July 02, 2008
The Illegal Ethicist in the NYT
Posted by Christine Hurt

I cannot possibly be the only person who hates Randy Cohen's "The Ethicist" column in the NYT Sunday Magazine.  Readers (real or imaginary) present sticky social and professional situations, and Cohen tells the reader the "ethical" path the reader must follow.  Exactly what code of ethics is being followed is unclear; Cohen is obviously drawing on some sort of moral compass, but we are never told where this moral compass comes from, what moral philosophy it draws from, etc.  Just a big jumble of what is right and wrong according to Cohen.  And of course, Cohen never takes into account what is legal, which should be at least part of the answer if we believe either that one has a duty to follow (at least just) laws or that laws reflect some sort of balancing of duties, rights and consequences. 

Anyway, this Sunday Cohen is asked by Patrick Hebron of Brooklyn whether it is "ethical" for him to give a young artist friend $9,000 in return for a 1% share of his "lifetime earnings" no matter what time of work the artist does.  Cohen claims that this is not unethical but might be a bad deal for the investor.  Cohen likens this arrangement to three things, which should raise red flags.  First, Cohen likens the arrangement to "investing in a corporation."  Bingo!  And we call that buying a security, which are required to be registered with the SEC unless covered by an exemption.  So, Mr. Hebron, Cohen has just given you the go ahead to possibly break the law.  Cohen, who seems to focus on whether this creates an indentured servitude aspect, says the arrangement are like the Bowie bonds.  But of course, the arrangement is nothing like the Bowie Bonds, which are the mere securitization of royalties from songs already written and recorded.  The moral hazard of the artist that Mr. Hebron is worried about is not present in the Bowie Bonds.  Cohen also likens the arrangement to "French Open tennis champion Ana Ivanovic, who received the backing of a Swiss businessman when she was 14 in exchange for repayment if she hit it big one day."  The businessman actually became her business manager and covered her expenses with an interest-free loan, hiring a coach for her and setting her up in Switzerland after she had to flee from Serbia.  That's called a loan.

Of course, if the Ethicist read the Glom, he would know that this arrangement was considered by a minor league baseball player and abandoned after both the SEC and the MLB became interested.

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