1. Bryan P. Marsal

Bryan P. Marsal, Co-CEO of Alvarez & Marsal and CEO of Lehman Brothers, oversaw the proceedings for the largest bankruptcy in history-the Lehman Brothers bankruptcy filing in September 2008. During a presentation to a group of businesspeople, he was asked to comment about the status of ethics in business. His answer, “there are none.” Marsal's response put a spotlight on the legal yet unsavory behaviors that permeated the financial crisis and led to some big reforms, particularly through the Dodd-Frank Act of 2010.

SEE: 4 History-Making Wall Street Crooks

2. Lipstick on a Pig vs. Honest Advice

Perhaps nothing better characterizes the way the Street operates than the antics of one-time Merrill Lynch analyst Henry Blodgett. Blodgett was the leading internet and e-commerce analyst on Wall Street during the height of the dotcom boom. He became infamous for publicly recommending technology stocks that he referred to with terms such as "junk" and "a disaster" in private e-mail messages.

Based on Blodgett's recommendations, Merrill Lynch brokers actively sold these "junk" stocks to investors. Client portfolios took heavy losses when technology stocks collapsed. Blodgett's actions, while very unethical, were still legal. As a result, he was banned from the industry, not because he promoted stocks that he disliked, but because the companies he promoted were Merrill Lynch investment banking clients, creating a conflict of interest. Today, investors are a little less trusting of Wall Street analysts than they were before the Blodgett fiasco.

In 2002, Blodgett was lampooned in a famous television ad for brokerage firm Charles Schwab, in which a hardened Wall Street veteran tells some brokers to "put some lipstick on this pig!"

3. Complex Securities vs. Let the Buyer Beware

The seemingly never-ending implosion of a host of complex investments, including credit default swaps, special investment vehicles, mortgage-backed securities, and hedge funds, has left a trail of shattered portfolios and bewildered investors in its wake. The investments, and others like them, have structures that are too difficult for even sophisticated investors to fully comprehend. This is clearly demonstrated when the investments collapse and drag down the portfolios of arguably knowledgeable foundations, endowments, corporate pension plans, local governments, and other entities.

With marketing and sales efforts that downplay the risks of these investments, put up against the "obligation" on the part of the investor to understand what they are buying, investors have some big challenges against these lofty opponents.

4. Window Dressing

Window dressing is a strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks that have large losses and purchase high-flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Since holdings are shown at a point in time, rather than on a bought and sold basis, it looks good on paper and it gets delivered as official results from the mutual fund companies. What can an investor do but read it and believe it?

5. Interest Rate Payment to Investors vs. Interest Rate Charged to Borrowers

If you go to your bank and put $100 in a savings account, you will be lucky if the bank pays you 1% in interest for a year. If you take out a bank-sponsored credit card, the bank will charge you 25% or more in interest. Now, what's wrong with that picture? According to the banks, nothing at all. It's all perfectly legal.

Better still, from their point of view, they can charge depositors a fee to talk to a teller, a fee for having a low balance, a fee to use the ATM, a fee to order checks, a fee for bounced checks, and a few more fees for other services thrown in for added profit and good measure. Then, if the depositor decides to borrow, they can charge a loan origination fee, a loan servicing fee, an annual credit card fee, and the interest on the credit cards and loans. It's all perfectly legal and fully disclosed, and can be bewildering to the average bank customer.

6. Higher Interest Rates for "Bad" Credit vs. Lower Rates for "Good" Credit

If you are having trouble getting by (maybe you lost your job or got behind on some bills) and are trying to get back on your feet after your credit rating took a hit, you will probably be charged a higher rate of interest the next time you borrow money. You will pay more for a mortgage, a car loan, a bank loan, and just about every other loan you can possibly imagine.

On the other hand, wealthy people can get loans at rock-bottom interest rates. It is standard practice to charge more to higher risk clients. This policy makes sense on paper but doesn't do any favors for hard-working people just trying make ends meet.

7. Subprime Mortgages

The subprime mortgage is a special variation on the "higher interest rates for bad credit" theme. Borrowers with credit ratings below 600 often will be stuck with subprime mortgages that charge higher interest rates. A borrower with a low credit rating will typically not be offered a conventional mortgage because the lender views the borrower as having a larger-than-average risk of defaulting on the loan. Making late bill payments or declaring personal bankruptcy could very well land borrowers in a situation where they can only qualify for a subprime mortgage.

8. Investment Firms Promoting Stocks to Clients vs. Selling Them in Other Accounts

One side of the business is busily selling stock X to its clients, while the other side of the business that manages money on behalf of the firm's own accounts is selling stock X as fast it can, to get out before the stock collapses. It is commonly referred to as a pump and dump scheme, with many variations existing in some form or another. In some instances, the firm's brokers are "advising" retail investors to buy, while the firm's hedge fund partners are being told to sell. In other instances, two "partners" are given contradictory advice, with one side buying from the other, even though the "advice" givers expect the buyer to be burned. Just like in Vegas, at the end of the day, the advantage goes to the house.

9. Stock Recommendations

Investors look to stock analysts for insight into whether or not a company's stock is worth buying. After all, analysts spend all day conducting research while most investors just don't have the time or expertise. With all that analyzing, one might expect a fairly broad distribution of recommendations across an investing universe, including "buy," "hold," and "sell." However, while comprehensive stock research can be somewhat challenging to identify for the retail investor, many investors may have noticed that most analysts are often reluctant to give a sell rating. This is often because, despite the potential conflicts of interest, most sell-side research analysts keep in mind that brokerage businesses are built for dealing stocks to clients.

For both retail and buy-side investors this can lead to the need for looking beyond just ratings to view the overall sentiment that comes with a recommendation. Oftentimes, the true opinions of analysts can be found in their estimates for a company’s sales, earnings, and price targets.

10. Pension Plan "Freeze" and Termination vs. Pension Payments to Workers

Imagine that you worked your whole life and gave the best years of your health to one firm. However, a few years before you are planning to retire, the company freezes the pension plan. Then the year you are ready to get out, they terminate the plan all together and give you a lump sum check instead of a pension check for life. The worst part? It happens often and is perfectly legal.

11. Class Action Lawsuits vs. Justice for the Wronged

So what happens when the "little guy" realizes that he's been wronged by a large company? More often than not, he'll probably take the company to court. However, since the little guy usually can’t afford the legal representation required to do battle with a corporate behemoth, he looks for a lawyer who represents a huge group of shareholders in a similar predicament.

For example, say the lives of 1,000 people were ruined by an ill-advised investment purchase. If the victims receive a settlement, the lawyers can command a significant portion of that money, even more than half. For example, a $10 million settlement can be divided into $5,000 each for the plaintiffs and $5 million for the lawyers, and it's all legal. The "little guy" might get his day in court, but there's no guarantee that he'll be getting paid what he deserves, especially if his lawyer wants a big chunk of the settlement as payment for services rendered.

12. Intellectual Property

The Trump Administration has shined a spotlight on one of the most questionable acts of businesses, (particularly in China) intellectual property theft. While this category of corporate action borders between legal and illegal, it is an attempt that has potentially helped some Chinese companies rise to greatness. Huawei, for example has taken intense pressure for its competitive culture that appears to promote copying and theft of intellectual property for its own gains.

13. Other Corporate Acts

Intellectual property is not necessarily the only way that competitive companies with dubious ethics seek to gain an edge. Other dubious business practices that can easily fly under the radar can include things like deceiving product marketing, unfair competitive schemes, employee manipulation, environmental affects, and quid pro quo or bribery agreements. Companies may use these tactics for their own gain but they can also come with the risk of lawsuits and shareholder disapproval.

14. Creative and/or Aggressive Accounting

Companies are in business for generating profits and reporting strong performance. Wavering from their grandiose goals can create the motivation for creative and aggressive financial reporting that improves the overall perception of a company’s success.

Numerous companies, including the likes of Enron, WorldCom, and Tyco, have made history for their illegal practices related to creative accounting. However, not all creative and aggressive accounting methods are necessarily illegal. There are a broad range of ways a company can potentially seek to boost its results, often just before earnings reporting. Some of these schemes may include creative non-GAAP reporting, an emphasis on IFRS results, lack of disclosure for troubled situations, stock issuance and buyback programs, revenue and expense timing, asset holdings and sales, pension planning, and auspicious use of derivatives.

The Sarbanes–Oxley Act of 2002 implemented a much stronger framework for public company, financial reporting, which has helped to ease some of the risks for investors. However, executives in the trenches have a keen understanding of their own financial reporting and the best creative measures for presenting the most propitious results to their stakeholders.

The Bottom Line

It might be hard to believe that some of these ethically dubious business practices are alive and thriving, while also legal and potentially legitimate in the eyes of lawmakers. However, being aware of these unscrupulous methods can help you avoid them as best you can. The examples above are just a few instances of where the law may not necessarily provide the most appropriate protections, despite the best intentions of regulators.