2021viii19, Thursday: A failure of trust.

A brace of Court of Appeal cases highlight both some fascinating litigation points – and why charitable trustees need to trust themselves, and their friends, a little less.

Like many people who’ve spent time in counter-fraud, I have a firm but nuanced view of fraudsters.

Nuanced, because part of the classic fraud triangle is “rationalisation” – the fraudster’s ability to convince themselves that what they’re doing isn’t really wrong. Not really. Not when looked at from the right angle, in the right light. (Albeit possibly only at 4.13pm on the second wet Thursday in October.) And not often, but sometimes, there’s almost genuine pathos in that rationalisation – particularly when it’s linked to a necessity which is caused less by greed than by some personal or family disaster.

But firm, because when you get down to it fraudsters are still essentially stealing someone else’s stuff, usually by lying to them or otherwise betraying their trust. And screwing with the trust someone places in you is, to my mind, one of the worst betrayals there is.

I could go off on a long tangent here about fiduciary obligations – for the non-lawyers, the term for the duties which arise in special kinds of relationship where you’re obliged to put someone else’s interests before your own, and not simply balance yours against theirs. Directors to their companies. Trustees to their beneficiaries. Solicitors to their clients. And so on. The tangent is tempting, not least because of a long talk with a client recently which I spent trying to convince them why what had been done to them, while patently wrong and immoral, wasn’t a breach of a “fiduciary” duty; and that calling it that would hurt their case, rather than helping it.

(We play with words, we lawyers, and forget sometimes that – as with any jargon – legal cant can seem to be a touchstone to the uninitiated, rather than a vessel of specific meaning.)

But I won’t, because what I’m really interested in here is a particular kind of fiduciary obligation: that of a charitable trustee. 

Because more than once in my career, I’ve seen charitable organisations – or those which, while not actually a charity, are non-profit and trying to do good – get taken. Badly taken. And while my primary visceral hatred is directed at the crooks (and, I admit, occasionally fools) who took them, there’s a small pipette of bile reserved for the idiots who let them.

Yes. Let them.

One example? A religious charity – an independent pentecostal church – whose affairs I investigated a decade or so ago, after they entrusted their money (that is, the money gifted by the faithful) to a friend of the pastor, who said he could produced a 60% annual return.

The return was indeed about 60%. Minus 60%. More than half the money was lost. Because the trusted idiot – and I think he was a fool, rather than a crook – had convinced himself and the pastor that contracts for difference were the right way to gamble with the church’s money. And because he was the pastor’s mate, none of the church elders lifted much of a finger to stop it happening. 

This kind of “we’re religious, so we should trust because our leaders say we should” is dangerous. It’s at the root of affinity fraud, the kind of fraud which rips through a community once the fraudster is inside the circle of trust, and which strikes religious groups particularly hard (but of course isn’t limited to them). And it’s particularly pernicious in the kind of religious groups with charismatic (small-c, I stress) leaders, tithing traditions, and few controls. Yes, ultimately it’s the fraudster’s fault, and yes, perhaps people should caveat the emptor just a bit. But in line with my core belief that certainty is not to be trusted, any leader who gives off a vibe that discourages his (usually his, rather than her) followers from doing their own due diligence is simply dangerous, unprincipled, arrogant and – put simply – in the wrong job.

That particular church case inspired me to put together a one-day course for pastors in training, as part of a ministerial training course run by a friend of mine. I only ran it once, but it centred on the vital importance of audit – and the idea that “trust, but verify” was the exact opposite of unfaithful.

Misplaced trust

All this was a long time ago, but I was reminded of it recently by a brace of Court of Appeal cases involving a genuine financial and legal tragedy. They involved a venerable law firm in Yorkshire, Dixon Coles & Gill, the Bishop and Diocese of Leeds, and four well-known national charities. 

And the former senior partner of the law firm, who over the course of a couple of decades stole millions – yes, millions – from the firm and its clients.

To tl;dr the background: the firm, DCG, had been around some 200 years. It was forced to close in 2016 after its two other partners discovered to their horror that Linda Box, their colleague, had systematically been bleeding funds not only from its client account but also from funds she personally held for several charities (including the Church). Unsurprisingly, the Church and the charities sued. Since the firm was an old-fashioned partnership instead of a more modern LLP, the two other partners – who, it should be said, were wholly innocent of deliberate wrongdoing – were in principle on the hook with unlimited liability.

In fact, the Court of Appeal allowed the remaining partners to benefit from the usual six-year limitation period, overturning a ruling in the High Court in Leeds that they should be found to have been “party or privy” to Mrs Box’s fraud under s21 of the Limitation Act 1980 – but it also dismissed an appeal from that same court’s ruling that the firm’s insurers were liable to pay out on all the claims (if the claimants were successful), rather than being able to limit total liability on the grounds that all the claims essentially arose from a single series of related acts.

They’re fascinating cases: in particular the first, for anyone interested in limitation (and that should include all lawyers involved in contentious litigation).

But I mention them in particular for a startling detail in the first-instance claim. At paragraphs 42 and 43, HHJ Saffman notes that the remaining partners suggest Mrs Box – in handling a substantial proportion of the Diocese’s money – was acting on a personal rather than professional basis. And he points to a 1995 letter where a past Bishop of Leeds seems to have allowed Mrs Box to have sole signing authority on a Church fund – a fund in relation to which he was (as Mrs Box wrote to him in 1995) “under no legal duty to divulge the accounts to anyone“.

I find this shocking, and frankly disgraceful. As some will know, I come from a Church background. My late father was a vicar, then a canon, then a bishop – retiring in 2011 after 15 years as Bishop of Winchester, one of the largest dioceses in the Church of England. I’ve met plenty of priests and bishops who took a pretty autocratic view of their rights, and of how they should be allowed to fulfil their obligations, although my dad – a believer in sunlight as the best guarantor of probity – wasn’t one of them. (Not for him the clergy equivalent of “I find your lack of faith disturbing,” although I’ve seen variants far too often.)

So I’m sure there are plenty of funds held by priests and bishops in the CofE with similarly – ah – opaque oversight structures. 

But to take such a fund, and give a single individual who isn’t even the office-holder the unaudited power invisibly to handle the cash? It’s insane. More than that: given that the funds are charitable, or at least the fruits of faithful labour by many hands and the generosity of many hearts. it’s simply immoral.

This simply shouldn’t be. No more should there be unaudited funds for charities and churches, than that churches should be able to mark their own homework when it comes to safeguarding. 

Not because churchpeople are uniquely bad. They’re not. Most are genuinely trying to do the right thing. 

But because they’re people. And in my view, it simply isn’t fair to put people in a position where – if they find themselves at risk of yielding to temptation – there’s nothing in place to hold them back.

Trust, but verify. It’s only sensible. But far more importantly, at least for people of faith like me: it’s un-Christian to do otherwise.

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2021iii15, Monday: Enlightened laziness

A message of hope for procrastinators everywhere. And a depressing but unsurprising long read about Facebook’s damaging take on AI ethics.

Photo of the Cam below King’s College, by Giacomo Ferroni on Unsplash

Short thought: Most of us, on occasion at least, struggle with procrastination. I know I do. Sometimes it’s simply having too many plates spinning. Sometimes it’s what I’ve come to call the “paint colour” problem: that when you’ve got a wicked problem and a more straightforward one, the temptation is to solve the latter and procrastinate the former. (“Paint colour” because if an hour-long meeting has two items on the agenda, one of which is existential and the other of which is what colour to paint the office, you can bet that 55 minutes will be spent on the paint.) And sometimes it’s simply that you’re tired, and focus and flow are elusive.

I don’t know of any magic bullets for this. But mindset can help. Whether it’s a form of self-induced CBT or not I don’t know; but I’ve found that a re-framing of my motives has been of assistance. I call it “enlightened laziness”.

This dates back to my college days. I was studying Japanese, which meant a first year spent sweating grammar and vocab for hours a day while friends were drinking around their weekly essay crises. But as it came to exams, I realised that I was spending less time revising than they were. Not because I’d consciously been doing more work; just because the pattern of my work meant I was constantly and consistently reinforcing things.

The upshot? While they sweated their way through a beautiful May in stuffy rooms and libraries, I lay on the banks of the Cam with a bottle of something.

That’s the laziness bit. I like to work. I like to learn. But I also like to live. And so I told myself: if I can translate this into a practice, I can keep lazing on the riverbank when the time is right to do so.

And thus was born enlightened laziness. If I manage my time, and get to things early enough, I get to laze around when I want to. That’s the motivation: not good behaviour, or efficiency. But making space for laziness.

It’s worked for me. Usually. I admit that life at the Bar has given it a knock; especially right now, with multiple clashing client deadlines. But as a general principle, one that says “spread the work out, don’t leave it till the last minute, so that you can laze about instead”, it remains a touchstone.

Now, of course, I’m trying to convince my 14-year-old daughter of the same principle. Don’t leave schoolwork till the last minute: less stress, and more lazing, to get to it earlier. I’m not conspicuously succeeding. Perhaps I never will.

But it might be worth a try, for those like me who’ve struggled with procrastination. I’ve heard worse incentives than to protect your lazing time. Give it a go.

Someone is right on the internet: There’s an excellent long read from the MIT Technology Review on work within Facebook on AI ethics. It’s well-reported, fascinating, and entirely depressing.

I loathe Facebook; I have an account solely for doing stuff I can’t do without it (like managing our relationship with my daughter’s Tae Kwon Do club), and always open it in a private tab to mitigate the risk of it infecting everything else I do. I regard it as parasitic, unpleasant, and sociopathic to a degree. And I fear deeply the fact that a single, exceptionally odd (and although from me that’s usually a compliment, this time it isn’t) and unfeasibly rich young white man can essentially dictate the terms of communication for large chunks of the world.

This piece does nothing to change those feelings. If anything, it accentuates them:

By the time thousands of rioters stormed the US Capitol in January, organized in part on Facebook and fueled by the lies about a stolen election that had fanned out across the platform, it was clear from my conversations that the Responsible AI team had failed to make headway against misinformation and hate speech because it had never made those problems its main focus. More important, I realized, if it tried to, it would be set up for failure.

The reason is simple. Everything the company does and chooses not to do flows from a single motivation: Zuckerberg’s relentless desire for growth. Quiñonero’s AI expertise supercharged that growth. His team got pigeonholed into targeting AI bias, as I learned in my reporting, because preventing such bias helps the company avoid proposed regulation that might, if passed, hamper that growth. Facebook leadership has also repeatedly weakened or halted many initiatives meant to clean up misinformation on the platform because doing so would undermine that growth.

In other words, the Responsible AI team’s work—whatever its merits on the specific problem of tackling AI bias—is essentially irrelevant to fixing the bigger problems of misinformation, extremism, and political polarization. And it’s all of us who pay the price.

“When you’re in the business of maximizing engagement, you’re not interested in truth. You’re not interested in harm, divisiveness, conspiracy. In fact, those are your friends,” says Hany Farid, a professor at the University of California, Berkeley who collaborates with Facebook to understand image- and video-based misinformation on the platform.

There’s something important in this notion of how a focus not on risk but on compliance – obeying law or regulation, and in the process minimising its effects on one’s business model – can be sheer poison for how a business manages its effect on the world, and the externalities it creates. I’ll try to get to it soon – apologies that it’s still brewing.

Till then, this is well worth your time.

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Lies and freedom. They don’t mix.

“All politicians lie,” so they say. No; all human beings lie. What matters is what lie, when – and what it does to your ability to choose.

I’m a sucker for a series.

By which I mean a sequence of books (for preference) or a good serialised TV show. Genre, of course – you can critique me all you like, but good fantasy/scifi/etc, written with love and care, can’t be beat.

Pratchett’s Discworld*. DS9 – particularly later seasons as the story gained pace. The Broken Earth. B5, of course, and Farscape. Aubrey/Maturin. Rivers of London. And Dresden.

A long-running tale is part of it, to be sure. But the key is writers and creators who let their characters grow and change over time, rather than remain stable as the world shifts around them. It’s a privilege to be part of that.

My problem, particularly with books where there’s been a long gap between instalments – and I recognise this may just be me – is a tendency to want to re-read the whole series before diving into a new one. Which, with the Dresden Files, is taking a while.

Sometimes, though, doing this unearths gems you may have missed the first time round. There’s a couple buried in Ghost Story which hit me squarely between the eyes – and made me think about what I respect, what I despise, and why I make the distinction.

Late in the book – and I won’t spoil it with too much context for the uninitiated – the main character, Harry Dresden, is talking to someone far mightier, but also far gentler, than he. That person’s mission in life is to preserve people’s right to choose, because good and evil mean nothing unless that fundamental human right is preserved. He notes that a particularly vicious misfortune which befell Harry was born of a particularly well-crafted and well-timed lie: convincing him that what was, wasn’t, and making him think he had no choice but to walk down a bad road.

And the character says this: “When a lie is believed, it compromises the freedom of your will.”

That sticks with me. We all lie. Yes, we whinge about politicians doing it – but we all do. Mostly for self-protection. But there are big lies and little lies. And the difference is found not in the extent of the untruth, but in the anticipated consequence.

So a lie designed and intended to sway the world, to destroy the chance to make an honest decision: that’s the lie that’s unforgivable.

Perhaps this is why our profession’s greatest sin is to mislead the court. Sure, represent your client. Highlight the truths that help. Play down those that don’t. Tell the story in the best way for your side – the most believable way. But to mislead the court – even by hiding a relevant authority that doesn’t help – is to rob the tribunal of its chance to make its mind up. It’s not persuasion. It’s a con.

It’s also why I reserve a special hatred for con artists. Sure, I can admire the artistry bit – sort of. But the most successful cons which turn their marks into their best salespeople. Whose self-esteem has been warped by the lies, such that it can scarcely survive if the lies are challenged.

And that inevitably leads me back to politics. As I said, all politicians lie. They’re human. Sometimes to make life easier. Sometimes to protect secrets – whether for fair reasons or foul will depend on the circumstances. Sometimes to protect a confidence.

But outright lies, told to sway and shape opinion, when it’s clear on close inspection that the teller knows perfectly well what they’re doing? That’s treating people as pawns. Playthings.

As marks.

Some thinkers take this further. Harry Frankfurt’s famous essay (and later book), “On Bullshit“, made a distinction between lies on the one hand – where the liar at least placed some value on the truth, prizing it in the act of obscuring it – and bullshit, where the teller simply didn’t care what was true and what wasn’t as long as it served their purpose. It’s a distinction that has been often criticised.

I’m not sure where I stand. I see the distinction, and we do seem to be swimming nostril-deep in particularly noxious and damaging political bullshit in recent years. (Brexit, Johnson, Corbyn, Trump, so many others. Lord, the list goes on. And a special mention for Michael Gove, whose Ditchley speech was an example of extreme – and, I can only conclude, calculated – intellectual dishonesty.)

But I think I care less about the lie-vs-bullshit axis than I do about this question of choice. Whether in politics or people’s personal lives – think of abusers warping the world to rob their victims of a vision of anything different, for instance – robbing people of the freedom to choose feels like the big differentiator.

Dan Davies, author of a wonderful book called “Lying for Money”, put it particularly well, in something he wrote getting on for a couple of decades ago entitled “Avoiding projects pursued by morons 101“. Seriously, read it – it’s not long. But it boils down to three rules, all of which focus on lies and testing them:

  • Good ideas do not need lots of lies told about them in order to gain public acceptance. (If people won’t buy into them without being lied to, that tells you everything you need to know.)
  • Fibbers’ forecasts are worthless. (You can’t mark a liar to market. You can’t hope to fudge their numbers towards reality. If a liar says “this is what will happen”, the only safe thing is to assume the opposite.)
  • The vital importance of audit. (Any time someone won’t let their predictions or their advice get tested against reality, or moves the goalposts mid-game, run. Immediately.)

Put differently: If you catch someone deliberately lying to you, so as to change your mind about something important: that’s it. They’re done. Stop listening to them. Now.

You can accept lies as a fair form of discourse. Or you can – while accepting that we’re human, and so we fail – focus on the right to choose with your eyes open.

You can’t have both. And anyone who favours option one? Don’t trust them. Ever. About anything.

* I’m gradually re-reading the whole Discworld saga. Taking it very, very slow. Essentially to leave till the last possible moment the time when I pick up the Shepherd’s Crown – because it will be the last new Pratchett I ever read. And that hurts.