This article originally appeared in Bloomberg View on January 4th, 2012.

On the surface, the year 2011 was one of ramped-up securities regulation and scary times for financial scammers, with enforcement cases soaring at the U.S. Securities and Exchange Commission and coverage galore about the humbling of inside traders and municipal-bond riggers.

Along with the sexy headlines about felled lawbreakers, though, there were also troubling free passes and favors granted to the accused and the privileged.

Laws that were set up to punish bad guys got waived within days of the press releases announcing that the offenders had been brought down. Well-connected lawyers in the employ of investment firms got express-lane access to regulatory brass. Among the C-suite set, there was even one big name who left the securities industry for a few years and returned to face the humiliation of retaking the licensing tests. Of course, as it should be for the privileged, he got a waiver from the requirements that lesser mortals on Wall Street must meet.

In November, the said big-shot wound up resigning from his gig at MF Global Holdings Ltd. after the firm filed for bankruptcy, but we’ll get to that later.

The good news is that the most compromising free pass of all, the ability of alleged financial cheats to dispose of SEC lawsuits by saying they “neither admit nor deny” what they’ve been accused of, is under fire and inspiring calls for congressional hearings. Just how odious these deals have become was exemplified in a spat late last month between U.S. District Court Judge Jed Rakoff and settlement partners Citigroup Inc. and the SEC.

Rakoff said in November that he wouldn’t sign off on the SEC’s $285 million settlement with Citigroup, which had been accused of misleading investors in a $1 billion financial product tied to risky mortgages. Dissatisfied with Rakoff’s decision, Citi and the SEC went to the appeals court on Dec. 27 seeking a stay, even talking on the phone with Rakoff later in the day about procedural matters without mentioning a word about their new motion. “Misleading,” Rakoff said in a Dec. 29 order.

Rakoff, who in 2009 nixed a similar deal between the SEC and Bank of America Corp., seems to have broken the spell of courts that rubber-stamp these ultimate regulatory cop-outs.

Paying fines and walking away from liability, though, isn’t the only break that the accused have been catching. It has become routine that, on the heels of a settlement with the SEC, big banks and other defendants request and receive waivers from punishments designed to kick in as a result of their settlement orders. My personal favorites are the series of agreements between the SEC and the investment firms it accused of rigging prices of municipal bonds. Five firms have agreed to pay $743 million in bid-rigging cases since December 2010 — all reaping the benefits of those “neither admit nor deny” clauses along the way, of course.

Start Believing

If we are to believe the SEC, some of those firms that didn’t have to say they did anything wrong really did break laws and hurt the public. Read this quote from a May 4 SEC press release: “Our complaint against UBS reads like a ‘how-to’ primer for bid-rigging and securities fraud,” said Elaine C. Greenberg, chief of the SEC’s Municipal Securities and Public Pensions Unit. “They used secret arrangements and multiple roles to win business and defraud municipalities through the repeated use of illegal courtesy bids, last looks for favored bidders, and money to bidding agents disguised as swap payments.”

I don’t know about you, but that sounds pretty bad to me. Fraud. Secret arrangements. Disguises.

Bad, perhaps, but not bad enough to stop UBS AG’s lawyers at Debevoise & Plimpton LLP from writing to the SEC five days later on May 9 to ask a favor. Through its lawyers, UBS asked the SEC not to enforce a rule that would have disqualified it from participating in securities offerings that are exempt from registration requirements. To help make the case for UBS, the letter cited nine examples of times the SEC had granted waivers for “similar reasons” since 2002, including another action against UBS. On the very same day, the SEC wrote back to say the waiver was granted.

In case you are having trouble keeping track, what we’re talking about here is an exemption from a ban from an exemption. Regulators do have the ability to bring administrative proceedings if a firm abuses the privileges it gets from a waiver. But if we need to go to this much trouble to undo the rules when somebody gets caught — but doesn’t admit it anyway – – why have rules at all? UBS didn’t respond to a request for comment.

While all the settling and waiving and exempting is going on, the banks paying the most for legal juice benefit from remarkable access. Thanks to research by the Project on Government Oversight, the public got hard data back in May showing just how easy it was for SEC professionals to leave their posts for the private sector and, on behalf of their new financial-industry clients, to get rapid entree to sitting securities regulators.

Nice Work

The group got five years’ worth of information about SEC employees who left their jobs and, within two years of their going-away parties, wound up representing financial firms before the agency. In all, 219 former SEC employees filed 789 of the required statements (“Hey guys, we’re back, and wearing nicer suits”) from 2006 to 2010.

To give you a flavor of how these things really work, I’ll mention one of several gems among the 789.

Margaret E. “Mitzi” Moore, former senior counsel in the SEC’s Office of Compliance Inspections and Examinations, resigned Jan. 13, 2006, and within two months disclosed that she and other colleagues at her new job at the Financial Services Roundtable would be meeting March 17 with then-SEC Chairman Christopher Cox. The Project on Government Oversight got its hands on the meeting agenda that Moore submitted, and the first item on the list was a shout-out for the “good start” and “positive mood change at SEC.” The question “positive for whom?” comes to mind. Equally depressing was her memo notation that the SEC had made “good staff appointments.”

Much as we would all love to know exactly which regulators were warming the hearts of Wall Street lobbyists, the names were deleted from the agenda. In July last year, the Government Accountability Office released a study on similar revolving-door issues, but did give the SEC credit for a new policy of collecting post-employment information from departing workers.

Perhaps I am being too tough on the financial cops who pride themselves on being vigilant enforcers of rules that keep financial markets safe and fair. At the Financial Industry Regulatory Authority, the Wall Street-financed self-regulator that is overseen by the SEC, decision makers have been known to be uncompromising in ensuring that members don’t skirt the rules.

With some exceptions, Finra expects members to re-take licensing exams if they have been out of the business for more than two years. It has fought and won battles against some former brokers, invariably small fries, who look for waivers.

Playing Rough

Some brokers who challenged Finra’s tough decisions have appealed to the SEC, only to have the agency back Finra with arguments that are hard to criticize. In one case, the SEC said the re-exams can be a safeguard to the public interest. In another, the agency argued that a broker who had been out of the business for more than two years should be denied an exam waiver because “in that time, there have been changes to the securities laws and regulations” with which she should be familiar. And who could argue that understanding the rules is important if you’re entrusted with other people’s money?

Which is why the exam waivers granted to Jon Corzine, the former MF Global chief executive officer who resigned from the bankrupt company last year, make you wonder. Corzine took his Series 7 broker exam in 1975, and took the test for brokerage principals in 1982, yet he landed a waiver of both of those exams when he took over at MF Global in 2010. By then, he had been out of the business since 1999, having served as the Democratic governor of New Jersey and senator of that state. Finra has said it showed no favoritism in granting the waivers.

But as history continues to get written in the MF Global story, regulators might take some lessons from their own tough talk about the importance of keeping up with regulations and safeguarding the public. Sometimes digging in your heels to enforce the rules isn’t such a bad idea.

This article originally appeared in Bloomberg View on November 4th, 2011.

I’m starting to get worried that Wall Street and its supporters are losing their touch.

The initial signs that the free marketeers were off their game didn’t have me all that alarmed. There was the collection of senior people in finance who, in a New York Times article, largely dismissed the Occupy Wall Street protesters as slackers with too much time on their hands, though there wasn’t much shock value there. It would take some deep thinking for a captain of finance to make the connection between a dearth of jobs and a surfeit of time for demonstrating.

Then there were the noisy cheerleaders of capitalism who busied themselves with trash-talking the protesters just as poll results started to show that much of the public was sympathetic to the views of the movement.

“Occupiers are arrogant, spoiled white kids who think they should be able to take public space from all of us for THEIR freedom of speech,” went one comment on a Twitter account that calls itself ‘DefendWallSt.”

“I wonder what smells worse, the hippies at OccupyWallStreet in LibertyPark OR the Staten Island Dump!” read another tweet from Provide Security, a New Jersey operation engaged in information-technology security, executive protection and — if they play their cards right — perhaps a whole new business in aromatherapy solutions for urban landfills. The site of the New York protests, Zuccotti Park (formerly Liberty Plaza Park), seemed to smell just fine the day I stopped by last month.

Tone Deaf

The existence of enthusiastic financiers who are sometimes tone-deaf about the little guy is hardly the stuff of Earth-shattering column fodder. What’s surprising to me is that Wall Street seems to have lost its mojo. It was a married couple on Long Island, not some cagey investment bank, who first filed with the U.S. Patent and Trademark Office to lay claim to the slogan “Occupy Wall Street” for use on things like T-shirts and bumper stickers. Nobody at an investment bank thought to lock up that slogan — and throw away the key — with a filing of their own?

And there’s mutiny out there with the public yanking money out of accounts to make a statement about the avarice of too-big-to-fail banks. Perhaps panicky that unhappy customers had figured out they might be better treated by consumer-friendly credit unions, even Bank of America Corp. abandoned plans to charge a monthly nuisance fee on debit-card transactions. This, of course, isn’t the way capitalism is supposed to work in an era of “socialism for the banks,” and “free markets for the little people.”

What’s happened to finance’s killer instinct? When the public takes money out of one product, Wall Street is supposed to be waiting with another. If this isn’t an opportunity to come up with the post-meltdown version of auction-rate securities, I don’t know what is. But I haven’t even spotted a slick new mutual fund that promises to make money by investing in populist rage.

The weakened state of Wall Street is even on display in its dealings with big customers. In cities from coast to coast, municipal leaders are starting to say that if a bank wants to get their business, it had better start hustling to modify mortgages and consider the lending needs of the community.

It’s possible that Wall Street’s leaders assume that the problem will go away as cold weather sets in, and neighbors and businesses complain about the disruption caused by protesters. Then again, it’s possible that financial companies are right on top of all this with sneaky new products and payoffs to politicians and I’m just too clueless to have figured it out.

Wall Street ‘Explode’

Beverly Gage, the author of “The Day Wall Street Exploded,” told me in a telephone interview that Occupy Wall Street shares traits with previous movements that wound up having legs. The Yale University history professor, whose book chronicled the Sept. 16, 1920, bombing near the New York Stock Exchange, says the nasty talk about smelly hippies and plotting socialists is standard fare. “If there is one thing that’s absolutely true about any movement targeting Wall Street it’s that there are accusations that there’s something un-American about it,” she said.

Gage says she doubts that protesters in cities such as New York will be deterred as winter approaches. The important marker in a movement is that demonstrators successfully “insist certain questions be part of the conversation.” Already, the Occupy Wall Street movement has heated up the national conversation about income inequality.

Meanwhile, capitalism’s boosters keep making things worse for themselves. After the Democratic Congressional Campaign Committee e-mailed supporters to ask them to sign a petition supporting Occupy Wall Street, angry financial-services executives made it clear to Democrats that they “can’t have it both ways,” according to an article by Politico.com. Translation: Democrats had better not expect donations if they side with the 1 percent-bashers. Of course, it’s just that sort of checkbook politics that the protesters are railing about, so the bullying only served to make the movement look smart.

You’ve got to wonder why the big banks don’t see the light and do what they do best: co-opt the protesters, just like they did the Democrats.

It is, after all, getting chilly in the Northeast, opening vast opportunities for the financial world to score points. The New York Stock Exchange, just blocks from Zuccotti Park, could welcome the Occupiers for tours of the nice, warm trading floor as bitter weather sets in. Who knows what good might result if the banks got to know the protesters a little better, and vice versa? Banks are flush with cash after getting bailed out by the Troubled Asset Relief Program, or TARP. The protesters have an ever-greater need for donations of warm gear and covers to keep dry. There’s a “My TARP is your tarp” synergy to it. If the ball got rolling, it would only be a matter of time before some of those unemployed protesters were sporting Paul Stuart jackets and interviewing for internships with stock-exchange members.

Move On

Sadly, I don’t think the NYSE is considering my strategy. On Oct. 24, it refused to let activist film maker Michael Moore even stand on the sidewalk outside the exchange for an interview with a reporter from CNBC. In a separate move, Goldman Sachs Group Inc. yanked its sponsorship of a fund-raising dinner scheduled for last night for a New York City credit union after it learned that one of the evening’s honorees would be Occupy Wall Street.

The securities industry gets together for its annual conference in New York on Nov. 7, but the Wall Street protest heard around the world “is not on the agenda,” according to Liz Pierce, a spokeswoman for the Securities Industry and Financial Markets Association.

I suppose you could argue that the ire of the 99 percenters doesn’t matter all that much to Wall Street as long as firms can keep hold of their platinum-level customers. There are still rich people whose lives were untouched by the economic crisis, and how could they not be repulsed by the noisy, stinking hippies who are disturbing the peace? Or not.

When I visited New York’s Zuccotti Park, I noticed a nicely dressed couple in their 80s who had stopped to take a few photos of the demonstrators. Harvey and Roberta Teitelbaum, from Chicago, told me they were visiting for a long weekend of sightseeing and Broadway shows.

“What do you think of these people?” I asked, bracing to hear a rant about, well, noisy, stinking hippies disturbing the peace. “I believe in what they’re doing because banks and big companies have ripped off the country,” Harvey Teitelbaum told me. “Let’s change this country.”

I hate to tell you, Wall Street, but the Teitelbaums looked like they shopped at the same stores your best customers frequent. What will happen if your most-coveted clients start to think the kids huddled under blue tarps are on to something?

This article originally appeared in Bloomberg View on October 6th, 2011.

Anita Hill sits at a tiny conference table in her office at Brandeis University, just outside Boston, as I quiz her on the obvious themes. Her testimony during hearings to confirm Clarence Thomas to the U.S. Supreme Court? Admittedly a “terrible” experience, “but I want people to understand that I survived it.” Attacks on her character? A good thing for women in the workplace because now “they know what to expect” should they ever go public about harassment.

Her sex-harassment claim stirred up the dregs of America. Hill got threats of murder, rape and sodomy on her answering machine. David Brock, a best-selling author, declared her to be “a little bit nutty and a little bit slutty,” only to recant that and other attacks years later. Yet Hill shows no bitterness, and exploits no opportunities to take a swipe at any of the people who turned her harassment complaint into a reason to assail her.

And today, she has a new cause. In a book released this week, “Reimagining Equality: Stories of Gender, Race, and Finding Home,” Hill says women, particularly single heads of households, face a new setback: Just as they were gaining social and economic independence by purchasing homes in increasing numbers, they were upended by the crash in housing prices.

Young women entering the workforce for the first time may not even know her name, says Joan C. Williams, distinguished professor of law at the University of California Hastings College of Law in San Francisco. “But Anita Hill shaped their lives in ways they don’t understand.”

Coke Can Incident

It was just shy of 20 years ago, on Oct. 11, 1991, when Hill riveted American television viewers and set off battles of the sexes at many a company water cooler. Then a law professor at the University of Oklahoma, she had worked for Thomas at the U.S. Department of Education and the Equal Employment Opportunity Commission. She alleged before the Senate Judiciary Committee that Thomas had spoken to her about explicit sex videos he had watched, and once asked in her presence while at work, “Who has put pubic hair on my Coke?” At the hearings, and 16 years later in his autobiography, Thomas denied her accusations.

Let me say upfront that I have concluded over the years that Hill, not Thomas, was the credible one in this sorry tale. I base that opinion, above all, on the work of journalists Jane Mayer and Jill Abramson, whose 1994 book, “Strange Justice,” offered extensive support for Hill’s accusations, including on-the-record comments from Thomas’s former classmates, who found Hill’s description of the sexual banter to be in sync with the man they knew. Mayer writes for the New Yorker. Abramson last month became executive editor of the New York Times.

Kathy Arberg, a spokeswoman for the Supreme Court, said Thomas declined to comment for this article.

Touched a Nerve

You may not agree with my take on what happened between the man who now sits on the Supreme Court — ruling this year against women in a historic sex-discrimination case, no less, involving Wal-Mart Stores Inc. — and the woman who today teaches courses including “Race and the Law” on a bucolic New England campus. But it’s hard to argue against this: Hill’s testimony touched a nerve with working women in America.

Even Hill was taken aback. “What then came for me was a surprise, and that is that my testimony started something else. It started individuals talking about sexual harassment; not only were they talking about it in ways they had never talked about it before, but they were talking about it. Just the fact that we were talking about it and we weren’t carrying around this shame about ‘Well, we were not tough enough if we admitted it bothered us.’ That was a change because we were always told ‘Just keep your mouth shut and just suck it up.’”

Changed Forever

Williams, the law professor, sensed the same historic shift in attitudes. “There was a common understanding that if you couldn’t handle harassment, you were kind of a wimp and probably didn’t deserve the job anyway,” she says. “Then came Anita Hill and all of a sudden there was a whiff of liability, and the cultural environment changed forever.” I read those words to Hill. “You know, I hope it changed forever,” she says.

It did. The Civil Rights Act of 1991, which for the first time gave employees filing a federal lawsuit the right to a jury trial and the chance to win damages for emotional distress, was signed into law five weeks after Thomas’s confirmation. Hill initially worried that the raking-over she got from critics would dissuade women from speaking up, but the opposite happened. Her testimony, combined with the new law, led to a surge of complaints, says Elizabeth Grossman, the regional attorney in the New York district office of the EEOC. (In August, a claim alleging a pattern of gender discrimination, part of a lawsuit brought by Grossman’s office against Bloomberg LP, was dismissed in a New York federal court.) “She brought a consciousness to many people and different employers in our society and got people talking about the issues,” Grossman says.

Constructive as that outcome was, it wasn’t what motivated Hill to recount so publicly the incidents of a boss who she says asked her out on dates and talked about “very vivid” pornography. It was about “whether Thomas, who was being considered for a lifetime appointment, was fit for the position,” she told me.

The Coke-can incident allegedly occurred in the offices of the EEOC, of all places. So the obvious question to Hill was whether a man who hits on a female employee and dishes talk about videos of oversize male sex organs had the appropriate “respect for the law” that a Supreme Court appointment calls for. Would she go through it all again knowing how hard it would be? “Oh yeah, yes,” she says. “The issues to me are so clear. This was about the integrity of the court.”

Magnet for Controversy

Despite Hill’s claims, Thomas squeaked by and was confirmed by a 52-48 Senate vote. He remains a magnet for controversy. Twenty Democratic House members on Sept. 29 asked the U.S. Judicial Conference, which oversees federal courts, to investigate the fact that he did not disclose almost $700,000 of his wife Virginia Thomas’s income from 2003 to 2007.

In a separate public-relations flare-up a year ago, Virginia Thomas delivered this contender for world’s weirdest voice message: On Hill’s phone at Brandeis, she suggested Hill apologize for “what you did with my husband.”

Much has gone right for women in the workplace since Hill spoke up. It would be tough to find a large U.S. company today that didn’t train employees on workplace-harassment issues, Grossman says. “It can be window dressing,” she says, but done right, harassment training can help companies decrease turnover rates, build morale and lower absenteeism. There’s also no question that women entering the workplace today have less to fear.

‘Ugly Out There’

Ironically, or some might say predictably, much has also gone dreadfully wrong, thanks to court rulings in which Thomas played a part. “Civil-rights laws are being undermined by the U.S. Supreme Court,” says Cliff Palefsky, a San Francisco-based employment lawyer. “It’s really, really ugly out there.”

Two decisions supported by Thomas this year could undo some of the post-Anita Hill progress by stifling the single-most-powerful weapon against workplace discrimination: the class-action lawsuit. The June 20 decision in Wal-Mart v. Dukes torpedoed a class-action discrimination case that would have included 1.5 million women. Employees looking to bring large cases in the future will have a tougher time of it.

And an April 27 ruling in a case called AT&T Mobility v. Concepcion said consumers who signed the company’s customer agreement could neither sue individually nor pursue a class-action suit. The fear is that the Concepcion case opens a door for employers to require employees to sign agreements that similarly take away an individual’s right to sue while also shutting down employees’ ability to join co-workers in a class.

Vulnerable Time

The decisions come at a vulnerable time for women. “I look at the growing number of women who were in the housing market” in the previous decade, Hill says. Buying a home was “not only a statement about their economic independence, but also a statement about their social independence. Because remember, single women weren’t supposed to be homeowners; they were supposed to wait until they were maaaa-rried,” — she says the word in a sing-songy voice — “and then they were supposed to have the big house and the children, and women, we were rejecting that, only to get slapped by these, in many cases, toxic loan instruments.”

The Consumer Federation of America expressed concern in a 2006 study that a lopsided share of subprime mortgages was going to single women. One in five homebuyers in 2003 was a single female, the study noted, up from one in 10 in 1991. But as women were stepping up their home purchases, they were being steered to mortgages with onerous conditions. Black and Latino women were much more likely to wind up with a subprime mortgage than were white men with similar incomes.

Old Problems

While women confront these new obstacles, some of them still make the morning commute to jobs where old problems continue. Things are better, but “we’re still bringing the same old sex-harassment cases where the boss is grabbing people’s breasts and rear ends, and threatening to fire them if they don’t submit to advances,” Grossman says.

Discouraging? Hill offers some perspective. “I don’t think we’ve gotten it right. As much progress as we’ve made socially, I’m not satisfied that it’s over, that the battle is won and that we can just brush our hands and say ‘lets move on to other issues,’” Hill says. “It’s been 20 years, but what we are talking about is changing centuries of behavior.”

This article originally appeared in Bloomberg View on September 19th, 2011.

In a dusty, Wichita, Kansas, re-creation of a frontier town last week, while state securities regulators slapped at mosquitoes and swapped stories about cagey financial crooks over cocktails, a spurs-and-boots-clad sheriff drew his weapon and staged a faux gunfight in the town square.

It was a perfect metaphor for the way things have been going in the real-life work of securities cops.

State regulators, the steadfast advocates of mom-and-pop investors, helped sentence crooks to 1,100 years of jail time and returned more than $12 billion to victims last year. Especially in these times when commerce at any price seems to trump protecting your Aunt Matilda, state investment watchdogs are often a lonely and unwelcome force pushing for tough rules. The nerdy investor advocates even have a geeky name: the North American Securities Administrators Association, or Nasaa.

Kansas was the choice for the group’s annual meeting this year because 100 years ago a Wichita politician pushed through legislation that made the state the first to enact laws to regulate securities — a shield against “fakers with worthless stock to sell,” in the words of Joseph Dolley, Kansas’s banking commissioner at the time.

Were he alive, Dolley probably would be taking to his Twitter account to malign the marquee-name U.S. politicians who work for Wall Street, not Main Street, and to blast federal securities regulators who have let the public down. His successors have their hands full with today’s regulatory battles.

Confused Customers

Few issues have been more important to the Nasaa folks in recent months than the push to ensure that stockbrokers work in the best interest of customers — a so-called fiduciary standard — and improving the regulation of investment advisers. Last week, they faced off against representatives from Wall Street and the insurance industry at a hearing of a subcommittee of the U.S. House Financial Services Committee. Stockbrokers since the 1990s have been working the word “adviser” into their job descriptions, leaving confused customers to believe that stockbrokers and registered advisers were pretty much the same even though only advisers have a fiduciary duty. Nasaa’s point is that all people who give advice to investors should be expected to act in their clients’ interest. Brokers — no matter what they call themselves — aren’t usually obliged to.

Reasonable People

Although a reasonable person — in short supply, needless to say, at a government hearing — might conclude that a broker should do what’s best for the client who’s paying him, the hearing was replete with reasons that could be a really bad idea. Particularly if you’re the broker.

A second question at the hearing was whether federal securities regulators or so-called self-regulatory organizations paid by financial firms should inspect the investment advisers. Sadly, the best option — to use a federal regulator accountable to the public — comes up short when that agency is the Securities and Exchange Commission. This month, the agency’s inspector general plans to release four investigations that stand a good chance of making the SEC look even worse than it already does.

Years of embarrassing failures at the SEC are leading some policy makers to conclude that the best way to police advisers is by outsourcing to the Financial Industry Regulatory Authority, which is technically overseen by the SEC but funded by financial firms. If this isn’t a formula for the lame leading the conflicted I don’t know what is. Making it even better for Wall Street is that, as a private corporation, Finra over the years has said that it can’t supply investigative information about its members. How cool is that if you’re a Finra member getting into some mischief?

Good Fight

It’s reassuring, I guess, that those state regulators at least continue to fight the good fight. But I can’t help but get the feeling they aren’t so welcome in the debate about what’s best for investors. Those Washington hearings last week coincided with the third and last day of the states’ meeting in Wichita, and if I didn’t know better, I’d wonder if the politicians didn’t want them there. The finance committee members “were aware of the timing of the Nasaa conference and they chose not to accommodate them,” said Barbara Roper, director of investor protection at the Consumer Federation of America, a frequent ally in Nasaa’s causes.

Here’s My Card

After a somber opening ceremony on Sept. 11 and a lot of angst over battles with financial firms looking to defang the Dodd-Frank Act and its efforts to police the financial industry, Nasaa’s 100th year didn’t exactly ring in with champagne corks popping. But the scrappy investor advocates haven’t lost their spirit.

Keith Woodwell, a division director with the Utah securities regulators, told colleagues the story of finishing up a meeting in his office with a rogue broker one day only to have the fellow hand over his business card “with the longest string of credentials I ever saw.” Woodwell looked at the alphabet soup of dubious pedigrees and spotted an accreditation he hadn’t come across before. “I asked him what ‘C.H.S.G’ stood for,” he recalled. The broker blushed, then came clean: It was an abbreviation for “Certified High School Graduate.”

The group roared in the standing-room-only session. It was no doubt a packed house because it covered matters dearest to the state cops’ hearts: fraud, sales practice abuses and the vast inventory of deceptions that take money out of the pockets of citizens.

This article originally appeared in Bloomberg View on September 1st, 2011.

If you’re like most consumers of business and financial news, you gobble up those useless lists of “Best Leaders” and “Most Admired Companies,” trusting that people in my line of work have the right formula to measure what’s “best.”

Over the years, I’ve been in the room when some business “best” lists were put together, and the creators of David Letterman’s Top Ten look like a Nobel Prize jury by comparison.

I got to wondering why so many of us do such a bad job of evaluating the quality of our leaders after Warren Buffett and Howard Schultz made news last month for doing what chief executive officers rarely do. They used their bully pulpits to take stands that weren’t, on their face, self-serving, and that had the potential to benefit people outside the privileged class. Who knew that business leaders could step up to lead?

Buffett, head of Berkshire Hathaway Inc., wrote an op-ed in the New York Times on Aug. 14 saying that mega-rich Americans like him ought to pay more taxes. The story went viral.

Schultz, CEO of Starbucks Corp., went public Aug. 12 with a proposal that business cease making political contributions until Congress and the president come up with a “fiscally disciplined long-term debt and deficit plan.” Ditto the viral story thing.

You can love or hate their proposals, but you’ve got to admit that Schultz and Buffett are a breed apart from their CEO brethren. Somehow, though, we keep putting the wrong executives on a pedestal. Why do we fawn over glitz and future felons instead of seeking out real leaders?

For one thing, we love those dopey lists, which sometimes aggrandize people or companies that may have satisfied a publication’s set of metrics, but may not be worthy of our adulation. To help discriminating readers get smarter about who deserves, and doesn’t deserve, our admiration, I’ve compiled — what else? — a list, including tips on how to see through flawed news coverage of CEOs and companies. Would somebody out there please consider tracking some of these?

No. 1. The Five Most Self-Serving Op-Eds List

If you really want to learn something about business executives, watch how they use the platform that comes with the job. Are you seeing their bylines on op-eds that whine about over-regulation, or are they, like Buffett, putting themselves on the line writing controversial articles that recommend policies that might benefit the public at large, even at their own personal expense? A theme that wily CEOs love: ranting about how they will have to cut back on all the wonderful products they offer to consumers if regulators crack down.

No. 2. The Most Flawed CEO Metaphors List

CEOs make lots of proclamations, but not all of them ring true. A favorite of mine was in a New York Times magazine story in December 2010 titled “America’s Least-Hated Banker,” an uncomplimentary compliment of a headline if ever there was one. JPMorgan Chase & Co. CEO Jamie Dimon — a winner in “best” executives lists over the years and the subject of the article – – compared his bank’s offering of loans, credit cards and investment products to what customers get at Wal-Mart. If they’re really comparable, is Dimon willing to let customers belly up, Wal-Mart style, to the bank’s customer-service desk for full refunds whenever those loan agreements or credit cards prove to be defective? My guess is customers are more likely to be greeted with a copy of the bank’s mandatory arbitration policy.

No. 3. Business’s Greatest-Ever No-Comments List

As Sherlock Holmes discovered, there’s a lot to be learned from the dog that doesn’t bark. I called media relations at the U.S. Chamber of Commerce, a business lobbying group that isn’t exactly shy about voicing its opinion, and asked what it had to say about the recent proposals by Buffett and Schultz. “At this point, we are not weighing in on either one of those,” said spokesman Bryan Goettel. Is that what you should expect from a group whose membership is chock-full of well-known business leaders and has lots to say about things like taxes? Warren Bennis, a professor at the University of Southern California’s Marshall School of Business, isn’t surprised the group ducked the question. “The Chamber of Commerce is doing its job,” which is apparently to avoid calling attention to its own policies on taxes and the deficit amid the constructive talk by Buffett and Schultz. The Business Roundtable, the CEO group that says on its Web page that “businesses should play an active and effective role in the formation of public policy,” went for radio silence when I called and e-mailed with questions.

No. 4. The Lamest Contrary for the Sake of Being Contrary Writers of the Year List

If you want to be a very cool journalist, you come out fastest with an argument about corporate and political big shots that runs counter to the prevailing news. This does nothing to advance public policy, but it can activate an ego gratifying Twitter-fest celebrating the clever writer. Dominique Strauss-Kahn is a loser-rat-womanizer in the headlines? Then be first to write that he’s a victimized hero. Buffett is getting praise for calling the fat cats to task? Then get out a story telling him to go write a check if he wants to pay more taxes. This instant contrarianism is usually filler on slow days when the writer had nothing else to go with.

No. 5. The Lists You Shouldn’t Pay Attention to List

This is a very long list, and to get on it, you have to produce a feature story replete with breathless and hyperbolic language describing the people or companies who have made the cut as “best.” Steve Jobs didn’t just make Apple Inc. the most valuable technology company in the world, according to Fortune magazine’s “Businessperson of the Year” feature published in November 2010. He made it “the most valuable tech company in the galaxy.”

No. 6. The Real Leaders List

This is as short as the previous list is long. Paul Janensch, professor emeritus of journalism at Quinnipiac University, says that Buffett’s call for higher taxes on the wealthy was a big splash because it was a man-bites-dog story. But “don’t hold your breath waiting for CEOs of utilities and manufacturing companies to lobby for tighter environmental restrictions or hedge fund titans to demand tougher regulation of the markets,” he says.

No. 7. The Top 100 Financial Advisers Who Made Money for Their Clients List

Wall Street is a place where a lot of people make a lot of money because they know how to measure things. So how come we get lists that measure financial advisers based on the revenue they make (see the Aug. 27 Barron’s) but not based on the money their customers make? On second thought, I take it back. You will never see a list like this.

No. 8. The Top Mutually Beneficial Relationships List

Lists are catnip for readers with short attention spans, an advertising bonanza for publishers (last year’s winners are natural targets for sales calls to run ads in next year’s feature) and a boon to any public-relations staff navigating a crisis. When reporters call with a tough question about the boss, flacks can cut them right down to size with a sneering, “You know that Mr. Indicted CEO is on the Top Leaders in the Universe List for 2011, didn’t you?” List articles have legs, says Alec Klein, a professor at Northwestern University’s Medill School of Journalism. “Those stories are disseminated widely by PR folks afterward,” he says. “It’s kind of a symbiotic relationship.”

No. 9. The Most Boring CEO List

Now we’re getting serious. Nancy F. Koehn, a business historian at Harvard Business School, says list-mania doesn’t always produce losers; it’s just that you have to look past the executives riding a momentary wave to find the gems. “On all those lists there are always serious hitters,” she says, citing A. G. Lafley, who retired as CEO of Procter & Gamble in 2010, as a “very, very serious leader” who is “completely unsexy,” but still makes all the lists. Happily, Koehn is predicting that Buffett and Schultz will inspire other executives to speak up about what’s wrong with government, calling the two CEOs “canaries down what will become a much more crowded mine shaft.”

No. 10. I don’t have a No. 10. Be wary of the list that has to add up to a nice round number, because it will be padded with filler. How do I know this? Because I’ve whipped up Top Ten stories before.

As Koehn notes, the ubiquitous lists don’t get it all wrong. Buffett and Schultz have for years found their way to the top of the inventories of excellence.

But so did Mark Hurd, the former CEO of Hewlett-Packard Co., who resigned after an investigation found he’d had a personal relationship with a contractor who had received inappropriate payments from HP. Businessweek, purchased in 2009 by Bloomberg LP, parent of Bloomberg News, named Hurd 2007 Businessperson of the Year in an online story in January 2008. (A spokeswoman said the magazine doesn’t publish that feature today, though it publishes other “best” lists.) Others the article honored as great leaders were Rupert Murdoch, whose News Corp. has been under fire for phone-hacking, and John Thain, who famously spent $1.2 million to decorate his Merrill Lynch & Co. office even as the firm was verging on collapse before Bank of America Corp. bailed it out. Similarly, the 1999 book “Lessons from the Top” listed Bernie Ebbers, Dennis Kozlowski and Kenneth Lay among 50 of America’s “Best Business Leaders.”

Ebbers and Kozlowski are in prison. Lay was awaiting sentencing for securities fraud when he died in 2006. If you insist on paying attention to roundups of the best and greatest, read them for their entertainment value. To really understand who the great leaders and companies are takes more than fancy metrics and a show of hands at an editorial meeting.

This article originally appeared in Bloomberg View on August 5th, 2011.

A thriving, sex-and-gossip newspaper has been shuttered, big shots in media, politics and law enforcement have resigned, and arrests have been made. It has resulted in a lot of headlines, but considering how old the real news is, I wonder what all the fuss is about.

The worst-kept secret in recent business history is that News Corp. is an underachiever when it comes to matters of corporate governance. Long before hacked phone messages and bribed London cops replaced Dominique Strauss-Kahn as the hot global story, the people who analyze how well public companies manage themselves were holding their noses whenever they perused regulatory filings from Rupert Murdoch’s media empire. Now, shares of the company are themselves a scandal, losing 19 percent since the scandal heated up July 4.

Garbage in — that is, a board encumbered with conflicts of interest — turns out to be a reliable predictor of garbage out.

To recap: It has been five years since newspapers reported that a journalist at Murdoch’s now-defunct News of the World had hired an investigator to hack the phones of Prince William and others. Armed with the royals’ messages, the paper imparted to readers an international scoop of history-making proportion: The prince had hurt his knee.

The reporter, Clive Goodman, and the investigator, Glenn Mulcaire, both did time in prison for that and other hacking crimes in 2007. News Corp. portrayed the matter as an example of isolated rogue reporting. Then on July 4 of this year the Guardian published a story detailing how News of the World staffers had also hacked into the mobile phone of missing teenager Milly Dowler in 2002, deleting some of the girl’s messages to make room for new voicemails in hopes of getting an exclusive. The girl’s distraught parents thought Milly herself must be deleting the messages, and thus was still alive. She wasn’t.

What a Prince

It’s one thing to mess with public figures like a prince, but it’s another to hack the mobile phone of a murdered teenager, providing hope to her traumatized parents and sidetracking police on the case — all in the name of breaking a story that has no public-policy value. The Guardian article marked the start of a deluge of news coverage that put to rest the implausible rogue-reporter theory. On July 31, News Corp.’s Wall Street Journal reported that U.K. police had expanded their criminal investigations of the company to add possible computer hacking to what was initially a probe of phone hacking and police payoffs. Jack Horner, a spokesman for the company, declined to comment.

There is much more to this sordid tale, but if you are a shareholder the only fact you really need to get your head around is why you hadn’t braced yourself for trouble in the first place. News Corp., as it turns out, is a case study in why corporate governance should matter to investors.

Case for Crisis

The details of all this couldn’t have been foreseen by even the most prescient of analysts, of course, but the prediction that News Corp. would at some point land in a crisis was clear to experts in corporate governance. “If you wanted to make up the sort of company that will fail in the future, this is the sort of board you’d put together,” said Paul Hodgson, managing director at GovernanceMetrics International, a New York-based governance consulting firm and rating service. GMI tracks 3,000 publicly held companies in its database. Only 36 of them now carry an “F,” the rating News Corp. has had since GMI began grading corporate governance in 2003.

It’s easy to understand why when you scroll through the list of the company’s 15 directors. Among nine directors deemed independent are Jose Maria Aznar, the former prime minister of Spain, who was 50 percent owner of a consulting firm that was paid 120,000 pounds ($195,000) for advisory services to News Corp. in the fiscal year that ended June 30, 2006; he and the company terminated the agreement on June 20, 2006, just before he joined the board, according to a News Corp. proxy. Aznar couldn’t be reached for comment.

Kenneth E. Cowley, another independent director, was a senior executive at News Corp.’s News Ltd. subsidiary in Australia from 1964 to 1997, according to a regulatory filing. He has been a director since 1979 and is on the corporate-governance committee. Rod Eddington, a member of News Corp.’s compensation committee and chairman of its audit committee, used to be chairman of Ansett Holdings Ltd., an Australian airline in which News Corp. had a financial interest until 2000. At least shareholders can take solace that independent director Natalie Bancroft comes with no strings attached. Put on the board as a condition of the deal when Murdoch purchased Dow Jones & Co. from the Bancroft family in 2007, she is a professionally trained opera singer. That might come in handy should Murdoch ever stage a hostile takeover of the Metropolitan Opera.

(Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.)

Getting F’s

News Corp. might get F’s when it comes to corporate governance, but you can’t say the operation is lacking for family values. Rupert and sons James and Lachlan sit on the board. James is deputy chief operating officer. Rupert Murdoch’s wife, Wendi Murdoch, was on the payroll from 2006 to 2010 for providing what company regulatory filings describe as “strategic advice” to develop MySpace in China. (After buying MySpace for $580 million in 2005, News Corp. sold it for $35 million this year). A Murdoch son-in-law, Alasdair MacLeod, worked for the News Ltd. news division until last year. Another son-in-law, Matthew Freud, runs a publicity company that in each of the past five years has been paid between $350,000 and $669,202 by News Corp., according to proxy filings.

Rupert Murdoch intends to add his daughter Elisabeth, the wife of Freud, to the board. News Corp. purchased her production company, Shine Group Ltd., for $673 million earlier this year, prompting a shareholder lawsuit in March that accused Murdoch of using the company as if it were “a wholly owned family candy store.” News Corp. called the suit “meritless.” Oh, and I almost forgot: JPMorgan Chase & Co. advised Elisabeth Murdoch on the transaction to sell Shine to her father’s company. Eddington is nonexecutive chairman of JPMorgan Australia Group.

Family Thing

Even non-Murdochs have that family thing going. David F. DeVoe is the chief financial officer; his son, David F. DeVoe Jr., is executive vice president of News Corp.’s Fox Entertainment Group Inc.

None of this would matter if News Corp. were a private company. But there’s this old-fashioned idea out there that managements of public companies report to boards of directors, and that shareholders are owners who have a say in things. Good luck with that if you hold News Corp. stock. Murdoch and his trust own 39.7 percent of the Class B shares, the only ones with a vote. “With a 40 percent holding, it’s very difficult for public shareholders unless they are in absolute concert to vote against him,” said Hodgson, the governance expert.

Fighting Back

That’s not to say shareholders haven’t tried to fight back. In a letter to shareholders on Oct. 7, 2004, News Corp. responded to a flap raised by shareholder advisory groups by making several changes, among which was a policy covering so-called poison pills, which are often used to deter hostile takeovers. If the board were to establish a poison pill without shareholder approval, it would expire after one year “unless it is ratified by stockholders,” the company said at the time. On Aug. 9, 2005, though, News Corp. broke that promise, extending its poison pill for two years without putting it to a stockholder vote. John Malone’s Liberty Media had accumulated an unwelcome 18 percent stake in News Corp., and Murdoch used the pill to keep him at bay long enough to cut a deal in 2008 to get Malone’s $11.3 billion stake in exchange for cash and certain News Corp. assets. With Malone out of News Corp.’s hair, the board dropped the pill later that year.

No Kidding

Bloomberg News reported on July 27 that News Corp. had asked New York-based public relations firm Sard Verbinnen & Co. to survey the biggest shareholders about the independence of New Corp.’s board, its dual-class share structure and its corporate governance. Why bother? News Corp. has known for years what shareholders think about those issues. And shareholders have known — or should have — what they were getting when they purchased News Corp. shares. Hodgson says companies with all the governance problems News Corp. has “will get away with it for a certain period, and then it comes home to roost.”

So who’s kidding whom here? When you buy shares of a company where more than one person on the board has the same last name, and spouses, in-laws, and directors cash in on job appointments, contracts and asset sales to the company, you should expect to get what you pay for. The best favor News Corp. could do for shareholders is to make sure nobody named Murdoch sits in the C-suite. Barring that, shareholders with a complaint about the downside of investing in a family dynasty have only themselves to blame.