MARTIN HOWELL is editor-in-charge of Reuters equities coverage in North and South America. He has directed much of Reuters corporate news coverage in the United States in the past four years, including coverage of the Enron scandal, the Internet bubble, and Wall Street deception. For the past 18 years, he has written, reported, and edited business news throughout the United States, Europe, Asia, and Australasia, and managed news teams on all these continents.
Reuters, the global information company, provides indispensable information tailored for professionals in the financial services, media, and corporate markets. Reuters information is trusted and drives decision making across the globe, based on the company's reputation for speed, accuracy, and independence. Reuters has 16,000 employees in 94 countries, including some 2,400 editorial staff in 197 bureaus serving about 130 countries, making it the world's largest international multimedia news agency.
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Table of Contents
1. Sages and Charlatans: Avoiding the Fads, the Buzz, the Rip-Offs, and the Merely Dumb.
2. Pipedreams and Big Lies.
3. The Superstar CEO: Celebrities, Showmen, and Destroyers.
4. Jets, Parachutes, and Stealth Wealth: Pay for Performance or Pay for Plundering.
5. Caffeine Badly Needed: Sleepy, Inept, and Tainted Boards.
6. Growing Mushrooms: The Art of the Opaque, Sneaky, and Buried.
7. Culture of Greed: Sports Stadiums, Shooting the Messenger, and Rank and Yank
8. Earnings Tricks and Games: Manipulating the Numbers and "Creative" Fraud.
9. Goosing, Stuffing, and Faking: Tricks of the Trade to Drive Revenue Up and Costs Down.
10. Beyond Their Means: Balance Sheet Clues That May Stop You from Losing Your Shirt.
Snakes and Ladders: Spinning, Flipping, and Walking through Wall Street's Walls.
12. At the Scene of the Crime: Funds Became Part of the Happy Conspiracy.
13. Where Were the Auditors? Counting Fictitious Beans.
14. Media Munchkins and Masters: Separating Puff Piece Writers from Hard Diggers.
15. Abstention to Follow Addiction: When Disenchantment with Low Returns Hits Home.
Appendix A. Tips for Handling Your Broker, Financial Adviser, or Financial Planner.
Appendix B. A Glossary for Investor Survival.
What People are Saying About This
As investors across the globe ponder the lessons of the fanciful financial era that appears to have come to a shuddering halt, you can do no better than begin with this remarkable book by Martin Howell. Predators and profits sets a high standard in analyzing just went wrong during the classic bubble we have just witnessed and presents a thorough, easy-to-navigate compendium that is the definitive study of what went wrong with capitalism.
Martin Howell's Predators and Profits shows us many of the important reasons why we are in the worst bear market since the thirties.Well written and researched, it is must reading for anyone interested in preventing the predators from looting their portfolios, or that of millions of other investors, the next time a market fad runs wild.
Chairman and Chief Investment Officer, Dreman Value Management
Introduction: Raw Greed and Red Flags
“Two gladiators are standing next to the door.… We have a lion or horse with a chariot for the shock value…. Big ice sculpture of David, lots of shellfish and caviar at his feet. A waiter is pouring Stoli vodka into his back so it comes out his penis into a crystal glass…. Everyone is nicely buzzed, LDK gets up and has a toast for K…. A huge cake is brought out with the waiters in togas singing…. HBK (Happy Birthday Karen) is displayed on a mountain, fireworks coming from both ends of the golf course in sync with music….”
—from an outline by event planners for the 40th birthday party of Karen Kozlowski, second wife of Tyco International’s then CEO Dennis Kozlowski (LDK in the above), in June 2001 in Sardinia
When Tyco’s then Chief Executive Officer Dennis Kozlowski held this $2.1 million soiree for his wife and a few dozen friends, it typified an era of corporate greed that had turned many executives into modern-day emperors. The Internet bust had only been the trailer for the main movie featuring business leaders who allegedly used large companies as their personal piggy banks to be looted at will. Many investors were ruined by a combination of hype, deception, and ignorance—their lives destroyed when they lost pension funds and other investments. This book will show you more than 170 ways to avoid the CEOs who cheat and deceive, the Wall Street bankers who promote investments they know are bad, the boards who have been bought off, the see-no-evil accountants, and those members of the media who seem to be in on everything but may know nothing.
If the corporate scandals of 2001?2002 needed a poster boy, then Kozlowski fit the bill. He had everything. His company had grown phenomenally, mainly through acquisitions. Big investors, Wall Street bankers, and award-winning analysts were fawning all over him. He had earned the nickname Deal-a-Day-Dennis, and at the time of the party he had just completed perhaps his most audacious takeover, the $9.5 billion acquisition of finance company CIT Group, a deal that promised to turn Tyco into a true conglomerate along the lines of General Electric Co. (GE). BusinessWeek named Tyco as the best performing company in the spring of 2001, and a Reuters survey of analysts at brokerages conducted by Tempest Consultants put the company first in 7 out of 15 categories, including transparency and quality of financial reporting and disclosure. And, if that wasn’t enough, his philanthropic work was earning him widespread recognition, including awards and honorary degrees. Life was sweet for the son of a second-generation Polish-American from New Jersey. If anyone might have felt entitled to host a lavish party in the summer of 2001, it was Dennis Kozlowski.
But it was the shareholders of his company, which makes everything from coat hangers to fire alarms to undersea cables, who were paying. Kozlowski had been systematically looting the company’s coffers, in addition to pocketing hundreds of millions of dollars of compensation, while he was CEO, according to indictments and lawsuits in September 2002 by the Manhattan district attorney’s office, the Securities and Exchange Commission (SEC), and Tyco itself. He allegedly used the company as his personal cash dispenser and got it to pay for everything from a $6,000 shower curtain to a $2,200 wastebasket as part of a $14 million furnishings and improvements bill for his $16.8 million New York apartment, which was also paid for by the company, regulators said. There were also yachts, fine art, jewelery, and vacation estates. Kozlowski and Tyco’s former chief financial officer, Mark Swartz, pleaded not guilty to charges that they stole $170 million from the company and obtained a further $430 million through fraudulent stock sales. Kozlowski is due to go to trial in the autumn of 2003, with up to 30 years in prison and potentially massive fines awaiting him if convicted.
While the Enron collapse grabbed more headlines, its roots were more complicated. If there was plundering at the Houston-based energy trader, it was done through Byzantine financial vehicles and transactions, and unraveling those has already taken prosecutors, regulators, the company itself, and bankruptcy court investigators many months. At Tyco, if the prosecution’s case is correct, Kozlowski put his snout straight into the trough without the need for complex financial structures. Tyco apparently typified an era when deal-junkie CEOs rode the wave of easy money to drive their profits and share prices to new highs whatever the longer-term costs, receiving a rapturous reception from many major investors and Wall Street securities analysts.
But, with both Enron and Tyco, there were some lonely voices expressing concern about the way the two companies were managed and their financial health. In this book, a number of those voices share their views, suggesting ways in which mainstream investors can spot trouble ahead and avoid losing their shirts.
How to Use This Book
Altogether, I have talked with more than 50 leading investors, short sellers, former regulators, independent analysts, shareholder rights activists, and leading financial figures to create a road map for investors trying to prevent executives more interested in personal compensation than corporate management from destroying the value of their nest eggs. Among those I have spoken with are former Federal Reserve Chairman Paul Volcker, three former SEC chairmen (David Ruder, Richard Breeden, and Arthur Levitt), and New York Attorney General Eliot Spitzer. I have also spoken with renowned money management figures such as Legg Mason’s Bill Miller, Vanguard founder John Bogle, TIAA-CREF’s just retired head John Biggs, and renowned short sellers such as James Chanos and David Tice. (Short sellers borrow stock and then sell it in the expectation that they will be able to buy it back at a much lower price and take the difference as profit.)
This is a book of warnings, alarm bells, and cautionary tales. It is based around a system of red flags—with three flags next to particular behavior by a company signaling highest risk, two indicating strong risk, and one standing for moderate risk. Also, at the end of many of the sections, I have given notes on how to find the information that I’ve discussed.
Certainly, this is more of a how-not-to book than a how-to book. If you see everything through rose-colored spectacles, believe the Dow Jones industrial average is heading to 36,000 early this century, and don’t hear out the arguments of grizzly bears, this may not be the book for you. To be a good investor, you need to temper optimism with common sense, with proportion, with a large dose of skepticism, and even with occasional cynicism.
I am not telling you to avoid investing in stocks altogether, to hide cash under the mattress, or to sell your house and head for the hills. A red flag on one beach shouldn’t stop you from swimming on the next beach where the waves are less threatening, and if you swim in the water when there is a red flag flying, it doesn’t always mean you will be dragged under or eaten by sharks. For example, one red flag I will cover later is the sale by executives of their own company’s stock. My calling it a red flag doesn’t mean that every time you see such a sale you should ditch the investment. If everything else—the company’s financial condition, board and management quality, and growth prospects—appears fine, then it may pay to stay put. But, when the inside selling is accompanied by shocks, such as the sudden resignation of the CEO, then it is the equivalent of seeing a shark’s fin 50 yards away and heading straight for you.
Readers should take particular note when they see a company that displays five or six of the warnings, especially of the two- or three-flag kind. This was certainly the case with Enron, which had impenetrable accounts, heavy sales of stock by executives, some ominous financial question marks arising from what was disclosed, a compromised board, resignations of senior executives, indications of arrogance at the top, and highly questionable business strategies. All this could have been gleaned from public documents or statements. In Tyco’s case, there was also plenty to worry about. Among the warning signs were an SEC inquiry in 2000, a short seller’s public warning, a serial acquisition policy that made it very difficult to discern how healthy the businesses really were, and a sudden, inexplicable change in strategy.
Sometimes, just one aspect of corporate structure or behavior creates a stench that should deter all but the most foolhardy. An example was the absolute dominance of the Rigas family at cable TV company Adelphia Communications Corp., which was among the companies that imploded as massive levels of alleged fraud began to surface.
Far from an Exact Science
There are no absolutes in this game. Experts say in the chapter on boards that it is best to avoid those dominated by families and those with long-serving, elderly directors who have business dealings with the companies on whose boards they serve. And yet, this applies to Warren Buffett’s Berkshire Hathaway Inc., widely regarded as one of the most successful American companies of the past 40 years. The seven-member Berkshire board includes Chairman and CEO Buffett, his wife Susan, his son Howard, and Buffett’s long-time managerial colleague, Vice Chairman Charlie Munger. Some of the other board members have long-term business links to the company. The majority are either more than 70 years old or about to reach that age.
Despite these and other warning signals, Buffett is seen as a key figure driving recent reforms in the American boardroom and trying to get the accounting profession back on track. Buffett is no Rigas. He has pushed hard for companies to expense stock options, which has been one of the major controversies of recent years, and he has condemned excessive compensation of executives. He is also widely regarded as one of the few at the top of the heap who really tells it as it is, admits mistakes, doesn’t seek to spin or hype, and doesn’t drive Berkshire’s short-term profits and share price. Buffett, who says he considers the ice cream produced by Berkshire’s Dairy Queen company to be one of his favorite treats, has taken just a $100,000 annual salary for 21 years. There is no reckless or wasteful extravagance. It is one of those exceptions to the rule.
In this book, I do not just focus on executives who looted companies; I also examine corporate leaders with a record of hyping their business prospects, a poor history of disclosure, or a habit of ignoring shareholders’ interests. These are hardly crimes. They will not be hauled off in handcuffs at dawn for being tardy about filing a document or for downplaying a major debt problem. However, I argue that anyone who deliberately misleads investors by telling them that a product is going to be a hit when he or she knows it could easily flop, who buries a threat to the health of a corporation, who ignores the wishes of the owners of a company, or who manipulates a board to get more than a fair share of a company’s profits deserves his or her own place in a rogues’ gallery.
This book has distinct elements. Most of the chapters have an introductory essay on the particular topic being addressed and a second section that details the relevant red alerts. There is also a glossary at the back of the book that explains some of the colorful vocabulary used in this era of corporate skullduggery.
There are two extreme attitudes in investing: one is to put all your trust in reputable chief executives to deliver on their promises and thereby avoid spending time looking beyond the headline earnings numbers. Many investors did this for years by buying into some large successful companies. If GE said earnings would grow at least 15 percent, that’s what they did, and there was no need to worry about debt levels, cash flow, pension costs, derivatives, or anything complicated like that. Indeed, GE encouraged this attitude by disclosing only what it had to.
Then there is the other extreme, exemplified by 61-year-old money manager Robert Olstein, who trusted management once early in his career, was lied to, and saw the investments of friends, family, and clients crash. He vowed never again to listen to CEO spin. “We don’t talk to management and we don’t care what management does,” Olstein told Reuters. “No management has ever told us that something is wrong with the company and we should bail out,” said the manager of the $1.5 billion Olstein Financial Alert Fund, which has succeeded by focusing on tearing apart financial statements and has therefore avoided investing in many horror stories.
This book tries to take a path between these two views. It starts by looking at some simple investment wisdom that, if followed, might keep even a fool and his or her money united, and it then heads straight into an examination of disclosure policies, the executive suite, and the boardroom—before we shake down the accounts. I have focused as much on how to avoid high-risk CEOs, uncritical boards, dubious fads, and corrupt Wall Street practices as I have on detecting accounting fraud in financial statements. For the Main Street investor lacking the time and expertise to comb through the footnotes of financial documents, the earliest signals of bad news often come from a pattern of behavior by executives rather than a detailed look at a cash-flow statement. Some go so far as to say that looking at the latter for shenanigans can be a waste of time. “You are not going to find financial fraud looking at the numbers—if it got past the auditors it is probably going to get past you,” said Michael Young, the outside legal counsel to the American Institute of Certified Public Accountants and the author of a book on accounting fraud. “Often there will be very logical explanations to numerical anomalies,” Young continued.
Certainly, when a fraud involves the transfer of large amounts of money from one part of the accounts to another, as was the case with much of the alleged $9 billion-plus fraud at telecommunications company WorldCom, it becomes very difficult to spot from outside. A much earlier alert to ditch the stock would have been the disclosure in the company’s annual financial statements filed in March 2001 that the board had agreed to loan then CEO Bernie Ebbers up to $100 million and guarantee loans for even more to help cover a margin call he was facing over purchases of the company’s stock. It should have been clear to shareholders at that stage that this was a company prepared to act recklessly, in this case by bailing out its top executive.
How Many Bad Apples? A Handful, a Barrel, or an Orchard?
When I started work on this book in the spring of 2002, it looked like the various investigations into the Enron collapse by Congress, the Securities and Exchange Commission, and the Department of Justice were going to destroy the energy trader’s auditors Andersen, probably lead to some prosecutions of Enron management, and prompt some modest tightening of various regulations. However, there was little sign of meaningful reform. The big accounting firms, in particular, appeared to have enough support in Congress to prevent tough new rules from being brought in to govern their behavior.
Well, Andersen was convicted and did disintegrate. Then, throughout the summer, there was revelation after revelation about alleged wrongdoing at a series of large companies, including the disclosure of the alleged massive WorldCom fraud. At the same time, there were continued investigations into corruption on Wall Street, including the use of tainted research, the allocation of shares in initial public offers to get investment banking business, and the role the major banks and brokerages may have played in Enron’s manipulation of its balance sheet.
Media and home products entrepreneur Martha Stewart, known to some as the doyenne of domesticity, perhaps illustrated the zeitgeist best. She was under congressional and then Department of Justice investigation amid allegations of insider trading in the stock of biotechnology company ImClone Systems, which had been run by her friend Samuel Waksal. Stewart declined to talk about the issue, and shares in her company, Martha Stewart Living Omnimedia, at one stage lost almost three-quarters of their value.
Every day brought a new scandal, another chief executive sitting stone-faced—but never, it seemed, shamefaced—in front of congressional inquisitors, or another accountant who couldn’t say why he or she hadn’t been able to detect billions of dollars transferred to one account from another—who apparently took so little interest in the task that he or she never compared his client company with rivals in the industry and asked about glaring discrepancies. Then, the events known in the United States as “perp walks” (when arrested, alleged perpetrators are marched in front of the cameras) began, with executives from Enron, Tyco, Adelphia, WorldCom, and ImClone all providing the photo opportunities. Most of the alleged perpetrators were handcuffed to improve the images. In one memorable moment, Stewart was quizzed about her problems while chopping cabbage during a regular spot on CBS’ The Early Show. “I want to focus on my salad,” she said. Stewart, who also said she expected to be “exonerated of any ridiculousness,” stopped the appearances soon after that.
But more important than such examples of the spirit of the times were a sliding stock market and sinking investor confidence. Altogether, $8 trillion of market value was wiped out in the two-and-a-half years following the market’s March 2000 peaks, and both the Dow Jones industrial average and the S&P 500 index reached their lowest levels for five years in October 2002. Attempts to rally in the following few months failed dismally. It was no longer a question of a few bad apples but fears that half the barrel was rotten. President Bush was forced to go to Wall Street to promise a crackdown on corporate crooks in the summer of 2002, but the measures he proposed weren’t enough once news of the WorldCom scandal broke.
Congress rushed through a tougher law, the Sarbanes-Oxley Act. It created a new accounting regulator, banned auditors from providing many consulting services to a company whose books they examined, forbade most loans to company executives and directors, speeded up disclosure of some information, introduced longer prison terms for securities fraud, and forced top management to certify to the fairness and accuracy of their company’s financial statements. The New York Stock Exchange weighed in with new corporate governance guidelines demanding companies appoint more independent directors, requiring directors to meet without executives present, and providing shareholders with voting power over equity-based compensation. Still, there were a number of signs at the end of 2002 and in the first few months of 2003 that reforms could be stymied. This delay in the pace of reform was partly due to a Republican success in mid-term elections, which gave the party control of the Senate (to add to the House and the White House) and suggested that voters were more interested in Bush’s tackling of post-September 11 issues and Iraq than in the economy and corporate crime.
And queries about corporate behavior weren’t just being levied at discredited telecom, Internet, and energy trading companies.
The veracity of earnings figures produced by some of America’s biggest and best-respected corporations, such as GE and IBM, and particularly their ability to meet or beat Wall Street expectations, was increasingly questioned. Critics suggested they massaged the figures from one quarter to the next through the use of accounting sleight of hand, charges that both companies denied. When combined with the uncertainty surrounding war with Iraq and the likelihood of further attacks on the United States and other Western targets, it was enough to undermine an already sputtering economic recovery.
The practices and policies of the business and financial gods of the previous decade were being questioned. Among them was GE’s now former CEO Jack Welch, who faced not only criticism of his record of smooth growth in earnings but also disclosures about munificent post-retirement perks during the start of divorce proceedings by his wife. Following days of negative publicity, Welch announced that he was giving up most of the company benefits.
Even the respected Federal Reserve Chairman Alan Greenspan had his reputation undermined. Stung by suggestions that he should have done more to prevent a stock market bubble by raising interest rates sooner, Greenspan said there was little the Fed could do to identify and fight such problems. Yet, on the day Greenspan was knighted by Britain’s Queen Elizabeth, one commentator suggested that the “Order of the Bubble” might be more appropriate.
Certainly, we should never forget that the greed, fraud, and corruption of the past few years were fed by the easy, cheap money available in the late 1990s. Half-brained ideas for Internet start-ups received funding from venture capitalists, banks, and ordinary investors. Banks and debt markets threw good money after bad in funding dozens of new telecommunications ventures—even as some observers were warning of a glut in capacity. No one cared about when a company might be able to make a profit—it was all a race to gain control of Internet real estate or future telecommunications traffic, whatever the cost. Business plans and cost controls were an inconvenience. Performance was measured in eyeballs and miles of cable, not cash.
Many believe the excesses were greater than anything seen in the insider trading scandals of the 1980s junk bond-financed takeover craze. They were comparable to the 1920s speculative conflagration that led to the 1929 stock market crash, and to some of the bubbles of previous centuries, including the Dutch tulip mania of the late 1630s that saw the prices of tulip bulbs climbing into the stratosphere, or the South Sea stock bubble that burst in Britain in 1720. “I don’t think we have ever seen anything, even the tulip craze, like the end of the last bull market,” said John Gutfreund, former head of Salomon Brothers. As for the Internet revolution, terrific things happened in terms of technology, but mispricing and valuations were just crazy. The wider level of stock ownership in the United States in the past 20 years, particularly through pension plans and mutual funds, means that this bust has hurt a wide cross-section of the population. The greed was also deeper than in some of the other scandals of the past 50 years. It involved more than just CEOs and Wall Street, with accountants, lawyers, venture capitalists, fund managers, and consultants all wanting a bigger piece of the pie.
The extent of the partying during the boom means that the hangover may last beyond a couple of years. “I would be astonished if things were over in a year because of the appreciating excesses,” said James Grant, the publisher of the newsletter Grant’s Interest Rate Observer and one of the lone figures who said the good times could not last through much of the 1990s. “I think the recrimination will be somewhat proportionate to the loss and to the betrayal preceding it. My guess is that the recovery from this particular great bubble is going to be protracted and painful and there will be periods of ferocious bear market rallies followed by more disenchantment, more broken hearts, more loss.”
Many of the veteran investors and former regulators I spoke with for this book voiced a deep disenchantment with the level of greed and the loss of values exposed in corporate America by the boom and bust. “You have a definite feeling in the past few years that ethical standards did deteriorate in many aspects of life, including the financial markets,” said former Fed Chairman Volcker. “There was not that feeling of caution that keeps people in line, whether it is good ethics or good morality or just fright—the fright component diminished and the greed component increased,” Volcker added.
The contrast between the images of greedy executives treating public companies as their own playthings and the rescue workers who died when the World Trade Center collapsed after the September 11 attacks clearly hit home with many people. There were pictures of selfishness, avarice, and cowardice on the one hand, and selflessness, generosity, and heroism on the other. Some commentators even suggested that Osama bin Laden hadn’t done as much as Enron Chairman Kenneth Lay to damage the American economic system.
One of the problems with being able to spread the blame for the scandals across so many industries, professions, regulators, and individuals is that it has given an excuse for many of the culpable to point at others and say it was everybody’s fault. It was, as Vanguard’s former head John Bogle likes to put it, “the happy conspiracy.” Money magazine even apportioned the blame for the disaster in its October 1, 2002, issue, awarding corporate executives 17 percent, stock options grants 16 percent, Wall Street 14 percent, individual investors 14 percent, accountants 12 percent, politicians 10 percent, the mutual fund industry 8 percent, the media 7 percent, and Osama bin Laden 2 percent. Certainly, smaller investors who were suckered in by dreams of overnight riches can’t be excused completely. According to Bill Fleckenstein, a short seller who is head of Seattle-based Fleckenstein Capital, during the mania, the attitude of the public was as follows: “We don’t care if you lie to us, in fact we love it, just don’t get caught.”
No More Heroes Anymore: Twisted and Conflicted Ties
There are few clean-cut heroes in all this. Few on Wall Street or in big business didn’t benefit from some of the crazier aspects of the 1990s stock market boom. There are few who can really say they have no skeletons in the closet or conflicts that could still dog them. Investors should question just about everything and everyone.
Indeed, as investors seek evidence of a clean-up in business attitudes, one less than hopeful sign is that many in positions of influence—whether in Washington or corporate America—show little understanding when they either face a conflict of interest or have created a perception that one may exist. The clearest example was Harvey Pitt, who met privately with former clients and others who were under investigation when he was chairman of the SEC for a tumultuous period beginning in the late summer of 2001. Pitt first put his foot in his mouth in October of that year, days after Enron had started to unravel, by telling an audience of auditors that the SEC would henceforth be a kinder and gentler place for accountants. It was a remark that would dog him for the next year as his critics accused him of being soft on accounting firms and some other former clients because he used to work for them.
Eventually, Pitt’s decisive vote that pushed through the controversial appointment of former CIA and FBI Director William Webster as head of a new regulatory board for accountants proved to be the final straw. He supported Webster after the accountants had objected to another candidate, former head of the TIAA-CREF pension fund system John Biggs, because he was seen as too much of a reformer. But Pitt and key SEC officials failed to tell the other four SEC commissioners that Webster had been chairman of the audit committee at a failed Internet venture that was both the subject of a fraud investigatons and had fired its auditors after they raised questions about the lack of internal controls. Pitt, the SEC’s chief accountant Robert Herdman, and Webster all resigned in the resulting controversy, leaving both the SEC and the fledgling accounting board in turmoil at the end of 2002.
I began this introduction with Dennis Kozlowski, and I’ll end it with him. A victim of his reign as the head of Tyco was one of the world’s foremost advocates of strong corporate governance, Robert Monks, who had once served on the company’s board and had once described Kozlowski as the best CEO in America. Tyco and Kozlowski even donated $4 million to endow a professorship in corporate governance in Monks’ name at Britain’s Cambridge University. Monks said in October 2002 that he was sad about Kozlowski’s indictment. “I was glad that Dennis was willing to put up money for the professorship—I’m just terribly embarrassed and sorry the way things seem to have worked out for him, and for Tyco, and for its shareholders.” When a figure like Monks—who has been naming and shaming bad corporate leaders for many years—can have his reputation besmirched by someone like Kozlowski, it shows how vigilant ordinary investors have to be.