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White-collar Confessors: Prominent Offenders Speak to Their Crimes

Published Tuesday, July 1, 2003 in the Star Tribune.

By Terry Fiedler

The First Baptist Church in downtown Minneapolis was the scene of an extraordinary recounting of white-collar sins Monday.

Dressed in prison khakis and escorted by two federal agents, George Kline, a man once regarded as one of Minnesota's most powerful financiers, presented himself as a cautionary tale of the late 1990s bull-market-gone-bust.

"I had a tremendous amount of income. I could borrow seven figures with a phone call," said Kline, who was one of five prominent white-collar criminals who spoke at program called "White Collar Crime and Personal Responsibility."

The gathering was relocated from the University of St. Thomas' Minneapolis campus to the nearby Baptist church to accommodate a larger-than-expected audience of about 300.

"I managed to go from the very top to the very bottom," Kline said.

Pointing to a number on his prison uniform shirt, he said, "This reminds me that this is what I am, and this is what I have been."

Kline was sentenced in April 2002 to 78 months in prison for insider trading and related violations. On Monday, the sentence was reduced to 54 months.

The program is a collaboration between St. Thomas and the U.S. Attorney's office in Minneapolis. In some cases, prosecutors approached the men they'd helped convict and invited them to speak. Neither Kline nor any of the other participants will be paid for their appearances nor were they given other special considerations, according to the U.S. attorney's office.

Former Minneapolis City Council Member Brian Herron, who resigned about two years ago after pleading guilty to extortion, told the audience: "The pain is still deep. I wanted to be a righteous person, a person of integrity."

Herron extorted funds not for want of money or power, he said, but because of his self-doubt and depression.

"Once you begin to dance, you can't stop dancing. You know something is wrong," he said. "Your thinking is not as clear is it should be. I justified it by saying, 'It's just a loan. He's my friend. He wanted to do this for me.' "

Herron said that when the FBI came calling, he decided against fighting the charges. "In my wrong, I wanted to be right. How do I make it right?"

Herron now works in a program that helps ex-prisoners to make the transition back into society.

A panel discussion included former business executive Marvin Goldstein, who is awaiting sentencing for trading illegally in some of the same stocks as Kline; Donald Snede, a former chief financial officer who pleaded guilty in 1992 to lying to investigators in connection with the Midwest Federal Savings and Loan criminal conspiracy; and Martin Fiterman, a Minnetonka stockbroker who pleaded guilty in 2002 to aiding and abetting an insider trading scheme that cost investors about $20 million.

'Just walk away'

The bull market of the '90s probably "contributed" to white-collar excesses, Fiterman said, but "in the end, you have to be responsible for what you do."

If it doesn't seem right, he added, "just walk away. It just isn't worth it."

Snede noted that many lawyers and accountants put themselves in the position of not knowing about unethical activities while at the same time structuring things in a way that allowed executives to run amok.

Regulators also didn't help the problem at Midwest Federal, which was the biggest savings-and-loan failure in Minnesota in the late 1980s. "It's an open debate whether we were regulated or not," he said. "Our organization had a history of breaking regulations and getting away with that."

Snede, who now is chief financial officer of a security company, said the Midwest experience -- including a sentence of just 60 days in the workhouse in part because he cooperated early on with investigators and testified against former executives -- has reinforced what he said knew all along: "Don't be afraid to tell the truth."

Goldstein, a former Dayton Hudson executive who also was chairman and CEO of Pet Food Warehouse Inc., said that "stupidity above all else" led him to illegally use inside information to profit on stock deals. He said he now will pay dearly for what he also called "a weakness of my character at that moment."

Goldstein made $33,000 from illegal trades and has agreed to pay $1 million in fines and faces a jail sentence that has yet to be determined. He also will be barred from serving on public company boards.

"The baggage I'm carrying will be with me for the rest of my life," he said. "I may be unemployed. There's also humiliation and pain, and you can't put a price on that."

Driven by ego

Kline's victory in court didn't appear to rob the edge of his emotional talk. His sentence was reduced after a federal appeals court ruled in March that U.S. District Judge James Rosenbaum erred when he sentenced Kline to 6 1/2 years. Kline is serving his sentence in federal prison in Duluth.

The man once known as perhaps the premier individual investor in promising small companies in Minnesota, said ego drove him to make trades on insider information.

Kline said he rationalized that insider trading was a "victimless crime" when in fact the person he bought stock from on the cheap was a victim when the shares soon jumped in price.

"He got screwed," Kline said. "It was a lousy deal."

Now he said the "victimizer" is facing the consequences.

"When I get out, I will proceed with what is left of my life," he said. "I know this: I will always be a felon."

Note: This event was sponsored by the University of St. Thomas School of Law, the University of St. Thomas College of Business and the Center for Ethical Business Cultures.

© Copyright 2003 Star Tribune. All rights reserved.

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