one of the court pleadings, Ponzi’s lawyer states that his client was not a “520 percent Miller.” This was a recall of an earlier fraud by William Miller and his Franklin Syndicate. Mr. Miller was promising a 10% return each week during his heyday of 1899. It was a Ponzi scheme before it was called a Ponzi scheme.

What about before 520 percent Miller? Mr. Zuckoff uses the older expression of “robbing Peter to pay Paul.” That expression refers back to the Reformation when taxes had to be paid to St. Paul’s church in London and to St. Peter’s church in Rome, so people would neglect the Peter tax in order to have money to pay the Paul tax.

Mr. Zuckoff provides a detailed look at the life of Charles Ponzi. Although it is non-fiction, Mr. Zuckoff has written the story in the narrative form, imposing some insight into the thoughts of Mr. Ponzi and those involved. The result is a nuanced and insightful look into a fraud.

Weekend Reading: Year Zero

It was December and I needed a “Y” book to finish off my A-to-Z reading challenge. I had my eye on Year Zero by Ian Baruma. But I couldn’t get my hands on a copy and the year was coming to a close. I noticed a different Year Zero by Jeff Long. I had read one of his novels many years ago and remembered enjoying it. I didn’t enjoy it that much, and a friend on Goodreads recommended a different Year Zero by Rob Reid. So I read that also. Then the first Year Zero came in, so I read it.

That’s the tale of why I read three books called Year Zero in a month.

Year Zero by Ian Baruma explores the history of 1945. The book covers a huge spectrum of topics, from the revenge on Germans to the re-education of Japanese students under General MacArthur. 1945, was start of a new world. Germany had been defeated. Japan had been defeated. The colonies in Africa and especially Asia saw that their European overlords were capable of defeat.

The problem was that the book tackled too much. That leaves vignettes of the problems faced in 1945 and what happened as a result. It lacks a narrative because the book stays focused on 1945 and does not trace the problems forward.

Year Zero by Jeff Long is a tale of an apocalyptic disease triggered by the opening of an ancient Christian artifact. The novel held promise of exploring themes of Christianity, the collapse of civilization, revenge, and redemption. But it fell well short of saying anything meaningful or interesting.

Year Zero by Rob Reid is a fun sci-fi farce, with aliens and lawyers. The universe has fallen in love with Earth’s music, but illegally pirated all of it. Then trouble and misadventures follow. It’s a great diversion away from reading about compliance

The Books I Read in 2013

My goal this year was to finish reading a book every other week. (For the math or calendar challenged, that’s a goal of 26 books.) I’m happy to say that I smashed through that goal. I ended up with 44 books on my Read in 2013 shelf during the year.

Compliance Books

For those of you looking for finance or compliance-related books, these may be of particular interest:

A-Z Challenge

You can see the cover for each and every book just below. If you look closely, you will see that the books are in alphabetical order. If you look even closer, you will see that each letter in the alphabet is represented.

I responded to a challenge on Goodreads to do so. It helped clear a few items that had been loitering on my to-read list, based solely on the first letter of the book’s title. As you might expect, the letters Q, X, Y, and Z have very limited choices.

GoodReads

I’m tracking my reading activity in Goodreads. I find the platform to be a great way to share book recommendations and to discover books to read. Now I’m looking for reading suggestions for 2014. Do you have recommendations?
Have you joined Goodreads?

2013 Reading List:

Starting New Compliance Habits in 2014

One of my favorite books of 2012 was Charles Duhigg’s The Power of Habit. The book is full of interesting ideas and based on an impressive collection of research. But it does a great job of balancing intellectual seriousness with practical advice. Even better, it’s written in a lively style, making it easy to read and digest. (The book was on my to read list before the publisher sent me a review copy.)

Fostering better compliance in your organization (or in you) can be improved by instilling better habits. Mr. Duhigg offers great information on how habit patterns form and how to change them.

If you have not yet read the book and would like a copy, Mr. Duhigg has offered a complimentary copy of his new paperback edition to one of my readers. If you are interested, leave a comment or send an email to [email protected] by Wednesday, January 8 at 5:00 pm EST. I’ll randomly pick a winner.

For those of you looking to start an exercise routine as a New Year’s resolution, here is a handy flow chart from Duhigg to help you:

High Performance with High Integrity

What is the proper role of business?

Ben W. Heineman Jr. served as the senior vice president and general counsel of GE for 15 years so he has some sense of the role of business. During that period GE was one of the most respected and valuable companies in the world.

Mr. Heineman has an answer the question and it’s the name of his book. High Performance with High Integrity.

High performance means

Strong sustained economic growth
That is based on superior products and services, and
That provides durable benefits both to the shareholders and to other stakeholders.

High integrity means

A tenacious adherence on the part of the corporation to the spirit and the letter of the formal rules, financial and legal
Voluntary adoption of global ethical standards that bind the company ans its employees to act in its enlightened self-interest
Employee commitment to the core values of honesty, candor, fairness, reliability, and trustworthiness – values which infuse the creation and delivery of products and services and which guide internal and external relationships

The book covers a broad swath of business ethics and compliance issues in a concise 177 pages. Half-sized pages. The book can fit in a coat pocket.

It’s a book that only a compliance geek could love. The larger pool of business readers will find insights and may enjoy the admiration of Mr. Heineman’s tenure at GE.

Weekend Book Review: Mortal Bonds

Sometimes, when I’m looking for a break from reading compliance materials, I look to read a thriller. Maybe a financial thriller would be a good change of pace. A publisher offered me a review copy of the financial thriller from an award-winning author and I cracked it open.

Mortal Bonds is Michael Sear’s follow up to his award-winning debut novel: Black Fridays. That book introduced Jason Stafford, a former Wall Street executive who went down a dark path and landed in prison.

In Mortal Bonds, Stafford is investigating a financial fraud. William von Becker ran a largest investment firm, but it turned out to be a fraud. After von Becker dies in prison, his family hires Stafford to find some of the missing money. They think there is a lot of missing money and want to return it to gain leverage with the Feds. It’s a thriller, so bad things start happening.

The “bonds” in the title refer to bearer bonds. Unfortunately, for Sears when I hear bearer bonds I think of Die Hard with Hans Gruber holding the Nakatomi Plaza hostage to steal $640 million in bearer bonds in the vault. That was a great action movie, with some ridiculous plot devices, but a fun story with enjoyable characters.

That’s too high of a bar for Mortal Bonds. I didn’t read the first Jason Stafford book, so perhaps I needed some of the back story to help with the book. It was fine for a light, fluffy read, but not remarkable.