This Planet Money Podcast raised some interesting questions about ethical lawyering. It tells the story of a businessman, Toby, who vowed to always be ethical who found himself in jail after committing financial fraud to sustain his business. He asked his staff to help him, without pressuring them (he says), and they happily agreed. During his interview, he comes across as a good person who is shocked at his own ability to do bad things and shocked at the acquiescence of other people in the fraud he proposed. The hosts of the podcast explain his story using some current psychological research. Psychologists explain Toby's situation by saying that almost everyone assumes that they would never be capable of committing fraud, but this assumption is incorrect for the vast majority of people. The assumption is based on their incorrect belief that bad or good character explains someone's propensity to commit fraud, but this idea is based on another incorrect assumption--that people who commit fraud understand the choices they are making. Psychologists argue that many people do not understand this choice, because certain cognitive frameworks--specifically one that is oriented towards business success--prevent people from perceiving that they are faced with any kind of ethical decision at all. Psychologists explain the behavior of all of the people who helped Toby as being motivated by a desire to do good rather than a desire to do bad. People like each other and want to help each other. In addition, people are bad at weighing the abstract harm that can result from fraud against the very concrete benefits from helping someone that they like. The combination of these traits results in people being surprisingly willing to help other people behave unethically. (On the podcast they go into more detail about the research that supports these hypotheses, so I would recommend listening to it if you're interested).

This research raises interesting questions for me about what it means to be an ethical lawyer. On the more philosophical side, I think that lawyers who prosecute financial crimes (and regulatory regimes that are designed to control them) operate on the assumption that financial crimes are the result of bad character. This narrative surrounds the most recent financial crisis with people attributing the behavior of many bankers to greed. I imagine that this is partly true, but this research suggests that at least some of the financial crimes were either completely inadvertent, or motivated by a desire to help people. An effective regulatory regime would take this research into account, as would a lawyer who wanted to work in finance. More generally, I think this research should force all lawyers to carefully monitor their own moral reasoning about the situations they confront in practice. The kind of complicity that results from wanting to help and please other people is something I know that I will have to be aware of, since I have an unfortunate tendency to seek approval from other people.

-- KatherineMackey - 21 Apr 2012

Your post helped me sort out a rationalization for why we might forgive mistake of fact of but not mistake of law in a criminal context. Because people may so often act with "good" motives, like stealing to help family or preserve a business, allowing individualized articulations of morality to excuse would lead to a strange system of punishment. You say that people block from themselves the knowledge that there is ethical ambiguity in a choice. Another way of saying that might be that they wouldn't imagine the law preventing their action; their actions are "right." If they act believing that their actions are good or right (legally sanctioned), they are not the result of "bad character." These are simply mistakes of law.

But the collective decides what actions are bad or punishable, not the individual. There is a uniform definition of "bad actions" (ok, in theory), and anyone who intentionally does one is either deserving of punishment or deterrence. You mustn't intend to commit a crime to be punished. You need to violate norms that society has codified and intention to commit those violative acts.

A regulatory scheme might respond to man's nature to assume that the law is on his side by punishing severely mistakes of law to encourage the study of law (or funding large compliance departments). It might also use evidence of mistake of law to mitigate sentencing. I think this would make more sense in areas where there is less law operating already. Few expect a citizen to know the material elements of a solo, unplanned act. As financiers consult large legal departments, it makes more sense to expect them to scrutinize technicalities when actions flirt with the line of ethical propriety.

-- AlexKonik - 22 Apr 2012

Katherine, I listened to the podcast, and I’ll suggest another way of looking at this. I think you accurately described what the program was driving at, but as I was listening, I kept thinking about the effects of deterrence. Would a ubiquitous written reminder about the unethical and illegal nature of falsifying loan documents really deter people from committing fraud? I am skeptical.

While the business decision/ethical decision dichotomy might explain why someone first thinks of committing fraud, I do not think it is an adequate explanation of why they go on and commit the fraud. The loan company executive might have been so focused on saving his business that he overlooked the damage that his fraud could cause. His colleagues may have been willing to help him because they viewed this as necessary to help a friend and meet business objectives, and they didn’t give much thought about the illegality of fabricating mortgage transactions. Hovering over all these decisions was the acceptance of the idea that the likelihood and consequences of being discovered was less than the likelihood that they and Mr. Groves would be in a bad situation if they did not commit the fraud.

There are at least two responses to this scenario. One is to increase the probability of the authorities imposing legal sanctions. This entails more monitoring and enforcement resources. In a free society, there has to be a limit on how far that solution can go. Another option is to increase the likelihood that extralegal sources will detect and punish you. Hence, the suggestion that was made on the program of requiring businesses to change auditors often is likely to be more effective than the disclaimer proposal. The researchers thought that switching auditors might work because then relationships couldn’t form and the incentive to “help out a buddy” is gone. That’s probably right in many ways, but it could also work simply because eventually a fraud starts to unravel when to many people are in on it. It’s just a lot more likely that someone detects it.

For lawyers, extralegal checks on behavior are often colleagues. Your colleagues may ostracize you if you do something unethical. They may assign you unpleasant tasks. They’ll keep you honest, like Mr. Collins requesting the shorthand notes from Baron Huddleston. We’ll have to check our own behaviors and those of our colleagues.