Non-judgmental Ethics Sunday: What Do You Owe the Friends You Unwittingly Scammed?

April 3, 2016 by Joshua
in Ethicist, Nonjudgment

Continuing my series of alternative responses to the New York Times column, The Ethicist, looking at the consequences of one’s actions instead of imposing values on others, here is my take on today’s post, “What Do You Owe the Friends You Unwittingly Scammed?


Several years ago, a friend of mine encouraged her friends, including me, to buy what turned out to be fraudulent securities. This friend believed the securities were legal, but they were part of a large fraud enterprise resulting in a loss of millions to hundreds of investors. As an agent, she arranged for her friends to buy some $250,000 of these investments. The perpetrators of the fraud are being brought to trial this year, but it appears that about half the money is gone.

I believe my friend did not know this was a scam, but I also believe she did not do due diligence in scoping out the background of the sellers of the securities, who have a criminal record. She did not do this background check because she received phony stock in return for selling to others and wanted to capitalize on this and become rich herself.

I invested an amount I knew I could lose, and many of my friends did the same, so we are O.K. with losing the money, as we knew it carried a high risk. However, one of our friends invested more than she could safely lose and is now unable to retire and faces reduced circumstances.

My question is whether the friend who sold the securities has an obligation to help the friend who is in a perilous financial condition. The seller friend is in good shape financially, with a paid house and a funded retirement account. She also works part time.

Of course, I hope she would think of helping the other friend herself, but she has not come to this conclusion. May I make this suggestion to her? This is having an impact on my friendship with her, and I will most likely drop the friendship if she does not help the friend in need. Name Withheld

My response: As to the question of obligation, that’s a matter of opinion, isn’t it? After all, you seem to think she does, or at least may. She doesn’t.

The law has evolved over thousands of years to handle situations like this. You can talk to a lawyer about legal obligation, but you seem to be asking about a moral or absolute obligation. No book in the sky exists that will give answer everyone will agree with.

I suggest the more relevant question is what you plan to do about it. Which leads to your next question, if you “may” suggest she help the other friend. I don’t know what you mean by “may” that would lead to any answer besides of course you can. Who or what would stop you?

Again, I think the more relevant question is not if you may, but how you would do it to achieve your goals, while being open to other ways of seeing things. So I recommend instead of pondering abstract ethical questions, that you practice your social skills. And instead of asking for third-party opinions on others, to develop confidence in your ability to figure out what you think is right, taking others’ considerations into account, and act on it.

In other words, I recommend acting with empathy and responsibility, not dependence.

The New York Times response:

There’s good reason for the old warning against doing business with friends. Your duty to look out for them and your interest in looking out for yourself go together like bread and mold. It’s worse when the parties involved lack the relevant expertise and can’t make their own assessments.

But settling the moral accounts can be tricky. You think that if your “seller friend” had done the right amount of investigation, she would have discovered the fraud. It’s natural to think so after things have gone wrong. Yet the success of the fraud suggests that others were taken in, too. The fact that you could have found out about the criminal background of the scammers doesn’t mean that she was bound to ask the right questions or know where to look for answers. The rest of you didn’t, either.

Then there’s the issue of motivation. You’re concerned that the seller didn’t engage in due diligence because she thought she stood to make a significant profit by receiving stock as payment. Maybe so. But in another respect, this inducement speaks to her sincerity: She wouldn’t have bothered if she knew the stock was worth nothing, and she was putting her relationships on the line for it, so there were real costs to being wrong.

Yet the fact that she, too, was duped — and that the buyers would have been well advised to make their own inquiries — doesn’t mean she bears no moral burden here. She has let you all down. The seller’s greed may well have clouded her judgment, as it seems to have clouded the buyers’. Whatever the explanation, a morally responsible person will feel bad about what happened — even if she doesn’t think she did anything wrong.

The philosopher Bernard Williams dubbed this phenomenon “agent-regret.” His example was the way a truck driver should feel when he runs over a child who darts into the path of his vehicle. If the driver knew that he did everything he could to avoid what happened, he should still feel a special kind of regret about his involvement in the child’s death. It would be natural to want to seek forgiveness from the child’s family, for example, and maybe to contribute to the funeral expenses. An apology would be in order even if your seller friend was as deceived as the rest of you, and exercised a reasonable level of care.

So let’s focus on the idea of apology. You suggest that only one victim was seriously harmed, and that your seller friend has enough resources to assist the victim without jeopardizing her own welfare. Even if the seller has no obligation to make this victim “whole,” chipping in to help would make that apology a lot more heartfelt.

A final note. Selling fraudulent securities to your friends has to be rare, but something a little like this is pretty common in this country: You get involved in a pyramid marketing scheme (the outfit prefers the term “multilevel” marketing), and you sell all your friends sales kits. They’re your “downline.” You get a share of what they sell, too. People do this with high hopes that everyone will make money; when the reality turns out otherwise, it’s bound to lead to bad feelings. Most of the people who do this are acting in good faith. They’re usually just ignorant (and maybe a little greedy). Still, you might think the endless news stories about these schemes would make everyone’s ignorance a little culpable. Sellers should take care, and buyers should, yes, beware.

I have a friend who works at a firm that provides its female employees maternity leave. In advance of having her first child (and before using a six-week maternity-leave benefit), she fully expected to leave her job after her leave was over; she was clear about this in conversations with friends. Is there an ethical obligation for her to tell her employer? I understand that some people may fully intend to return to work and change their minds after becoming mothers. In those cases, it would seem fine to not return to work ever. However, is it fair to wait until after the leave is complete to notify an employer when there was never any intention of returning to desk shackles? Name Withheld

My response: Did she and the employer sign a contract? What does it say?

If you disagree with her choices, why don’t you talk to her about them? If you come to agreement, great. If not, what are you going to do, impotently judge her? How does that improve your life?

The New York Times response:

Maternity leave is a benefit of the job. While she has the job, she can take the benefit. No doubt there is a hope, perhaps even an expectation, that people will return from maternity leave, but if she hasn’t misled her employer, she isn’t at fault. (You don’t suggest that your friend has a habit of gaming workplace benefits.) Still, giving two weeks’ notice seems to be a usual norm in workplaces, and she’d do well to give her employer a little time to plan for her permanent departure. She’s entitled to the six-week provision all the same — and were the employer to try to deny her that benefit (say, by firing her), the employer would be at fault. Bear in mind that the employer could have decided to have a formal requirement of predeparture notice for all employees (whether on maternity leave or not), with a reward for compliance or whatever penalties for noncompliance are legally permitted. This might be prudent if many employees see their work in terms of “desk shackles.”

I have been a loyal Volkswagen customer for 30 years, having purchased seven new VWs during this time. I was disappointed by the news that VW rigged millions of its diesel vehicles to defeat mandatory emissions tests by detecting the tests and adjusting their settings so as to pass. The deceit continued with its marketing of “clean diesel” technology and its new C.E.O.’s declaring during an interview on NPR that VW “didn’t lie” — only to have to retract his statement later. Of course there are many who will suffer for a relative few’s wrongdoing. Please weigh in on this morass and help me decide if I can purchase a VW with a clear conscience. Name Withheld

My response: Let’s go back before then. Adolph Hitler played an early role in the company’s growth, in particular with the car that became the Beetle. The Volkswagen logo even incorporated a swastika. Whatever you think of the diesel emissions deceit, I’m sure you consider collaborating with Nazis more wrong.

Since you bought Volkswagens since the 80s, you forgave them for something I presume you consider more wrong. So you’ve resolved a similar issue already. Use the same critical faculty you used before.

You can figure this out yourself. No one else can figure it out for you.

I can’t help but note that growing up, my family boycotted Nestle, for its apparently murderous marketing practices. I still avoid them as best I can. I’m not sure if that’s relevant because I still disagree with their marketing practices and you may believe VW has turned around.

Opposing Apartheid in the 80s, I stopped drinking Coca-Cola or Pepsi. I forget which because I ended up stopping drinking both and then all soda soon after and never restarted. Again, they are still companies I avoid doing business with for their continued practices and products.

Same with companies that put hydrogenated oils and corn syrup in their products. I avoid doing business with those companies as best I can. Having no Nestle, Coca-Cola, Pepsi, Keebler, etc has resulted in more fresh fruits and vegetables, which has improved my life.

My point? I find it improves my life to avoid doing business with many companies. I’m not sure if VW has changed forever, like those companies haven’t.

If you live in New York City you can just not get a car.

The New York Times response:

I’d focus on the future here, not on the contagion of past wrongs. Volkswagen, it’s fair to assume, has learned that its “clean diesel” deceptions were bad business — maybe even just plain bad. High-level executives have been dismissed; VW’s market cap is less than half what it was last spring; it is facing fines and lawsuits that could amount to tens of billions. (The penalties were far, far less when Volvo, Mack and several other companies got caught cheating diesel-emissions tests in the 1990s.) It’s your favorite car, and as long as there continues to be reason to believe that the company is cleaning up its act — so that its new models don’t have any especially negative environmental impact — and you’re confident that VW will be around to support servicing when you need it, there’s no reason to switch. How you drive, not what you drive, may prove of greater moral weight.

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