It’s Wednesday, December 3, 2008. I had the privilege of working for three of the top financial firms in the world: Merrill Lynch, Bear Stearns and UBS. Ironically, my happiest moments were when I was working for Crowell Weedon and Co., a small regional firm on the West Coast. Richard Jacobson was the branch manager of the Encino branch and he welcomed me with open arms. He was a wonderful manager and an even better person. Jacobson offered me a guaranteed salary that would easily eclipse six figures. I was 24 years old.

At Crowell, Weedon I worked the phones and worked the street. By cold calling and cold walking, I picked up every account I could find, adding hundreds of thousands a week to my assets under management. I had my spiel down, promising to deliver the world, while not giving a thought to asset allocation or the client’s specific needs.

Within months I became one of the top brokers in the office. Jacobson loved my performance and constantly encouraged me. I felt experienced and ready to make a move to the bigger players. I asked a friend to line up a meeting with an associate of his who worked at Bear Stearns in Los Angeles. [We will refer to this associate as “Kenny”]. Kenny was older and more experienced and, it just so happened, was looking for a junior partner. After several interviews with Bear Stearns’ management, I was offered a compensation package and, without giving Jacobson at Crowell Weedon any opportunity to counter, I submitted my letter of resignation, pulling all my accounts with me. Any loyalty I felt was to the advancement of my career, not as part of a team at Crowell, Weedon & Co.

With only 15 million under management, I accepted the role of junior partner. Kenny had managed more than 40 million. That relationship left me with a smaller portion of the revenue when we were distributing commissions. Although I agreed to terms of the partnership, several months into my career at Bear Stearns, I grew to resent my status as the junior partner. I felt as if my contributions warranted a higher payout. I was on track to earn north of $200,000 during my first year but Kenny stood to rake in more than 3 times as much! The revenue split did not sit well with me. I had brought in a lucrative hedge fund that was kicking off as much as $100,000 a month in commissions. Despite the efforts I had made to win this account, and all the work I was performing to handle the complex derivative trades, the partnership agreement gave the lion’s share of the commission split to Kenny.

My sense of being under appreciated and under compensated did not move Kenny. As the senior partner, he felt entitled to the higher split. After all, he insisted, his influence was the reason Bear Stearns hired me. At 25 years old, I was one of the youngest brokers ever hired in the Los Angeles office. He told me that I still had dues to pay; that both patience and gratitude would serve me well.

Although I agreed to continue with our agreement, beneath the surface I felt as if he was exploiting me. When I spotted an opportunity to even the playing field, I took it. I now recognize that those actions represented my succumbing to what others have called the fraud triangle. It is a trap that can lead to moral failure, a slippery slope that frequently lands people in prison.

With the fraud triangle, the individual feels pressure. He feels as if he is being cheated or needs to overcome a hurdle. That hurdle may present itself in the form of the need for higher income to pay obligations or even the desire to advance one’s studies. In my case, I resented the concept that I had to pay dues. l was bringing in the money and I felt entitled to respect and compensation. Without that perceived sense of fairness, I felt as if my colleagues were taking advantage of me. In my mind, this injustice could not stand.

Looking back, it’s easy to see how my life got so off track. Through my work I strive to help others avoid the career pitfalls that can land them in prison. Tomorrow, (December 4th), I will discuss the second prong of the fraud triangle and on Friday, the third prong.

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