Taking Risks and Reaping Rewards

Ethical Emulsion

In a AP article today, it was pointed out that some of the clients of Bernie Madoff actually made money as a result of what were probably fraudulent efforts on the part of Madoff. This was because they invested for a long period of time and periodically took some money out. So they did get their initial investment back and maybe more. It's unclear what the courts will have to say about this, apparently they can demand part or all of the money back, but let's put aside the legal issue for the time being and ask this:

Is it ethical to keep the money gained from a fraudulent act, even if the act wasn't of your own doing?

From the point of view of an outsider with nothing to gain or lose, most would likely say no, it's not ethical to keep ill-gotten gains, especially when some that lost were charities. But that leads to another question.

Will those that profited from dealings with Madoff actually be willing to give some or all of the money they pulled out of the Madoff investment back?

It would be shocking if any were so inclined. Perhaps someone that really didn't need the money anyway might be more concerned about their reputation than some pocket change. But for those that saw significant money disappear, the very likely response will be to get a lawyer and try to keep every dime.

What can we learn from this?

When it comes to money, many, probably most, people will say one thing and do another. Their views on ethics and values apply to every situation they can think of except the situations where they themselves would lose money. "That's different," is often the retort when presented with the contradiction.

Ethics and money are like oil and water, they don't mix together very well. Sure we can put the two in a bottle, shake vigorously, as in making oil and vinegar salad dressing, and a emulsion will result. It may even taste good for a while. But the natural tendency is to separate again, which begins as soon as the shaking stops.

Knowing this can be a tremendous help in dealing with others, including close friends and family. The example that comes to mind is settling estates among family. Loving sibling relationships are often shredded when the parents die as the money clouds their view and changes their otherwise ethical behavior.

The key to avoiding problems like this is to accept that the natural tendency for oil and water is to separate and plan for it.

To make an ethical emulsion, assuming the worst will work the best.