LAS VEGAS — When news broke late last month that three former executives of McKesson HBOC Inc. had been charged in a multimillion-dollar fraud scheme, Steve Behunin, a manager with a recently sold McKesson division, was already in prison.
Behunin, operations director for Sparkletts Water Products Co., now a unit of Groupe Danone SA of Paris, wasn't involved in the alleged crime. But he was at Nellis Federal Prison Camp outside Las Vegas to learn from criminals, as part of his midcareer pursuit of a master's degree in business administration at Pepperdine University. The Malibu, Calif., school sends students here as part of its business-ethics curriculum, to demonstrate what can happen when career ambition crosses the line to criminality.
"The best of us can be tempted," says Behunin, 45 years old, who found himself picturing what his former bosses would look like in prison duds. "This is real."
Call it "Scared Straight: The Club Fed Edition." Just as in the celebrated 1978 documentary "Scared Straight," which chronicled a group of juvenile delinquents brought to a state prison for an encounter with hardened convicts, the Pepperdine program aims to produce "virtuous managers" — or at least deter white-collar crimes — by introducing students to former bankers, managers and entrepreneurs who ran afoul of federal law.
At Nellis, the M.B.A. candidates meet prisoners "who are like themselves," says James T. Martinoff, the finance professor who created the program and has been running it for 13 years. Many of the inmates at the facility "have the same drives and ambitions that they do, but maybe went a little too far."
Does it work? Martinoff says the program has been a success because, to his knowledge, no participant has ever been arrested. He says his surveys show that, in reflection, half the students say that they had made unethical business decisions in the past, and more than one-third realize that some of their prior business transactions "might have been criminal." Nearly 90 percent of his alumni, the professor says, report that the Nellis program gave them an "ethical anchor" for making future business decisions.
On the other hand, he says that in previous years students seeking help raising funds for their entrepreneurial efforts have called upon two of his ex-convict guest lecturers — Mark Morze, who, as an executive in the Los Angeles carpet-cleaning outfit ZZZZ Best Co., helped swindle more than $70 million from investors in the mid-1980s, and Ted Wolfram, a former stockbroker from Toledo, Ohio, who served 10 years for embezzling approximately $50 million.
"It's as if they forget that these are ex-felons and are won over by their charisma," Martinoff says. "Not everybody gets the message that we want them to have."
Gathering at the Treasure Island hotel and casino on Las Vegas Boulevard, the 56 students in this year's program began with an evening orientation highlighted by Morze and Wolfram. "I'm a fox, I'm a fraudster. I was the biggest liar in North America," crowed Morze, 49, an energetic former college football player who has parlayed his notoriety into a career as a motivational speaker. ("I guess crime does pay," he joked.) He also described the horrors of 53 months in prison, including watching one inmate smash in another's skull in a dispute over a chicken wing.
The more reflective Wolfram, lamenting that he had "defrauded my customers, my partners, my family and myself," leaned on Oscar Wilde to make his point: "Remember 'The Picture of Dorian Gray'? That's what my soul looked like," Wolfram, 70, told the students. Another consequence of his fraud convictions: Friends won't let him be the banker when they play Monopoly.
The next morning, beneath a mammoth billboard touting Siegfried and Roy, the students, dressed in business attire to distinguish themselves from the inmates, boarded the bus for the eight-mile trip to Nellis. Such Vegas landmarks as the Elvis-a-Rama Museum and the Flamingo hotel, the legacy of mobster Bugsy Siegel, soon gave way to the Mojave Desert and the low-slung complex of bungalows that make up the prison.
Nellis is no San Quentin. The minimum-security institution and its 556 inmates are largely free to move about the facility during the day. But there are few happy campers at a prison camp, particularly among the white-collar crooks who have shed power ties for khaki uniforms and six- or even seven-figure salaries for 12 cents an hour performing menial chores at the adjacent Nellis Air Force Base.
To hear some of the inmates tell it, the line they crossed between legal and criminal behavior was thin indeed. "We are exactly like you," inmate Darrell Van Brocklin, a former bank president serving nine years for fraud and money laundering, told the students. "If you think that a good set of ethics will keep you from going to prison, you are mistaken." Protesting his innocence, he likened his conviction to a random act of violence dealt by overzealous prosecutors. He warned the mostly male students that, if statistics hold, "two of you gentlemen are going to prison."
With his white hair and bifocals, the 57-year-old Van Brocklin retains the looks and demeanor of the finance executive he once was, before a jury found he had made more than $1 million by manipulating the sale of loans held by his Rapid City, S.D., bank. But, acting as master of ceremonies for the inmate panel, Mr. Van Brocklin launched a critique of the justice system that could have come from the most incendiary radical, attributing his confinement to the fact that "the prison industry is geared to having a constant flow of cattle."
A somewhat different spin came from Robbin McLaurin, aka Robbin Nelson, 43, serving 10 years for a running a telemarketing scam in Las Vegas.
"My biggest crime was my arrogance," McLaurin said. "I thought everything I was doing was legal and ethical until it was challenged." Nonetheless, he allowed that "people are extremely greedy," and added: "I capitalized on that." (According to McLaurin's indictment, his scheme involved falsely telling victims they had won prizes of up to $1 million, which would only be paid after they sent him thousands of dollars in "taxes and fees.")
Prof. Martinoff asked McLaurin if his actions could have passed this test: "Would you have done it if you had explained it to your wife?"
"She would say, 'Don't do it!"' McLaurin replied. "I'd say, 'Look, we're talking about millions of dollars. Just be quiet and keep driving that Mercedes."'
Some students had trouble relating the egregious acts of the criminals to the more mundane ethical dilemmas they face each day. Thyonne Gordon, 37, a producer at a Web publisher in Marina del Rey, Calif., said that she and her colleagues often can spot a simple fix to help a client's software run better. "But do we tell them? No," she said. "We basically shrug our shoulders and say, 'Your tools are not working. You're going to have to use our tools"' — at greater expense.
Such business behavior may be legal, but is it ethical? The Nellis visit didn't help Gordon answer that question. "I don't need to be scared straight. I'm already scared of prison," she said, noting with some envy that students in the import-export class got a field trip to Japan.
Other students, meanwhile, walked away filled with sympathy for the inmates.
"Ten years for a nonviolent crime? I don't see that as helping society," said Vince Monteparte, 35, a software-company manager from San Diego. The convicts, he said, were businessmen eager to make their fortunes. "A lot of the things they aspired to, I aspire to. And sometimes we all get trapped in pursuit of those goals," Monteparte said, before heading off to the craps tables.
Richard Hutchin, 54, president of an aerospace manufacturer in Calabasas, Calif., was one of the few participants in a class exercise who found it improper to read a subordinate's private e-mail, even though it usually is lawful for an employer to do so. "There seems to be about 10 percent of the class that can relate to the issue," he said.
Hutchin wondered if some of his classmates might end up spending considerably longer than a day at a place like Nellis.
"The two characteristics of the potential criminal are arrogance and greed," Hutchin said he had learned. "And there are a couple of people in my class who share those characteristics."