Lynn Turner, former chief accountant at the SEC, told an audience of six hundred ethics professionals this week that Alan Greenspan didn’t think it mattered. Turner, speaking on Sep. 25, a day when all eyes were directed at Washington DC, where government leaders were scrambling to salvage a $700 billion bailout of financial institutions and the global economy, covered wide ground in his keynote speech to the Ethics and Compliance Officer Association in Orlando.

I’ll cover more about his presentation in an upcoming entry, but the talk of the hallways was Mr. Turner’s recollection of a meeting he attended when he was Chief Accountant for the SEC with then-Chairman of the SEC Arthur Levitt, then-Chairman of the Federal Reserve Alan Greenspan, and a number of other leaders from both institutions. Mr. Turner recounted how at the meeting he criticized inappropriate accounting practices by a number of banks. After Turner’s critique, he recalls Alan Greenspan saying “What’s the matter if the banks fudge their numbers a little bit?”

Given the magnitude of the current crisis in financial services we could hardly believe our ears. Could this really have happened? Mr. Turner seemed to have little affinity for Mr. Greenspan, calling him simply “Greenspan” while everybody else in his stories had a first name. Perhaps Greenspan made the comment ironically, and Turner failed to note or recount this important detail.

If Greenspan actually made this comment seriously, it is a stunning and important piece of the economic history unfolding daily. A tone like that reverberates throughout a culture for a long time. It is a perfect illustration of what not to do as the leader of an organization. Tone at the top is an ethics mantra for a reason. And the worst tone of all is the message that a little bit of fudging the numbers is OK. This is damning if you are the CEO of a small manufacturing firm, and even more so if you are the head of the Fed.