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The below lesson is an excerpt from my upcoming book, When Not If: A CEO's Guide to Overcoming Adversity, Forbes Book, January 2024.

LESSON FOR CEO’s: When you face extreme adversity, fight your battle early. If you appease the black swan instead of confronting it and standing up for what you believe is right, it can rapidly expand into an overwhelming and unmanageable, even existential, challenge. Be Churchill, not Chamberlain!

As regulators expected, their press releases that our billion-dollar firm was under investigation became an immediate existential issue for the company. Clients already spooked by the turmoil in the markets in the wake of the Madoff scandal and the housing crash of 2008 began to run for the exits. Many of the advisors on the team also went to greener pastures to avoid the battle.

Without an opportunity to utter a rebuttal, review an accusation, or even offer a resolution to any discrepancy, this public release had accomplished its mission. Our firm would have to close its doors. It truly was genius, by design, as the regulators accomplished their goal to shut down a second-tier firm without ever going to court or providing any evidence. Due process was not required. Proving or even explaining any allegation was not necessary.

I raged with all the typical outbursts that evening, “How is this possible in the United States of America?!” The reality is that I was completely outmatched. Our attorneys and accountants were outmatched. I now could see I was staring into the abyss. As the CEO, once again I was defeated. As protector of our employees and clients, I failed. As a father and husband, I failed.

Nevertheless, I refused to accept what I believed were fabricated allegations. The regulators claimed our firm had inflated the price of one private security, EPV Solar, in one of our three hedge funds. We priced shares of EPV Solar at $2.88 per share. The government argued that we criminally mispriced the shares, that $2.88 was too high, and the price should be lower. The government never specified what the proper price should have been.

The government claimed that I, as the CEO manipulated my management team, the independent valuation experts, and the licensed auditing firm to all place and approve a fraudulent price on this one stock, which was point-two-percent (0.2%) of our total investments, in order for our firm to receive $140,000 in unearned incentive fees, during the period our firm earned over $8,000,000 in fees. It all seemed utterly absurd to me.

So, I told them to go to hell. I believed in my naïve, inexperienced mind that there was no way their baseless accusations could stand up in a court of law. How terrible was my judgement about the real world.

J. Peter Lynch was called to testify. Lynch was sworn in and took the stand as an expert government witness. Under examination, Lynch described the calculations he used to assign a value to EPV Solar.

QUESTION: When you fixed it on the last amount of $2.88, you felt that also was a reasonable figure based upon the value of the company?

LYNCH: Correct.

QUESTION: And in the attachment, you say, “consequently it is my conclusion that the share value of $2.88 and the overall company valuation of approximately $500 million arrived at earlier in this memo is conservative,” correct?


Following the testimony of J. Peter Lynch, the financial auditor Michael Umscheid, of Harbinger PLC, was sworn in.

UMSCHEID: (S)o my audit was focused on the cash transactions in and out and the valuations of the companies that the hedge fund held . . . because of the bond raise (Jefferies & Co. $77 million raise for EPV Solar) there was an intrinsic value to the stock of $2.88 per share, based on the bond raise . . . Yes, I—I approved—I gave my opinion that the asset value that they put at $2.88 was reasonable, yes. (Trial Transcripts pps. 2453, 2532, 2542]

Yet, they killed the firm, they convicted me as CEO, and they sent me to 14 years in a violent federal prison. I never understood why they had to kill the golden goose. If the regulators truly believed I had masterminded a wild fraudulent scam, then why didn’t they just fine, censure, prosecute, and bar me, the founder and CEO, from the securities industry? Instead, they, overnight, shut down a company that supported the lives and families of so many people—employees, clients, vendors, shareholders, charities, and community partners.

When the adversity showed up in our office reception area, I was Chamberlain. I appeased all processes and never believed the aggressors would carry forward in what seemed an absurd mission contrary to the benefit of all stakeholders. I was weak, and I failed everyone. I should have recognized these threats as existential and taken a stand when the stakes were much lower. I allowed a regulatory fishing expedition when I should have battled everything early on. I should have been Churchill from the beginning.

Please learn from my mistakes.

Have a great week!

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