[00:00:00] Speaker A: Foreign hi everyone and welcome to a special live episode of @ the Cast Reacts. On October 23, the FBI indicted more than 30 people within the National Basketball association for various charges related to illegal gambling and namely insider trading style schemes around so called prop bets that wager not on a game's outcome but on an individual's performance or specific moment or event within a game. Both Portland Trailblazers coach Chauncey Billups and Miami Heat guard Terry Rosier. I believe I'm getting that right. Rosier. Rosier, not sure.
Have been specifically named in the indictments. Billups for acting as a so called face card to entice people to rigged poker games as well as supposedly sharing information that was subsequently shared with a third party for the purposes of betting. Rosier is is accused of sharing information about an ankle injury that third parties use for betting purposes. Both Billups and Rosier deny these allegations. Meanwhile, in a statement about the indictments, the NBA said, quote, the integrity of the game is paramount to NBA players, but so is the presumption of innocence and both are hindered when player popularity is used to gain attention, end quote. NBA commissioner Adam Silver said he was deeply disturbed by these allegations. Quote, there's nothing more important to the league and its fans than the integrity of the competition. End quote. The indictments have been described by the FBI as a major blow against organized crime and characterize this as a super crisis for the NBA. For those within the ethics and compliance profession, however, this is a corruption scandal with clear lessons to teach around subjects such as incentives, pressure and more. And with us to discuss those things is ethisphere Chief Strategy Officer Erica Salmon Burn. Erica, as always, it is great to have you on the show. Thank you so much for joining us.
[00:01:53] Speaker B: Oh Bill, thank you so much for having me. And you know, you and I were thinking for a while about whether we were going to tackle this particular one and you know, it was, it was, I think it was a hard decision for us, particularly because so much of the coverage was on the other scandal which was the special contact lens poker betting, you know, side of, of the equation.
And we're going to leave that one to whichever Hollywood studio is already pitching, you know, the, the, the, the mockumentary on, on that, that piece of things. But the more I sat with, with, with, with the, the part of this that you just articulated, the more it really seemed to me that this is the perfect kind of story for Ethicast Reacts to tackle because we are trying to use things with this particular piece of the podcast. We're trying to use things that happen in the real world that you as ethics and compliance professionals can then take as a moment internally to have a conversation with your teams or with leaders in your company about what you can pull out of something that everyone is talking about. Right. This is a very high profile story. Lots of famous names involved in it.
You know, we will continue to learn more and more facts as, as the, the, the, the prosecutions proceed.
But at the, at heart this is a, an insider information story, right? At heart, this is a pressure story.
At heart, this is a risk assessment and incentive story. That's what this really is about. And seize this moment to have those conversations with the people inside your organizations and that may be reading this story in their personal lives thinking, wow, that's a really interesting piece of news, but seeing it as something that is very, very far apart and away from the work that they do on a day to day basis.
[00:03:49] Speaker A: Absolutely agree. Ethics is everywhere and that's what Ethicaster X is all about. Wherever you look in the news, there's usually a pretty interesting story to pull from that that will inform your ethics compliance program.
And I have a few questions for you on this one. The first one is that NBA coaches and staff are informed at the start of every season that betting in casinos is permissible and betting on other sports is permissible, but betting on basketball is not. Now what we're seeing here in this scandal is not players betting on themselves, but potentially altering their behavior so that others can bet on them. And it remains unclear if the players themselves are getting a cut of the winnings.
[00:04:23] Speaker B: Right.
[00:04:23] Speaker A: So what does this situation tell you about the incentive situation within the NBA insofar as they provide a potential inroad for corruption?
[00:04:31] Speaker B: Yeah.
You know, I think the, the, the heart of a lot of this bill, is, is prop bets, right? So the idea that you can bet on the number of minutes a particular player is going to play, or the number of points a particular player is going to score, or whether someone will hit that buzzer beating, you know, three pointer at the end of the first half. Right. Those are the kinds of things that we're talking about here. And if you take a step back from that and you think about that from a risk lens, anytime you have the ability to wager on the outcome of individual people's behavior, that becomes something that ought to pop very quickly on your, on your risk radar. Right. Because when you think about a risk assessment, you're thinking about probability, right. You're thinking about the likelihood of an outcome and then you're thinking about the potential impact of that, of that particular issue. And here what you have is you, you have put into place a system where individual player behavior is the, is the focus of speculation. Yeah, right, that's, that's what gambling is. It's speculation.
And so you are going to necessarily, as a result of that, find yourself in a position where someone who has information about that, players physical health, for example, is going to be inclined to maybe use it the way that we wouldn't want to. You know, in this particular story, we have a third party who was passing on some of this inside information, who was a very, very good friend of LeBron James.
You know, that is a classic example of who's in your circle. What do they know? What are they doing with that information?
Who might they potentially be passing it to?
How do you, as a compliance professional know whether or not you're trusting the right people with particularly impactful inside information in that, you know, that made news because this person was really good friends with LeBron James. It could easily have been a trainer. Right. We have seen sports scandals where we have had refs that have been banned from the sport because they have inappropriately influenced, you know, know, behavior in a game. And we have, on the flip side, you know, lots of stories out there now about players getting death threats because of prop bets. And so, you know, as a compliance professional, thinking about what, what are the, this is a, a systematic lever that has been pulled.
What is the ripple effect of that lever and how do I potentially think about that in the context of the program I've built?
[00:07:08] Speaker A: Yeah.
One of the pillars of an ethical culture that we speak of frequently here at Ethisphere is pressure. The degree to which employees feel free from any pressure to behave unethically.
How do you see the NBA indictments through that pressure lens? And what can organizations learn from this when addressing pressure within their own cultures?
[00:07:27] Speaker B: Yeah, so 25% of our data set, Bill, the, the culture data we collect here at Ethisphere, as we have talked about a lot in the past reports, feeling some level of pressure to compromise company standards to achieve business objectives. Right. They have been given a goal and they feel like they need to cut corners in order to hit that goal. And that is a figure that every compliance professional out there should try to get in front of. Because when you, you know, do the Venn diagram of when bad things happen, a piece of it is incentives and a piece of it is pressure. And so, you know, you, you can, you can look at this particular situation, through that exact same lens, you have, you know, people who have information that would allow them to make money on a prop bet.
And then you are essentially saying to, you know, staff and coaches, don't do it. I'm going to put the chocolate cake on the table in front of you, and I need you to not eat it.
And so in order for that to happen, you have to have the right mix of carrots and sticks available to you as a compliance team to keep it from happening.
You know, for them to leave that chocolate cake uneaten on the, on, on the counter, you have to have a reason that you chose not to do it. And so, you know, can you put some. I'm gonna totally destroy this metaphor, and I apologize to the listening audience in advance. You know, can you put, you know, a force field around it? Can you move it farther away from the person so that they don't see the cake anymore? Right. What are the things that you can do to put a barrier between that pre. That incentive and the person who has the ability to, To, To. To. To go for the short term game?
[00:09:11] Speaker A: Yeah.
[00:09:11] Speaker B: And, you know, some of that is, is again, stuff that, that we talk about all the time, right? It's talking about why integrity matters in sport. It's talking, you know, for. To use this particular scenario. It's talking about the potential implications on the reputation of the player and the team if you engage in this kind of behavior. It's talking about fan anger. It's talking, you know, all of those pieces are a piece of how you inculcate your organization from these kind of corrupting influences. But the first thing is figuring out where those levers are and then who they're going to impact. Because there are certain people who would have information, you know, about player behavior aside from the players themselves. Certain people who have information about. About, you know, player behavior that might get themselves into a position where they would be incentivized to use that information improperly. And then there are other people who would never have that access. And so who are those, you know, who are those folks in your organization that have the equivalent of. LeBron's ankle is hurting and he's not going. He's only going to play the first 12 minutes. Right. Who's got that level of information and how do you know that they're not using it improperly?
[00:10:26] Speaker A: So two things. One, Erica, I have a bit of background noise, so if you hear that, I apologize and to everyone, fell off.
[00:10:32] Speaker B: My wall at the beginning of this live stream. So we're just rolling.
[00:10:37] Speaker A: The bigger question is, Erica, is it okay if I hit you up with a follow up question?
[00:10:40] Speaker B: Absolutely, Bill, hit me.
[00:10:42] Speaker A: So the follow up question is this.
The federal ban on sports betting was struck down by the Supreme Court in 2018. This is something that the NBA's current commissioner himself supported. Since then, major sports leagues like the NBA have partnered with online betting houses such as DraftKings, FanDuel and BET MGM. And in a survey with sports publication the Athletic, only 34 of NBA players felt that gambling was good for their sport. You know, you just talked about, you know, having that chocolate cake on the table and telling people not to eat it.
When we talk about pressure, we often speak of an affirmative push towards unethical behavior. Nobody's pressuring people to make illegal bets here. This is just simple greed. But what are we, what are we to make of organizations that create or widen vectors for print for potential corruption?
[00:11:26] Speaker B: Yeah, I mean, again, you know, Bill, I think, I think this, if I'm thinking about this from the, you know, sort of the typical ethics and compliance professional perspective, I'm going to go back to risk assessment.
Did, did anyone or has anyone thought through the implications of prop bets? Because to me, you know, if we think about this from the, from the perspective of risk, you're going to have differing tiers, like in any risk assessment, right? Low risk behavior, medium risk behavior, high risk behavior, the game outcome, the player outcome. Right? Those are different levels of risk behavior. And so thinking through, as you know, at the league level or at the team level, what are the, what are the places where, you know, my organization is going to be particularly susceptible to the corrupting influences of this possibility. That's, that's the work that I think needs to happen that perhaps hasn't happened to the extent that, that we need it to. And look, I mean, let's be real, there's tons of money in this, right? And that creates its own types of pressure. There's also, you know, criminal elements as, as, you know, the, the indictment outlines in extraordinary detail that, you know, there's, there's that aspect of it and, and then, you know, the third aspect of it is, is the long term, you know, safety of these players.
You know, when you have this kind of prop bet situation and somebody decides to bet on the, you know, the, the kicker to pull it wide, right, in a football game that, you know, we have multiple examples of situations where kickers are then, you know, getting death threats because somebody bet $30,000 on them to pull, you know, to hit the know to hit the, the field goal and they hit the upright instead. And is that really like, that's what we were aiming for here? Because it's a, you know, it's a very natural, it's a very natural outcome. So I, I do think, you know, applying some of these skills that we have built over the years from an ethics and compliance perspective around understanding the pressure points, understanding the perverse incentives, thinking through the, the various tiers of risk targeting our behavior in response to that, to say, you know, look, we get it, but you need to think about who's in your circle that knows, you know, that knows that your ankle is hurt and what are they doing with that information and can you trust them with it? And we're picking on the NBA right now, Bill, but you see this across all of the major sports, right? They, I, I, I, I don't think maybe curling doesn't have a scandal yet, but basically everything else has, you know, has, has a version of this, so.
[00:14:20] Speaker A: Erica, bite your tongue. I can't live in a world where curling has got a major scandal attached to it. Please don't, don't, don't, don't put that evil out in the world. Come on now.
[00:14:28] Speaker B: Well, and those of you listening in, maybe there's another, there's another sport that hasn't had one yet. And you can, you can, you can correct.
[00:14:35] Speaker A: Bill, if stone skimming can have a scandal, then curling can have a scandal too, right?
[00:14:39] Speaker B: If stone skimming can have a cheating scandal, I don't think anybody's really, really, really immune. But, you know, it's, it's, again, it's my, my hope to those of you who are listening to Bill and I talk about this is you, you find a way to pull the, you know, to pull the threads of human behavior out of this. Right. To pull the threads of organizational risk out of this. It's, it's a juicy story, but it's also, you know, a universal one. And so what can you do inside your organizations to look for those same places where you've got that mix of personal incentive pressure point and high risk and get out in front of those things, you know, before, before they hit you with an indictment.
[00:15:34] Speaker A: Yeah. FBI Director Cash Patel has described the scandal as, quote, mind boggling with, which seemed a little hyperbolic when compared to things like the FTX crash from last year. But having said that, though, there do seem to be some important lessons to be learned for ENC leaders when it comes to preventing, detecting and deterring corruption within a sport that has no small history of illegal betting scandals itself, as you mentioned. I'm curious, Erica, what is your biggest takeaway from these indictments as them being part of a larger pattern of misconduct?
[00:16:05] Speaker B: Yeah, I mean, you know, look, I'll, I'll give FBI Director Patel that these, some of the details, particularly on the piece, Bill, that you and I did not touch on, which was the, the, the, the poker betting piece, right. That rigged cards, devices under the table, special contact lenses like that was a little mind boggling. I'm gonna go with him on that one. Right, I'm gonna go with him on that one. That was like a Martin Scorsese movie. Um, this one is not mind boggling. This one is entirely predictable because you've got, again, a situation where you have that overlapping Venn diagram of, you know, the ability to impact something individually, juicy information that will allow you to make money and, you know, a system that makes that shockingly easy. Right. I mean, if I don't have it, but I could download a betting app or six on my phone tomorrow, right.
And, and you know, be engaging with that at any point 24 7. So we've, we've significantly lowered the access barriers.
I don't have to go to a sports book. I don't have to walk into a casino. I can do it in my living room in my pajamas while I'm yelling at the television, right?
We've lowered the barriers, we've increased the incentives.
And those are the places where as ethics and compliance professionals, we need to put our time, energy and effort.
Is those places inside our own organizations where we have the functional equivalent of me betting on a game in my basement in my pajamas. We've all got them. We've all got them. Maybe it's deciding on a market entry point. Maybe it's selecting your third party. Maybe it's, you know, a hiring practice. There's something happening in everybody's organization right now today that is that functional equivalent. And the challenge we have is to go find it and try to get out in front of it and, you know, use this story to get the attention of the people that you need to get the attention of so that you can talk about what it would look like if it happened inside your organization. Because it's not could it happen here? It's what would the version be?
[00:18:21] Speaker A: Well, we're getting close to time. I do have one last quick follow up question for you, which is that as we were preparing for this, I read an interesting article in the Atlantic that kind of cast this as a Bit of a tempest in a teapot and suggested that, you know, the announcement by Director Patel was, was sort of over egging what this thing really was and that there are perhaps bigger fish to fry and that this whole thing was kind of, you know, is, was this really worth bringing all these, these resources to bear? And as I read it, I couldn't help but detect a certain sense of, you know what, maybe we could just let this go. All things considered. And, and that strikes me as a dangerous tone to take and I'm just kind of curious to hear from you. Is there such a thing as an acceptable level of corruption?
Yeah, I mean, I can guess your answer, but I have to, I'm bound to ask it.
[00:19:04] Speaker B: Yeah, you know, look, I, I don't think there's an, I don't think there's an element of an acceptable level of corruption.
I don't, I think that it is, you know, particularly in a, in, in a, if we're thinking about this from an intangible asset analysis perspective, Bill, which is a lens that you and I like to take to a lot of things which is, you know, what, what is the value of the enterprise that we are responsible for protecting and we know that 80% of most enterprises value is intangible. And I would say for, for sports leagues in particular, whether we're talking about stone skimming, the NBA, the NFL, the NHL, baseball, whatever it is, cheating in the sport has a impact on fans and their willingness to engage full throatedly with the team.
And in the absence of that fan base, that full throated engagement, in the absence of, you know, me being willing to believe that the people out on the ice, because I'm a hockey fan are skating full out to, you know, for the love of the game and not because somebody is, you know, kicking back whatever they make on their, you know, hat trick, that that's, that matters deeply to my willingness to engage in the sport. And we see that, you know, with fluctuating fan numbers, when you have these kinds of issues, if, you know, whether it's baseball, you know, baseball, the Astros or, you know, you pick, you pick the cheating scandal, it implicates the integrity of the game, which then implicates the intangible value of the asset.
And so I can't think of a place where, you know, a tiny bit of corruption would not implicate the intangible value of the asset. But I would say, particularly when there is, when, when a core piece of the exchange is my money to the team for my enjoyment of the experience there's really no room for error there.
[00:21:18] Speaker A: Yeah. And, and so, yeah, I, I am reminded of a moment in my childhood when I woke up one morning and got myself some breakfast. And in my half awakened state, rather than putting sugar on my cereal, I took a salt shaker and put one little small dash of salt on my cereal and it was just a few grains of salt. I tried eating my cereal anyway and it was inedible. Right. It took so little to it. So just a little bit of corruption taints the whole pool. And I very much appreciate your answer. So.
[00:21:42] Speaker B: Yeah.
[00:21:43] Speaker A: Well, Erica, thank you so much for coming onto the show and covering this particular news story. I sure appreciate your insights on this one.
[00:21:49] Speaker B: Yeah, no, absolutely. Thanks so much for inviting me. You know, Bill, I would, I would say see you next time, but I know next time is probably right around the corner because there's no shortage of things for you and I to react to. But for everybody out there listening, if you've come across a new story and you say to yourself, this would be a great efficacy reacts, please let Bill and I know because we're constantly, you know, sort of scanning the news looking for, for new things that we can turn into a teachable moment for our community. But we would love, you know, the more of us that are crowdsourcing those good stories, the better. So please keep the ideas flowing to us 100%.
[00:22:23] Speaker A: And for plenty of free ethics and compliance resources on conflicts of interest, speak up, culture, values based leadership and more, please visit the Ethisphere resource
[email protected] resources and to appear as a guest on this program and share an ethics, compliance best practice or success story, feel free to drop us a
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That's all for now, but until next time, remember, strong ethics is good business. Thanks everyone.
Wonderful. Thank you so much. I know.
