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Ethics in Business

Ethics in Business

Money or Morality?…or Both?

My grandma used to say: “It takes all kinds to make a world” and she always said it when she was exasperated with people. Over time, I think I have met almost every “kind” of person in the real estate world - some very good, some very bad. Existing laws governing real estate practices, general business activity and professional services exist of course, but knowledge of them and caring enough to comply can be a different matter. Being on the good side of the laws is always the goal, but then there are the situations where I am legally right, but ethically conflicted.

A great example

An area I developed in for years had granite rock layers, sub-surface. Unfortunately, granite sometimes contains naturally occurring arsenic, a water soluble and highly toxic element that has been associated with multiple types of cancer with long term exposure at even minute levels. My state Department of Ecology was well-aware of the local arsenic potential and had set up very stringent guidelines for testing and approval of well water for household use. One of many inorganic solutes that required testing was the amount of arsenic drawn from a well that was intended to be used to supply potable household water.

Follow along closely

Arsenic was measured in PPM (parts per million) and at the time anything less than 50 PPM of arsenic was considered safe for household use. But wouldn’t you know it, the state had elected to double the safety factor, deciding to reduce the allowable amount of arsenic down to 25 PPM. They had given us advance notice of this and I was still in the time period where 50 PPM was going to be ok for a few months.

The Problem

I had to supply individual potable water hookups for 6 lots that were stuck out on the far edge of a much bigger project and separated from it by a big chunk of dedicated open space. My choice was to drill 6 individual wells on each lot or run a long 2” PUD spaghetti line to the lots, curving along the edge of the open space. The PUD line was way more expensive, so I decided to dig 2 test wells on Lot 1 and Lot 6 to get an idea on how much arsenic, if any, might be around the immediate area.

Luckily, both test wells turned out to be below what was the maximum allowable arsenic level. I forget the exact measurements, but they were somewhere in the mid 30’s in PPM. This was less arsenic than the current allowable standard of 50 PPM, but more arsenic than would be allowed under the new standards of 25 PPM that would be put in place soon.

Ethics Put to The Test

It looked like I could get away with digging the individual wells and closing with the builder that I had lined up. He would have time to get building permits before the change. That’s what he wanted to do and he had zero problem with the future decrease in allowable arsenic as long as it was legal now. He didn’t care about the future change or its possible long-term effects.

I was more conflicted. The guys I was selling the lots to were building starter and step up homes. Homes for families with kids. I had 2 kids at home at the time and I was just picturing what the arsenic could do to the residents with prolonged exposure to both young and old. I talked to some water experts and discovered that filtration was possible, but the systems were costly and very maintenance intensive. I didn’t feel good about some lazy homeowner complying in the real world and could just visualize a situation where the system wouldn’t be serviced for years, if ever. The state wasn’t involved in enforcing it since it would be an individual well servicing a single home. In other words, it was up to the homeowner.

What’s My Part?

I am not a saint and I have made plenty of mistakes in my life. I feel the worst guilt when I see the hurt on the face of someone that I was the cause of. But, it would have been pretty easy to rationalize the whole thing by saying to myself that I was selling to a builder and he was selling to the future owner. As long as I disclosed everything I knew to the builder on the Disclosure Statement, I would be clean of anything having to do with the eventual homeowners … and legal to boot. Future Disclosure to potential homeowners was up to him.

But, I just couldn’t do it.

The project had a single investor and he was a principled man. I told him the whole story and that I had decided if he wanted to drill individual wells, given the upcoming arsenic change he would have to do it himself. He had made a ton of money on the earlier phases, so he was in a pretty good mood about the project, but he didn’t go along with me for that reason. His reason was similar to mine: we both knew more of just about everything than a typical homeowner would know and neither one of us felt right about knowing the change was coming and sliding by on the current rules that were being changed for a good reason based on real science. It probably cost us about $60 grand more to run the PUD line than drilling the wells, but It still felt better in the end.

YOU might Say: “What a Dope”!

Some might figure that so long as you are legally covered then the rest is caveat emptor (buyer beware). Maybe so, but that’s not me and it felt better knowing that no amount of arsenic was going to wind up in the baby formula of some unsuspecting mother whose husband was too lazy and stupid to maintain an essential filtration system.

If another guy would have made a different decision I don’t judge him as long as he follows the laws, but I have to be able to look in the mirror in the morning and be reasonably happy with myself. That’s what it took in this case. I always try to remember that my actions today can have cascading consequences on the lives of others that are not always immediately known and that if I take good care of others I am really taking good care of my own self too, … because guilt is a bitch to live with.

Negotiating Mineral Royalties

Negotiating Mineral Royalties

Understanding Water Rights

Understanding Water Rights