Ethics talk booming
Cool real estate market brings issue to forefront
From the News-Press
June 3, 2007

By Dick Hogan

When the housing industry was hot, builders coaxed people with no money to borrow huge amounts to buy investment houses.

Now prices are down and the people are trying to get out of their contracts while their lenders and builders are threatening to come after them legally.

The courts will sort out who's legally right, but who has the moral high ground?

"This is a classic business ethics situation," said Cape Coral-based ethics consultant Dawn Marie Driscoll, author of the book "Ethics Matters."

She said the real test is "Is it the right thing to do? Whose interest is being served? And that's when you get into the gray areas."

While today's volatile real estate market has brought ethics issues to the front burner in that industry, there's a steady supply of moral decisions to be made in good times or bad in nearly every industry.

That's why the nonprofit Uncommon Friends Foundation introduced the Business Ethics Award in Southwest Florida to recognize a business with high standards of ethical behavior in all levels of the organization.

The winner will be chosen Thursday. The three finalists are WilsonMiller engineering firm; LeeSar, which provides materials and supplies to Lee Memorial Health System and Sarasota Memorial Health Care System; and Entech Computer Services, which offers on-site technology services.

Annette Jacobs, chairwoman and CEO of SafeHarbor Technology Corp. in Seattle, is a nationally recognized expert on ethics and a judge in this year's Uncommon Friends competition.

Wherever you go, she said, "The issues really aren't any different. I do think it's part of survival: Ethical organizations are the ones that succeed in the long run. As you come into a company or start a company, you have to ask yourself: 'How do we want to conduct ourselves?'"

For example, Jacobs said, she recently fired an employee for "some very questionable lunch and dinner expenses."

The easy solution would have been to let the worker cop to sloppiness and get away with just paying the money back, but as she investigated, "There were some very clear indications that it was not just sloppiness. It involved another employee being taken to lunch; there was a relationship, known to people in the organization."

Her rule of thumb for making the final decision: "If I feel comfortable enough that if this made front page news, I'd be happy with the headline."

Is business in the United States becoming more ethical? Driscoll said a number of factors have pushed things in that direction in recent years.

For example, she said, federal sentencing guidelines instituted in 1991 for companies make it advantageous to behave ethically: "They say we know there's going to be wrongdoing, nobody's perfect, but we will give you a pass if you have instituted training and standards to prevent it."

Also, she said, a lot of trade groups are taking steps to set down formal standards. Recent examples are the used car and chemicals industries, which both instituted overall codes of conduct.

In addition, she said, spectacular scandals such as Enron have raised awareness by executives of the downside for those caught engaging in bad behavior. "Whatever industry you were in, you probably had a pretty good scandal. There's more awareness that you can operate legally but your business can be ruined if you don't act ethically."

The answer to an ethical question isn't always simple, said Richard Woodruff, vice president of WilsonMiller, recalling a recent decision involving the construction of a fast-food restaurant in Fort Myers.

WilsonMiller was responsible for preparing the property for development, but the actual building was engineered by another company, and when the project was almost finished it turned out there was a 4-inch difference between the sidewalk and the pavement that would have prevented handicapped access. That would have prevented the restaurant from being approved by county inspectors.

"We felt like our drawings were correct, the other engineer felt like theirs was correct, but it really couldn't be documented," Woodruff said.

Ultimately, he said, WilsonMiller decided to spend $15,000 to fix the problem because fighting it out would have delayed the opening of the restaurant. "It would have hurt everybody."

To keep ethical concerns from destroying a company, Woodruff said, it's important to assure employees that they won't be punished for acknowledging that an error was made.

At WilsonMiller, he said, "You do not have to worry about being fired for making mistakes; what you do have to worry about is covering up mistakes and not telling anybody because we will fire you for that. They always wind up surfacing, and the sooner we realize a mistake has been made, the sooner we can repair the damage."

As for real estate, a lot of people involved on both sides of the debate have strong opinions.

"It's your signature" when an investor signs a construction loan to build a house, said Karen Quanstrom, a loan officer specializing in construction loans for SunTrust Bank's Fort Myers branch. "These are things that people did to themselves because they didn't think through the process."

Besides, she said, some buyers are engaging in arguably unethical behavior themselves. For example, they instruct banks to hold off giving a builder his last payment in order to stall the completion of a house the buyer doesn't really want to purchase.

As a result, Quanstrom said, "Now there are builders who are going to be either destroyed or financially harmed as a result of that."

Lenders and real estate agents should honestly inform buyers of the risks involved, she said.

"A few people said to me, 'What is the worst-case scenario?' Quanstrom said. "I said to them, 'You have to be prepared for six months' payments and no income.' I feel obligated morally to tell them that, and I did."

Some investors decided to back out because of her advice, she said, but many forged ahead despite of it.

Others take it a step further.

Real estate agent Brett Ellis of The Ellis Team at RE/MAX Realty Group in Fort Myers said there were deals he refused to put investors in during the boom and he stopped putting people into investment home purchases when the market became too overheated in 2005.

What's legally allowable isn't always what's in a client's best interests, he said.

"I can sleep at night."

Copyright © 2007 The News-Press.

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