Business Ethics: What General Steel and Bernard Madoff Have in Common

This is my longest article yet, because of much-needed background info, which forms a case study in American business ethics, or the lack thereof, as we have it in the marketplace of modern America.

Burdened by the racial division a former African refugee observed in the Baptist churches of Kentucky, he began dreaming of a local church where blacks, browns, and whites could worship together, a church where it would not be true that 11 O'Clock was still the most segregated hour in America. So, with some 30 friends who shared his vision of a congregation without segregation', the African immigrant-turned-American-citizen launched Church For All (CFA) on March 21, 2004, at a skating rink in Owensboro, Kentucky's third largest city.

It quickly became evident that the church would need a permanent place of worship. In their search, they found that buying an existing building would cost about the same as building new. That was when Rev. Matally recalled radio ads by a company that calls itself "The General", offering up to half-price on a metal building. He called General Steel for more information. Before long, the minister was having regular conversations with Al Lamp, a salesman, whom the pastor later connected to the church treasurer.

Based on the following email from Al Lamp to the church treasurer, dated Friday, June 16, 2006, with the subject " General Steel Commitments", the church decided to make a deposit on a steel building from General Steel. Mr. Al Lamp wrote, "Bob, per your request, this is what we discussed. The building original cost was $36,173. The rebate eligible through today's business is $7,958. This brings your final building steel cost to $28,215. Based on similar church projects, you should expect your finished cost to come in at 4 times the amount or at about $120,000 ($50 per square foot). This is a safe figure and is really only at risk by your own choice of beyond the normal type of finishing or materials choices. General Steel will assign at no charge to you a Project Coordinator to handle your project including your engineered and State stamped blueprints, anchor bolt plans, components, and will assign our own network of subcontractors for the erection, concrete, and finishing. General Steel will also arrange shipping at a cost of $2,239. The Church for All will be handled with the same due diligence, professionalism and quality as all other projects. I hope this gives you what you require. If not then call me."

As you may notice from the first line of this email, Bob had required something in writing, so the church would not just have the salesman's word to go on. The church considered Mr. Lamp's email official General Steel correspondence, or they would not have decided to make any payment to General Steel.

Church for All's decision to write General Steel a check for a deposit towards a steel building was driven by three key factors: (1) The promise that the final cost of the building would be around $120,000 or not more than four times the cost of the metal frame; (2) the impression that General Steel was a manufacturer of metal buildings, that being the reason for their very low price; and (3) the promise that General Steel would help the church find a contractor familiar with their material/product.

After CFA paid the initial deposit of $6,900, Ronald Lamping was assigned to them as their Project Coordinator. The church later asked to increase the size of the building from 40X80 to 50X80; CFA sent a second check for $2,344.69 to General Steel for a total deposit of $9,244.69.

Mr. Ronald Lamping then gave Rev. Matally the names of two contractors that were supposedly close to Owensboro. The first one was supposed to be located in Bowling Green, Kentucky, which is 70 miles from Owensboro. But when the pastor dialed the phone number, a man told him that he was not a contractor and did not know of General Steel; the man gave no further information.

Pastor Matally dialed the second phone number only to learn that the contractor lived in Michigan. That Michigan suggested CFA find someone local in order to control the cost of construction. Rev. Matally called Mr. Lamping back for the name of another contractor, but there was none. At that point, Lamping began to tell Rev. Matally that General Steel was not obligated to assign CFA a contractor. Mr. Lamping's tone changed from courteous to defensive, even combative.

Pastor Matally and fellow church leaders began contacting local contractors, each of whom required an engineered drawing in order to quote a price on the construction. The pastor called Mr. Lamping for the drawings that General Steel promised, but what Lamping sent was a set of drawings with the words "NOT FOR CONSTRUCTION" written across each page. The minister thought CFA would be receiving construction-ready drawings, since they had paid the full deposit. Mr. Lamping then demanded additional funds as a condition for General Steel to release engineered drawings that a contractor could use for construction.

Rather than send General Steel more of the church's money, the minister sought engineered drawings from a local source. Four contractors looked at the engineered drawing and submitted bids ranging from $300,000 to $400,000!

Meanwhile, Ronald Lamping began to remind the church of the impending delivery date, and that if they reneged on the contract they would forfeit their full deposit. Mr. Lamping made sure the church took his threats seriously. The church tried to let Mr. Lamping know that it was General Steel who had not kept their word, but Lamping kept pounding the delivery deadline.

Pastor Matally refused to send General Steel additional funds. On January 30, 2007, the minister asked an attorney to write a letter to General Steel on behalf of Church For All, requesting a refund. General Steel never replied that letter. The pastor then asked his Pre-Paid Legal firm to write another letter. General Steel did respond to that letter, saying CFA breached their contract and would not get a refund. The Pre-Paid Legal lawyer told Pastor Matally it would cost a significant amount of money to pursue a legal course with General Steel.

Despite the General Steel scam, CFA managed to build a new building, using a supplier recommended by the local contractor they found. The church moved into their new building on Sunday, April 20, 2008. Still, they could use the money taken by General Steel to complete their church sign, not to mention a few other expenses.

Pastor Matally feels like General Steel has taken advantage of their small church, simply because the church cannot afford the legal fees required to sue General Steel. A company like General Steel should not have the right to take and keep over $9,000 from a struggling church, without doing anything to earn that money. What did General Steel do to earn the money they got from CFA, except for making empty promises and issuing threats?

General Steel gave the church the impression all along that they manufactured metal buildings. General Steel is listed on the website of the industrial directory called MacRAE's Blue Book, with the following misleading information: "Steel building construction; manufactures prefabricated metal buildings & components; travel agency Travel agents, Tour arrangement services, Travel agencies, Chartering services, Structures and Building and Construction and Manufacturing Components and Supplies."

Here is the truth: General Steel is a sales company that does not manufacture the metal shell and the components it sells. This is deceptive to say the least.

On July 1, 2008, Rev. Matally mailed a letter to CEO Jeffrey Knight of General Steel. The pastor opened his letter with these words, "I am writing this letter to you, because every effort to get our money back from General Steel has been met with refusal, total lack of understanding and cooperation. I, along with Church For All, have been taken advantage of by General Steel, who was supposed to save us thousands of dollars in construction cost, but ended up taking more than $9,000 (nine thousand dollars) from our church and gave us NOTHING in return."

The pastor called the company on July 17 to find out if they received his letter. One Mr. Bruce Graham, who claimed to be "the finance guy" for General Steel, returned the phone call. Mr. Graham blamed the church's building committee chairman for "breach of contract". Graham said the church is responsible for General Steel losing thousands of dollars, far more than the $9,244 of deposit that the company took from the church. He said General Steel should be suing CFA to collect damages.

Talk about business ethics, which The Free Dictionary defines as "the study and evaluation of decision making by businesses according to moral concepts and judgments"... So whatever happened to business ethics in the United States? Are they still teaching business ethics in America's business schools? If so, how do we explain the shady loan instruments that have tanked the American economy, especially the housing and financial sectors? If they are still teaching business ethics in America's business schools, what accounts for the success of such rip-offs as Bernard Madoff with his $50 billion ponzi scheme, Alan Stanford with his $9 billion banking scam, and General Steel Corporation who got away with financially raping a helpless little church in Western Kentucky? Capitalism cannot survive a collapse of ethics in the marketplace. Reform in business ethics is perhaps the most important turn the American economy is waiting for to rebound.