Former Broker Tells Cautionary Tale About Criminal Past
By Brooke Southall, Investmentnews.com

SAN FRANCISCO — A former bad apple held the crowd captive at the Investment Management Consultants Association conference here last week.

Patrick J. Kuhse, a former stock broker and supervisor at Planner Independent Management in San Diego, riveted the IMCA faithful with tales of defrauding clients and paying his debt to society in penitentiaries and a Costa Rican “dungeon.”

The San Diego-based principal of Speaking of Ethics told a cautionary tale of how easy it is for anyone to make critical-thinking errors that could lead to unethical conduct and its consequences. Speaking of Ethics is a consulting firm that teaches corporate ethics.

Mr. Kuhse’s crime was kicking back payments to get a friend in Oklahoma’s Treasury department to look the other way on bloated commissions he charged on trades. Mr. Kuhse made as much as $400,000 a week between 1990 and 1992 on transactions that normally would command about $1,500, he said.

What leads to white-collar crime isn’t what many expect, he said. Mr. Kuhse grew up in the most nurturing of nuclear families in rural Iowa and watched minimal television.

That didn’t make him exceptional on the cellblock.

“Everybody in [prison] looked like people in this room,” Mr. Kuhse said. “That startled me.”

The first critical-thinking error many people make in becoming unethical is developing a sense of entitlement.

“I’m deserving of all the things I can amass,” Mr. Kuhse said to describe his former attitude.

But the handmaiden to entitlement is rationalization, he added. For instance, in the case of his own crimes, Mr. Kuhse was able to rationalize that the state of Oklahoma was making millions of dollars from the investments he sold it.

The ability to rationalize sustained him while he hid from the U.S. authorities in Costa Rica from 1993 to 1997 after driving over the border to Tijuana, Mexico, from San Diego with his family and hopping a flight to the Central American country.

Playing the victim

“I considered myself an ethical person during this entire time,” Mr. Kuhse said. “I told my wife I was a victim.”

But eventually Mr. Kuhse’s wife tired of the fugitive lifestyle and moved back to San Diego with their children.

Her decision changed his outlook, and — after getting the American embassy in Costa Rica to agree to send him to Miami to avoid the notorious local justice system — he turned himself in.

“I ended up in a Costa Rican dungeon with 150 guys and a pipe for a toilet,” Mr. Kuhse said.

Eventually, he was sent back to the United States where he spent more than four years in prison, an amount of time that likely would have been doubled under Sarbanes-Oxley, he added.

However, harder time — or even the death penalty — for corporate malfeasance wouldn’t be a major deterrent, Mr. Kuhse said in an interview.

“[Corporate executives] don’t think they’re going to get caught,” he said.

That presumption was part of what befell Martha Stewart, though she was victimized by another type of poor critical thinking: that seemingly unimportant decisions can turn into vital ones, Mr. Kuhse said.

She made a split-second decision to sell shares as she rushed off on a vacation, he noted.

Later, Ms. Stewart tried to cover her mistake by saying she didn’t remember.

“That worked for Ronald Reagan,” Mr. Kuhse said. “Unless you take personal responsibility, you will go through this.”

Mr. Kuhse’s professional responsibility now includes making about 100 speeches a year on ethics, but he hasn’t entirely escaped his past.

What used to be

“My kids still won’t let me be banker in Monopoly,” he quipped.

But being banned for life from working in the the brokerage industry is a more hurtful hangover, Mr. Kuhse said in the interview.

“I miss it. I miss it a lot,” Mr. Kuhse said.

“It’s the greatest profession on Earth,” he said. “You help people with their dreams and aspirations, and you can make a good living.”