Jul 1, 2015

By Guest Blogger, Ron Smith

Boscobel is a beautiful Federal period manor house on a bluff overlooking the Hudson River. The grounds offer a southward view of the river toward Bear Mountain, the Appalachian Trail, and the US Military Academy at West Point. On summer evenings after dinner on the grounds, Shakespeare is performed under the stars. During the day, visitors tour the house and the grounds and read the history of the estate from the brochure:

Boscobel was originally built from 1804-1808. The project was conceived and initiated by States Morris Dyckman, a Loyalist, who made his fortune working for British quartermasters during the Revolutionary War. States died in 1806 with only the foundation for Boscobel in place. The project was completed by his wife Elizabeth Corne Dyckman, who lived in the house until her death in 1823.

But wait. How can it be that Mr. Dyckman “made his fortune working for quartermasters?” Could there be a Procurement story behind this wonderful estate with the magnificent view? Yes, there is.

States Morris Dyckman was a descendant of a long-established New York family, and a staunch Tory. At the age of twenty-one he was arrested by the revolutionaries in Albany, imprisoned, and banished to New York City, where he quickly found wartime employment as bookkeeper for the British quartermasters serving the army of General Sir Henry Clinton. As the revolution raged around him General Clinton and his army sat entrenched in New York. Neither General Gage at Saratoga nor Lord Cornwallis at Yorktown received any assistance at all from General Sir Henry Clinton. His army sat through the revolution: eating, drinking, drilling and spending vast amounts of the King’s quartermaster funds.

Every day States Morris Dyckman sat meticulously recorded every penny and every pound of Crown funds spent by the quartermasters. Including the overpayments that they kept for themselves. Apparently his records were very meticulous, and his memory was very sharp, because after the war, the British quartermasters awarded a generous stipend to States Morris Dyckman. The stipend was not a pension from the Crown, but rather annual payments from the individual officers, paid privately from their own funds. From these funds Dyckman was able to live prosperously for the rest of his life and support his adult Illegitimate son, to support his sister’s Opium habit and to build his ideal home: Boscobel.

This was clearly a very generous stipend, but one that was not consistently paid. On several occasions, Dyckman was obliged to travel to London to meet with the British officers and to remind them of his thorough bookkeeping and superlative memory. On each of these trips, the British officers were apparently extremely impressed, because the stipend was immediately brought up-to-date and the annual payments were resumed.

On one such visit, in the Spring of 1800, Dyckman arrived in London to discover that the Quartermaster General and his subordinates were being investigated and prosecuted by the Crown for fraud and misappropriation of funds. The officers were vigorously defending against these charges and were eager to pay Dyckman an additional fee to assist in their preparations. He remained in London for three years, carefully researching the books and records from the wartime occupation of New York by the army of General Sir Henry Clinton.

When the matter came before the military tribunal, the quartermasters introduced into evidence a current, complete, and accurate set of books transcribed in fresh blue ink accounting for every penny and every pound. These documents showed conclusively that the British army had indeed been the victim of a massive fraud. The documents showed that the fraud had been perpetrated by the American contractors, all of whom were 5000 miles away, none of whom were British subjects anymore. Thanks to the careful research of States Morris Dyckman, the British quartermasters were exonerated, promoted, and sent to India, where they continued to serve until their very prosperous retirements.

So how do we interpret the case of States Morris Dyckman, a successful landowner and businessman? In life his record of ethics and compliance was never impeached. He was never charged with a crime or subjected to scandal (except perhaps for the illegitimate son or the opium). Historians cannot sustain a charge of Blackmail because the stipend was merely an act of generosity by his employers, a generosity so profound that the Heirs continued to pay for decades after the war was over. He can’t have been a Forger, since the books implicating the greedy American contractors were fully accepted by the Crown prosecutors. In historical context we recognize him as an opportunist, an entrepreneur, and an early success as a government contracts consultant. We can also draw some contemporary lessons from his revolutionary experience.

First, we are reminded that the one of the greatest Ethics and Compliance vulnerabilities is the Inside Job. Many government and corporate ethics and compliance programs focus on the individual responsibilities and accountabilities within the workforce. The ethics policies and procedures are designed to deter the individual employee who opportunistically seizes upon a weakness in the system to commit a crime. Few compliance programs are robust enough to withstand systematic attack by highly-placed individuals who control both decision making and record keeping. In the case of States Morris Dyckman, the British officers controlled the money, the flow of the money, and ultimately the interpretation of the facts, all with the willing and well-paid assistance of their shrewd bookkeeper.

Second, we become acquainted with the personality of the Fraudster, the socially adept and morally flawed individuals who see themselves as exempt from compliance programs, checks-and-balances, or ethics in general. To them rules are made to be broken, and thinking-outside-the-box is meaningless because there is no box. When their fraud is detected as in the case of the British quartermasters they solve the problem with a forgery, or a perjury, or any expedient that serves their purpose. Like the British quartermasters, Fraudsters have rationalized their behavior and justified their actions so that detection only increases their defiance.

Did the British officers use Dyckman or was it the other way around? Either way the Crown paid the price in the end. In modern organizations we flatter ourselves that this principle is well-settled, but is it really? In recent years we have experienced multiple examples of ethics violations where financial officers and executives conspired to violate the ethics rules. For example the Enron case and the Darleen Druyun case resulted in indictments of both CEO and CFO in Fortune 500 companies.

The revolutionary lesson, both then and now, is that ethics and compliance programs cannot be top-down. The risk to the organization from executive malfeasance is as great, or perhaps greater, from executive violations as from employee pilferage. Ethics programs cannot be top-down or bottoms-up, but rather pervasive, built into the fabric and culture of the organization. Where agency or company leadership sees ethics and compliance as a stand-alone set of rules imposed on the workforce as a “program” the door to the vulnerability is opened. Ethics and compliance success depends on a uniform and integrated application of the rules, encompassing the workforce, the leadership, and (as in the case of States Morris Dyckman), the bookkeepers who keep score.

 

 

About Ron Smith:

Ron Smith is a contracts and procurement consultant specializing in negotiations and contract resolution. His clientele includes both buyers and sellers seeking improved negotiation results. He has served in senior executive positions at Airbus, Hewlett Packard, and Northrop Grumman including major systems acquisitions, state & local contracts, commercial and international projects. As a professional leader he has served as National President of the National Contract Management Association (NCMA) and is a recipient of the Charles A. Dana Award for NCMA service. He is the author of numerous books and articles, including the Contract Management Body of Knowledge (2004).

Ronald Smith Contracts, Inc.

7777 North Wickham Road, Suite 12-403, Melbourne FL 32940

Phone 202-664-0707

ronaldsmith@ronaldsmithcontracts.com

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