Unjust Gain

On April 20, 2013 NYPD officers raided a drug den in a Brooklyn, New York neighborhood. The police found a crew of five men in possession of 23,000 pills of oxycodone with a street value of $460,000. Apparently the men had used stolen prescription sheets to obtain the drugs. They were also accused of peddling heroin and cocaine and possessing a sawed-off shotgun.

But there was an interesting twist to this story: the men routinely texted their customers that they were closed for the Sabbath. One text read: "We are closing at 7:30 on the dot and will reopen Saturday 8:15 so if u need anything you have 45 mins to get what you want." That explains why police officers dubbed their year-long investigation into the group "Only After Sundown."

Editor's Note: This story is not intended to disparage all devout Jews—who may have much to teach us about honoring the Sabbath. It shows one example of our human tendency to observe one part of our faith while we ignore other parts.

Every few years the U.S. Department of Defense publishes a short book that contains amazing stories about real crime, cheating scientists, drug dealers, and rogue real-estate agents. It's called The Encyclopedia of Ethical Failure. The book is filled with true case studies of government employees acting badly. It's used to train new government workers how not to behave on the job.

For example, one case study focuses on a federal employee who backed up his van to the office door at night and stole all of his department's computer equipment. A short time later he was arrested for trying to sell the equipment at his yard sale. He wasn't hard to catch: the computers were still plastered with barcodes and stickers that read "Property of the U.S Government."

Or there's this story: For several years two government executives apparently had never taken vacation time. But investigators noticed that they had taken lots of "religious compensatory time." Curiously, though, those days never fell on a religious holiday from any known religion. Instead, they happened to coincide with the employees' golf outings. When asked if golf tournaments should be considered a religious holiday, one of the employees replied, "They could be for some people."

Why do seemingly decent people do such dumb things? The current editor of The Encyclopedia of Ethical Failure offered this explanation:

I found it didn't relate to grade, or rank, or gender. The [main] issue was that at the moment they didn't think of the ramifications. In most cases when you would sit down with these folks afterwards and say, What were you thinking? They would be banging their heads on the table and saying, You're right; I wasn't thinking.

Do you ever wonder why people cheat—or feel tempted to cheat—on expense reports, taxes, exams, and other endeavors? According to a series research studies at four major universities, cheating often provides psychological rewards that motivate people to act unethically. Cheating can even give many people what researchers have labeled a "cheater's high."

In one experiment, researchers from the University of Washington's Foster School of Business asked subjects to predict how they'd feel about cheating. As the researchers had expected, most of the subjects predicted they'd feel bad about cheating. Then they conducted an experiment in which 179 subjects had to unscramble as many words as possible in a 15 minute period, earning money for each word completed. When the subjects were offered a chance to cheat, 41 percent of the participants did so. Right after the test, the participants took a test that measured how good they felt at the moment. Surprisingly, "[The] cheaters reported higher positive feelings [than the non-cheaters] (such as excitement) and no difference in negative feelings (such as guilt) than non-cheaters."

A second study with 205 participants revealed even more disturbing results. Once again, the participants were given a test that allowed the chance to cheat. And once again, the cheaters felt better than the non-cheaters. But this time the cheaters also rated themselves higher on how often they felt "clever, capable, accomplished, satisfied, and superior." In other words, they not only felt good about cheating; they also felt smug about it.

An article in Forbes magazine concluded, "[We can] add this [study] to the pantheon of research undermining the idea that humans are good at heart …. And we wonder why Wall Street investment banks, stocked with the smartest minds from Ivy League schools, all plunged lemming-like off the same cliff in the credit crisis?"

Possible Preaching Angles: The Power of Sin/Temptation—The Bible is honest about "the passing pleasures of sin." Sin often entraps us and becomes habitual because it feels good. It makes sense to our "flesh."

Harrun Majeed realized he had lost his credit card when he arrived home after shopping at a grocery store in his Florida neighborhood. A military veteran now earning his college degree, Majeed assumed he had dropped the card after paying for his groceries. He called the company to cancel his account, but was quickly informed that the card had just been used at a pizzeria in the same shopping center as the grocery store.

Majeed called the police.

When officers arrived at the pizzeria, they found Richard Lewis Ludwig—a 54-year-old dentist from Michigan—waiting for his order of two large pizzas with extra olives. Ludwig was arrested for credit card theft and forgery charges.

The bill for the pizzas was $40.64. When police asked Ludwig if he was having money problems, he claimed his dental practice was worth between 3-4 million dollars. He had $250 cash in his wallet.

Have you ever gotten yourself in big trouble—really, really big trouble? So big you can't even conceive of how much trouble you're in? That's what 31-year-old Jerome Kerviel is accused of. Jerome worked for a prestigious bank in France. He had worked his way up from the back room to being one of the men who did the bank's investing. In January 2008 he was caught allegedly committing investment fraud. In other words, he carried on bogus trades designed to make him money. Here is the amazing thing: he was dealing not just in millions, but in some $7 billion! According to an article in the The Times, at one point in the alleged scam, Kerviel had put his bank in a position where they would lose "the equivalent of about half of all the gold and currency reserves held by France. The sum also exceeded the entire value of the bank at which he worked."

Imagine what it felt like when the market turned the wrong way, and he realized that it was only a matter of time until he would get caught. Now that's getting yourself in big trouble!

What you may not realize is that you may be in bigger trouble than this bank employee. He committed a crime against his bank and against other investors who lost their money through his alleged fraud. He messed up the world financial markets for a while. But you—you have committed crimes against God! Any person who breaks any of God's commands commits a crime against him, called sin, and it's more criminal in God's sight than a multi-billion-dollar investment fraud is in our sight.

Banks come and go. Jail time comes and goes. Money comes and goes. But God is an exalted and holy being. To commit a crime—any crime—against the infinite God is so big that you cannot even imagine how criminal it is. It's infinite.

The man who committed the bank fraud got himself a lawyer. I suggest you find yourself a Savior, because it's only a matter of time until you're caught.

In their book Freakonomics, Steven D. Levitt and Stephen J. Dubner explain how a simple change to U. S. tax rules in 1987 exposed the depth of the public's willingness to deceive for financial gain:

In the 1980s, an I.R.S. research officer in Washington named John Szilagyi had seen enough random audits to know that some taxpayers were incorrectly claiming dependants for the sake of exemption. Sometimes it was a genuine mistake (a divorced wife and husband making duplicate claims on their children), and sometimes the claims were comically fraudulent (Szilagyi recalls at least one dependent's name listed as Fluffy, who was quite obviously a pet rather than a child).

Szilagyi decided that the most efficient way to clean up this mess was to simply require taxpayers to list their children's Social Security numbers… The idea never made its way out of the agency.

A few years later, however, with Congress clamoring for more tax revenue, Szilagyi's idea was dug up, rushed forward, and put into law for tax year 1986. When the returns started coming in the following April, Szilagyi recalls, he and his bosses were shocked: seven million dependents had suddenly vanished from the tax rolls, some incalculable combination of real pets and phantom children. Szilagyi's clever twist generated nearly $3 billion in revenues in a single year.

Have you ever had high hopes for something and then seen those hopes crumble to pieces? It happened to one man in Pittsburgh, Pennsylvania. His story hit the news wires as one of those sadly humorous, stupid-thief tales. Actually, if you knew him, his story is probably only very sad.

He wanted money. Maybe he desperately needed money. Perhaps he had a substance addiction or owed tens of thousands of dollars on a charge card. Regardless, somehow he got the idea to go into a grocery store, hand the checkout clerk counterfeit money, and ask for change. If it worked, he would get real money in exchange for fake money. Brilliant!

He was a big thinker. If he was going to risk attempting this fraud, he was going to do it in a way that would set him up for life. So he decided to try to pass off not a counterfeit $100 bill, not a counterfeit $1,000 bill, not even a counterfeit $10,000 bill, but a counterfeit $1,000,000 bill.

Again, you can pat this poor fellow on the back for thinking big, but you also have to pity him for thinking badly. First, you have to suspect that the average checkout clerk doesn't keep a million dollars in her drawer. Second, you have to think that a one million dollar bill is going to attract some extra attention and might even bring the scrutiny of the store manager. Third—this is the clincher—there is no such thing as a $1,000,000 bill. The largest currency printed in the U.S. is a $100 bill!

When the counterfeiter walked into the supermarket on that Saturday in Pittsburgh, holding that one million dollar bill in his sweaty hand, just imagine his soaring hopes. Soon he would be able to pay his bills, buy a nice house and car, get all the things he had always wanted, never work another day in his life. This would be his lucky day!

Needless to say, his high hopes were dashed. The checkout clerk refused to give him change for his bogus bill. The manager came and confiscated the forgery. His dreams went up in smoke. He got angry. He grabbed the electronic funds transfer machine and slammed it on the counter. He tried to grab the scanning gun used to read product labels. Soon the police had him in custody.

It's a sad, sad thing when a person's high hopes come to nothing. How do you know when your hopes are resting on something true and legitimate and real, instead of on something bogus and stupid? Where do you place your hope?

Former Secretary of State Madeleine Albright shares this brief moment she shared with Holocaust survivor and author, ElieWiesel:

Not long after September 11, I was on a panel with Elie Wiesel. He asked us to name the unhappiest character in the Bible. Some said Job, because of the trials he endured. Some said Moses, because he was denied entry into the Promised Land. Some said Mary, because she witnessed the crucifixion of her son. Wiesel said he believed the right answer was God, because of the pain he must surely feel in seeing us fight, kill, and abuse each other in the Lord's name.

Freakonomics is a fascinating book by economist Steven Levitt that turns conventional wisdom on its head. On the subject of cheating, Levitt calls it "a prominent feature in just about every human endeavor." Although he doesn't declare it part of human nature, Levitt notes the prevalence of cheating among ordinary schoolteachers, wait staff, and payroll managers. While evidence for cheating is often hard to uncover, at times it is overwhelming.

Consider what happened one spring evening at midnight in 1987: seven million American children suddenly disappeared. The worst kidnapping wave in history? Hardly. It was the night of April 15, and the Internal Revenue Service had just changed a rule. Instead of merely listing the name of each dependent child, tax filers were now required to provide a Social Security number. Suddenly, seven million children—children who had existed only as phantom exemptions on the previous year's 1040 forms—vanished, representing about one in ten of all dependent children in the United States.

As of 2006, the stock market boasts 150 mutual funds that designate themselves as "socially responsible." This means that investments are only made in companies that meet the ethical standards of fund managers.

But back in 2002, a new investment vehicle quietly surfaced: the Vice Fund. The prospectus of the Vice Fund claims that it favors "products or services often considered socially irresponsible." Investments have been made by various managers in companies linked to alcohol, tobacco, gambling, and military contracts.

This fund and another, the Gaming and Casino fund, both rest on a certain approach: Stocks that exploit the dark side of human nature are a natural for Wall Street, particularly during economic downturns.

Dan Ahrens, former manager of the Vice Fund who moved to start the Gaming and Casino fund, expands on this philosophy in his book Investing in Vice. He believes that bad habits don't change, even through bad economic times. People still indulge in vices regardless of what happens in the stock market; smoking, drinking, gambling. There's financial profit in war.

And, so far, those philosophies have produced results. The Vice Fund has returned positive monetary gains, some reaching beyond 20 percent over five years.

Editor’s Update (2023):

The Fund has reported fairly steady annual total returns, with dividends consistently contributing to the Fund’s overall return. As of June 30, 2022, the Investor Class has a five-year annualized return of 0.74%, and a 10-year annualized return of 6.79%.

Through June 30, 2022, it reports an annualized return since inception of 7.82% versus the benchmark set at 8.32% by the MSCI All Country World Index.3 As of Sept. 9, 2022, it has a dividend yield of 0%.

As of Sept. 9, 2022, the Vice Global Fund had total assets under management of $79.2 million. As of June 30, 2022, top holdings in the Fund included Galaxy Entertainment, Northrop Grumman, Raytheon Technologies, and Philip Morris International.

In his autobiography in 2004, Pete Rose finally admitted that he bet on baseball games while employed as manager of the Cincinnati Reds—an infraction that produced a lifetime ban from the sport in 1989. Rose's admission of guilt came after denying any wrongdoing for almost 15 years.

And he has not stopped confessing, either. In September of 2006, he began using his website to personally apologize to each of the fans he had failed or offended. In fact, for only $299 (plus $4.95 shipping handling), Pete Rose will send you an autographed baseball that reads, "I'm sorry I bet on baseball."

The marketing copy on the website says: "Now you can get the baseball collectible everyone's talking about—Pete Rose's personal apology for betting on baseball, newly inscribed on an actual baseball—at a fantastic price."

Who says there's no integrity in the business world? In the spring of 2006, an administrative assistant at Coca Cola's Atlanta headquarters left work with several classified materials hidden in her purse. These materials included recipes for upcoming products, future promotions, and a beverage sample for a product not yet on the market.

With the help of two other employees, the secretary sent a letter to Pepsi—Coke's oldest and biggest competitor—offering to sell the secrets. It was a chance for Pepsi to seriously damage its competitor for a relatively low price.

Immediately upon receiving the letter, however, Pepsi officials contacted Coca Cola's headquarters, which then called the FBI. The Feds conducted a sting operation that netted three conspirators two months later, when they agreed to part with the secrets for $1.5 million.

"We were just doing what any responsible company would do," said Pepsi spokesperson Dave DeCecco. "Despite the fierce competition in this industry, it should also be fair."