Convicted Stockbroker Describes Ethical Lessons

By · Sunday, March 8th, 2009

I met Justin Paperny in federal prison. He self-surrendered to the minimum-security camp in the late spring of 2008, and we became friends. Justin was sentenced to serve an 18-month term for a conviction redacted to securities fraud. His was not a background that would have suggested he would encounter trouble with the criminal justice system.

Justin graduated from the University of Southern California in 1997. He had played third base for the Trojans’ baseball team, and he earned a degree in psychology. Following his graduation, Justin pursued a career as a stockbroker.

Justin acknowledge that he had been reared with privileges, good role models, and advantages that others did not enjoy. By his 25th birthday, the then distinguished brokerage house of Bear Stearns employed him. When he was 26, the rival firm of UBS recruited Justin by offering him a mid six-figure signing bonus. At 28, Justin allocated and oversaw more than $150 million worth of securities. As a young, single man, Justin’s annual income placed him in the top three percent of all American earners.

Despite what others would have considered a smashingly successful career, Justin yearned for more. Greed and envy clouded his judgment. When he learned that a client of his was operating a Ponzi scheme, Justin took steps to shield himself from liability. Though he did not take appropriate steps to report the fraud to authorities. Having done so would have cut into the commissions he counted on earning. By abusing the discretion that came with his position, Justin became complicitous with the fraud.

Those were the reasons that brought him to prison. While we were together, I asked Justin to participate in a project on which I was working to gather data on the subjects of ethics. I explained the efforts I was making to contribute to the work of Professor Jana Schrenkler, of Saint Mary’s University. Professor Schrenkler had designed a questionnaire that I was using as a guide. Justin’s responses follow:

Ethical Development

1. Do you feel you have a good understanding of your personal core values? How did those core values guide your decisions while you were on the job?

Now, with nearly a year of imprisonment behind me, I have a much better grasp of my core values. Ironically, those were the same values that guided me as a child and through my college years. I was an athlete. I valued the importance of honesty, hard work, self-discipline. Once I graduated college, however, my allegiance to such values diminished. I had entered the world of money management. As a stockbroker, I made decisions that would lead to short-term earnings. I deeply regret having lost the core values that I know to have been right. I am ashamed to admit that while I was building my career, the values that drove my decisions had more to do with greed and immediate gratification.

2. What was the most important aspect of a career in business for you? What motivated you most?

As a young stockbroker, I was compensated in accordance with the amount of trading commissions I generated. I felt a constant pressure and motivation to earn more. My colleagues encouraged me to devote my time to activities that would yield higher commissions on trades, and fees we could earn through other areas, such as margin loans and asset management. The more money I had under management, the more income I generated for my brokerage house, my colleagues, and for myself. High earnings motivated me. Such values led me to decisions that I now regret.

3. Who do you think is responsible for the ethics of a company?

A company is made of individuals, and every individual who works for the company bears a responsibility for its ethical culture. The culture of ethics begins at the top. It works its way down through officers, supervisors, and every employee.

Ethical Decision Making

4. Did you have a written code of ethics at your company? Did you base your decisions around those cods.

We had a written code of ethics at both Bear Stearns and at UBS. Yet it was not a part of the culture. As financial services professionals, we had requirements to participate in various continuing education courses. Unfortunately, those were not the codes that drove the culture. I participated in the obligatory courses, though I focused more on my responsibilities as a young broker. As I perceived them, and as I was compensated, my superiors expected me to generate an income. Naturally, they expected me to use the discretion of a professional. Though I sensed that my duty was to the firm and to surpassing Wall Street earning expectations. The subject of ethics was not one we discussed.

5. Did you believe your business decisions followed your company’s core values?

I am ashamed to say that yes, I believe the decisions I made were consistent with the values of my company. This acknowledgment may strike some as absurd. I was a stockbroker, and a decision I made resulted in my being charged with securities fraud. Yet I am referring to the company’s core values as I perceived them, not to the company’s published values.

The published values may have touted the importance of ethics, integrity, and honesty. Unfortunately, such was not the emphasis at UBS or Bear Stearns. Indeed, both firms have been disgraced in recent months because of their unethical cultures.

My decisions were unethical. Unfortunately, I also feel they were consistent with the unethical culture in which I worked. That does not excuse my behavior, as I recognize now that I should have made decisions based on honesty, integrity, and the good character of which I was capable. Indeed, I let myself stray from what I know to have been right.

6. Did you think you should have been held to a higher ethical standard, given your position?

Without question, I should have been held to the highest ethical standard. I was reared in a good home. I had an education from the best schools. My clients trusted me to look after assets worth millions. That position leaves me without excuses, only a great deal of shame.

7. Do you feel your employees were equipped to recognize ethical dilemmas?

As a broker with many clients I employed an assistant. Her allegiance was to me and to the commissions I was generating. I do not believe that I provided her with the leadership necessary to recognize or resolve ethical dilemmas

Corporate Environment

8. Please explain the corporate culture within your company during your involvement.

I worked at Bear Stearns and UBS for the majority of my brief career. Prior to those two firms, I briefly worked at Merrill Lynch. Ironically, all these firms have been mired in scandal since the economic crisis began. One of the reasons, I believe, was that the corporate culture was driven by greed rather than good citizenship. I recognized it within weeks of beginning my career. I am ashamed to admit that I lacked the strength of commitment and judgment to act in accordance with a code of values that I know to be superior.

9. Is it possible to have a very aggressive corporate culture, yet foster an ethical environment?

Yes it is, I am certain of it. Such a culture, however, must be nurtured from the top. Although as a young broker I chose the path of least resistance, I had the privilege of acquaintance with some outstanding investment managers. They did not work for the large Wall Street firms. Instead, they ran boutique firms, and the leaders of those firms personified excellence. They were living the values they professed, and rewarded their employees with regular training. That training included speakers who offered seminars on ethics, balance, and the inherent value that accompanied lives of significance. The leaders of those firms aggressively recruited clients, though they emphasized that their culture differed from aggressive trading strategies. They nurtured long-term relationships with the client. Such was a winning strategy, though it was not one I appreciated at the time.


10. If you could choose to redo anything, what would it be?

I would have continued to pursue higher education. I should have not only advanced to graduate school, but I should have continued learning in informal ways. My focus was wrongly placed on earning a high income. In my early 20s, I lacked patience and discipline to appreciate the value of wisdom. I needed more raining to grasp the significance of reputation, of leading a values-centered life. That misdirection did not serve me well. As a consequence of my having lost touch with my core values, I made decisions that disgraced my career. Worse, it contributed to the victimizing of others.

11. Did anything good come out of this?

Yes. I feel sad for the trouble I caused to so many others. Though I feel grateful to have had this opportunity to recalibrate my life. Prison has given me a wake up. I intend to live the remainder of my life as an honest man, never having to look over my shoulder because of unethical decisions I made. In time, I hope that efforts I make to redeem the bad decisions of my early career earnĀ  my place back as a good citizen.

12. What is your biggest regret?

The biggest regret I have is the shame I have caused to my family, and the lifelong disgrace my decisions bring to me. I strive to atone, but there are some bad decisions we can make that we cannot undo. I caused others harm, and each time I see a financial scandal on the news, I feel a sense of humiliation. It stings. I regret the bad choices that I made in order to serve my interests at the expense of others.

13. What roadblocks do you expect to encounter upon release?

I am a felon and I am barred from the securities industry. My convictions have cost me well over $500k in hard costs, fines, and restitution orders. I expect to work the rest of my life to pay off the costs that were associated with the greed and poor judgment of my early career as a stockbroker. Somehow, I hope to make contributions to society, though I must also find a method to sustain myself. Perhaps I can teach, as I’ve learned lessons that can be of value to others. Still, I do not know the restrictions or stigmas I will encounter as a man released from federal prison. I must also learn to live with the shame that follows me like a shadow.

14. What advice would you provide a business student?

As a young student at USC, I dismissed courses or lectures on ethics. I never expected they would have relevance to me. Yet as I entered the business world, I was constantly confronted with ethical dilemmas. They would have been a dilemma to me at all if I had had a strong core. I would advise business students that an education does not end with a degree. Each individual should recognize the value that comes with a commitment to learning. Taht student should not neglect the importance of ethical lessons, as they are human lessons. I learned mine from the wrong side of prison boundaries. As a consequence, I carry a heavy burden. I advise students to recognize that they must prepare themselves for the challenges and ethical dilemmas of the business world.

15. How do you feel about a Business Ethics class questioning you on your ethics?

I feel a sort of catharsis in writing about the shame that I carry within me. I made some bad decisions, decisions that I would not have thought possible when I was a college student. Talking about my disgrace is like an exercise in expiation. If I were speaking in person, I suppose that those in audiences would cast aspersions at me. As a felon, I will have to learn to live with the disgrace I have brought upon myself. By talking about my ethical lapses, however, I hope that I may help others, and I hope that I may begin the healing process for myself.


I found Justin honest and remorseful for his actions. Perhaps his efforts to atone will help him reconcile with his conscience and with society. I welcome reader questions and comments.

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One Response to “Convicted Stockbroker Describes Ethical Lessons”

  1. Jana Schrenkler says:

    While I am thrilled at Justin’s participation in my project, I am surprised at his response to question number 9. Other respondents have started their answer to this question with: “yes, but…”. I find it fascinating that Justin is certain it is possible to have an agressive corporate culture and an ethical culture as well. This is an area I plan to explore further. Thanks so much for the participation. I welcome comments via email: