Notes on a scandal

The world has been hit with scandal after scandal of late, each worse than the last. Will this era be looked upon by historians as a time when society lost all confidence in its leaders?

Is it just me or has anyone else noticed the ridiculous number of scandals uncovered recently? And I’m not talking about dodgy horse jockeys or US generals caught emailing inappropriately. The latter is more farce than scandal.

No what I’m talking about are the large number of truly awful scandals that are on such a scale as to bring our whole western way of life into disrepute. These scandals either involve a large number of victims – sometimes children, or the clear misuse of power.

This week our collective breaths have been taken away by the scale of corruption unearthed within the former New South Wales Labor government. It seems Eddie Obeid and mates were able to change New South Wales premiers at will. Then the "mates” proceeded to loot and pillage New South Wales. No doubt more revelations on this unfolding drama will emerge in coming months.

Another former member of the Australian Labor Party, Craig Thompson continues to deny any knowledge about prostitutes being procured on his Health Services Union credit card.

Apparently he had nothing to do with the decimation of the finances of his former union, the Health Services Union, of which he was secretary. These allegations have been around for years and relate to events that occurred five or more years ago. Meantime he is still to be charged and remains a member of our esteemed parliament.

And of course a royal commission has just been established to investigate serial child abuse amongst our nation’s youth care organisations! Again the victims are thought to be many, perhaps hundreds.

In Italy, the courts are now hearing revelations around former prime minister Silvio Berlusconi infamous Bunga Bunga parties. Reportedly inspired by now deceased Libyan dictator Muammar Gaddafi, Berlusconi has denied anything was amiss, other than "he loves women”. The younger the better apparently.

Then there was Dominique Strauss Kahn – DSK to his mates. The former IMF head and front runner for the recent French presidential election was arrested in New York after allegedly molesting a hotel housemaid. Soon other women came forward with similar allegations. Later it emerged DSK frequented French parties where young naked nymphs frolicked around a bunch of rich old guys. DSK denied he knew they were prostitutes (which would be illegal). He just thought they enjoyed getting naked. And yes, he enjoyed watching.

Nor are just politicians being exposed. Celebrities are in the frame as well. In the UK we have the very ugly spectacle of Jimmy Savile being unmasked as a serial paedophile. It’s been suggested his activities were known, indeed aided and abetted by many including hospital doctors and nurses and his employer the BBC. Perhaps the most shocking revelation is that the now disgraced and very dead Savile had been trawling for victims since the fifties. Savile is a truly grotesque character. There are literally hundreds of victims.

Reports are circulating he operated within a ring of paedophiles suggesting others are yet to be exposed.

Not all the scandals involve sex. In the UK there has been the ongoing News of the World hacking scandal. Hundreds of victims stretching over many years have had their privacy invaded and some of their most intimate secrets splashed across the front page of the British press. The victims are not just celebrities and pollies but include crime and terror victims.

In the US one of the world’s most recognised sports stars, Lance Armstrong, has just been conclusively exposed as perhaps the worst sporting cheat in history. His doping goes back to the nineties. Between then and now Lance won seven Tour de France’s and earned tens of millions. But Lance wasn’t just doping. Accusations of stand over tactics and bribery have gone hand in hand with his doping.

The US can also claim ownership of the all time largest fraudster, Bernie Madoff. Having ripped off $US62 billion, he is now serving 150 years. But Madoff is treated like a "king” by fellow convicted felons. Disturbingly, his new friends most common question is "Bernie, how did you pull it off?”. In his wake Bernie left a trail of not just broken clients but also family members.

Many have suffered early death or suicide, including his own son who hung himself on the anniversary of his original arrest.

Former US hedge fund manager Raj Rajaratnam led a group of otherwise respectable hedge fund managers whose main skill was eliciting inside information on stocks. It turbo charged Raj into "billionairedom”. Raj is now serving 11 years. To date 70 other former "Masters of the Universe” including a former Goldman Sach’s director have been convicted and are at various stages of sentencing.

Nor is Asia immune. China is notorious for the corruption of its elite. The Bo Xilai murder and cover up is merely the best known and most highly publicised scandal. Recently there have been allegations surrounding Chinese PM Wen Jiabao and the multi billionaire fortune his family has accrued whilst he led China.

Common themes

There are a number of common themes to all these grotesque scandals.

Firstly they span very long time periods. Savile operated with impunity for nearly 50 years! Madoff is thought to have gone to the dark side in the nineties – perhaps earlier. Armstrong’s doping also dates to the nineties. Raj was bad for at least seven years before he was stopped. In many cases such as the News of the World and international cycling, the corruption became institutionalised. By that I mean it was accepted practice because, everyone was doing it.

Second, there appears to have been many who knew of the illegal activities but for various reasons kept quiet. Those who spoke out were ostracised, ignored or worse – intimidated.

Third, most of the "perps” as the Americans like to call them, appear to be psychopaths. Psychologists describe psychopaths as often witty, articulate and almost always glib. They can be "amusing and entertaining conversationalists, ready with a quick and clever comeback, and tell unlikely but convincing stories. They present well and are often very likeable and charming. To some they are charismatic or 'electrifying'. Unfortunately they are inveterate liars and cheats who are cruel, exploitative, destructive, irritable and aggressive.

Other typical traits include criminal behaviour (see above), irresponsibility, poor relationships and shallow emotions. They see themselves as the centre of the universe; superior to mere mortals and live according to their own rules. They lack remorse or guilt or empathy for others. They love power and the control of others. They cannot comprehend alternative opinions. Their final personality quirk is their uncanny ability to conceal their total contempt for others from society – most of the time. Like I said, psychopath is an appropriate label for most of the "perps”.

Fourth and most disturbingly – all are establishment figures. Which raises the question, was the "establishment” complicit in these crimes and protected its own?

Whilst not all have been convicted, in the court of public opinion the verdicts are coming in. And they are unfavourable. Every time an establishment figure is scandalously exposed, it raises the question in polite society as to whether the game is rigged. Is there one rule for commoners and a different set of rules for the establishment class?

Global inequality

If perceptions grow that "establishment” types operate under a different set of rules, it would match recent economic history. In my view perhaps the greatest indictment of recent times has been the failure to seek out and punish those responsible for the GFC. Many financiers describe the GFC as a "speed bump”. With a shrug of their shoulders they mutter "shit happens”. But most in the industry know "bad shit was going on”. But no one has been convicted.

In the US, the GFC caused millions to lose their homes. In southern Europe unemployment rates are over 25 per cent and for youth they are now approaching 60 per cent in Greece. Family breakdowns and early deaths are not far behind. Yet in most cases the victim’s have been innocent. For example for those whose home was foreclosed, their only crime in most cases was to trust their mortgage broker. "Shit happens” and "speed bumps” are unacceptable excuses in my view.

In just a generation we have witnessed an enormous transfer of wealth within most western economies. By way of example in the US the top 1 per cent earns 24 per cent of the US national income.

In the 1970s, they earned just 10 per cent of total income. Since 1983 total real income growth saw 87 per cent of total increases accrue to the top 20 per cent. This has led to the greatest income disparity in the US since 1927.

And the wealth disparity is even starker. Today the six heirs to the Walmart fortune have as much wealth as the poorest 30 per cent of Americans! The 400 wealthiest Americans have a combined net worth greater than the bottom 150,000,000 Americans! And the top 1 per cent of Americans own more wealth than the entire bottom 90 per cent. And when the Republican presidential candidate Mitt Romney was asked if he thought it fair his tax rate was just 13 per cent but teachers, nurses and firemen paid 30-35 per cent; he replied "yes”!

What if the Mayans were right?

Historically the fall of empires has often been associated with scandalous behaviour. The best example is the fall of the Roman empire. Everyone recalls the orgies hosted by Caligula and Nero. Trouble with that association is that those particular orgies pre-date the fall of the empire by about 400 years. Nonetheless, the mental link is deeply held within society.

So let me pose a hypothetical? What if the Mayans were right and civilisation as we know it finishes in 2012? To what would future historians attribute this sudden collapse? There would probably be any number of actual triggers; nuclear terror, the US fiscal cliff, a sudden collapse in confidence in fiat money or China exercising their economic muscle. But for my money what historians would most associate with the hypothetical collapse of our current civilisation would be the loss of confidence by ordinary citizens in their leaders due to persistent and long standing scandalous behaviour.

When a front running presidential candidate accepts clearly unfair tax rates as fair and reasonable, when multiple establishment scandals emerge, when the economic order collapses with barely a ripple of internal navel gazing, when 400 Americans can own as much wealth as the 150,000,000 poorest, then I think such a society is in very big trouble. The Mayans were probably wrong to close their calendar off in 2012. But I suspect they were a lot closer to the mark than most of us can even begin to fathom.

Mike Mangan has been a stockbroker/fund manager since 1987. From 1992-2005 he was a highly rated Australian media analyst. He has been a regular contributor and guest on various Australian media as well as an expert witness in corporate litigation.

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