No perp walk for Enron and Halliburton?
August 2, 2002 10:30 AM Subscribe
No perp walk for Enron and Halliburton? Asked to explain why no arrests had been made for these two companies, Larry D. Thompson said, "Some cases are more complex than others."
Does it matter what the penalties are for corporate crime? Seems all you need are the right political connections and an adequately complex scheme to defraud investors and employees. Is the White House protecting corporations with their interpretation of whistle blowers? Aren't preventive measures more appropriate than punishments for these crimes? Does wealth truly create a double standard for prosecution under our legal system?
Aren't preventive measures more appropriate than punishments for these crimes?
What do you propose, we arrest all the CEO's before they commit more crimes?
Does wealth truly create a double standard for prosecution under our legal system?
I'd say the legal issues of prosecuting individuals acting on behalf of a limited liability corporation have more to do with it, and the complexities relating to this.
I guess you would have to also come down on the politicians from the Bush I and Clinton administrations who helped bring Enron's "success" about. But we all know that won't help them. The more the politicians go after guys like these, the more they cannibalize potential future campaign funding.
posted by insomnyuk at 10:42 AM on August 2, 2002
What do you propose, we arrest all the CEO's before they commit more crimes?
Does wealth truly create a double standard for prosecution under our legal system?
I'd say the legal issues of prosecuting individuals acting on behalf of a limited liability corporation have more to do with it, and the complexities relating to this.
I guess you would have to also come down on the politicians from the Bush I and Clinton administrations who helped bring Enron's "success" about. But we all know that won't help them. The more the politicians go after guys like these, the more they cannibalize potential future campaign funding.
posted by insomnyuk at 10:42 AM on August 2, 2002
Does wealth truly create a double standard for prosecution under our legal system?
Absolutely. You have to ask? Have you been living abroad the last 30 years?
posted by Ynoxas at 10:42 AM on August 2, 2002
Absolutely. You have to ask? Have you been living abroad the last 30 years?
posted by Ynoxas at 10:42 AM on August 2, 2002
Arianna's got it figured out.
When corrupt scumbags are writing the laws, only corrupt scumbags will get rich. Duh. This has been going on a very, very long time and it's sad that the vast majority of people are only now waking up to this fact.
Not that it matters. The vast majority of Americans will happily forget about it and walk right off of the cliff if Dubya says, "Bin Laden! Saddam! Booga Booga Booga!"
After all, most of us happily accept massive corruption. It's all around us and it's a way of life.
posted by mark13 at 10:50 AM on August 2, 2002
When corrupt scumbags are writing the laws, only corrupt scumbags will get rich. Duh. This has been going on a very, very long time and it's sad that the vast majority of people are only now waking up to this fact.
Not that it matters. The vast majority of Americans will happily forget about it and walk right off of the cliff if Dubya says, "Bin Laden! Saddam! Booga Booga Booga!"
After all, most of us happily accept massive corruption. It's all around us and it's a way of life.
posted by mark13 at 10:50 AM on August 2, 2002
by "that won't help them", I mean it won't help the politicians who are going after the CEOs, so they probably won't do it. They are self-interested individuals just like the rest of us.
posted by insomnyuk at 10:50 AM on August 2, 2002
posted by insomnyuk at 10:50 AM on August 2, 2002
I was able to dig up at least one study which takes wealth into account. I'm sure there are others. The correlation is pretty obvious -- if you're wealthy, you're able to retain better lawyers, get out on bail (which improves your chances of formulating a decent defense), etc. It's certainly a big factor.
posted by Kikkoman at 11:04 AM on August 2, 2002
posted by Kikkoman at 11:04 AM on August 2, 2002
The solution, obviously, is to socialize law, so that everyone can have bad lawyers.
posted by tirade at 11:12 AM on August 2, 2002
posted by tirade at 11:12 AM on August 2, 2002
Not that it matters. The vast majority of Americans will happily forget about it and walk right off of the cliff if Dubya says, "Bin Laden! Saddam! Booga Booga Booga!" - mark13
Amen brother!
"CORPORATION, n. An ingenious device for obtaining individual profit without individual responsibility."
--Ambrose Bierce, The Devil's Dictionary
WorldCom, Enron, Tyco, and Adelphia (to name a few) could cost the United States over a trillion dollars this year. That's a fifth of the Gross Domestic Product.
The Bush Administration has been widely described as the most business-friendly administration in American history. Since Eisenhower's presidency, no president has had more than one former chief executive in his cabinet; Bush has four. At lower levels, an overwhelming proportion of the appointees come from backgrounds in business rather than public service or academia.
White House spokespeople have long argued that the depth of business experience reflected in Bush's cabinet allows for an intimate understanding of the corporate world and a corresponding ability to make the necessary fixes. But many of the former businesses of Bush's appointees have histories of fraud and corporate crime. There are serious questions about whether the administration is sufficiently distanced from the recent scandals to offer real solutions.
Here's a rundown of the corporate connections (and past wrongdoings) of Bush's top brass:
President George W. Bush: Bush himself has recently come under attack for his actions as a director of Harken Energy, a small oil company in Texas. After Bush sold millions of dollars' worth of stock shortly before bad news sent the price plummeting, the SEC opened an investigation. As economist Paul Krugman put it, the investigation was "peculiarly perfunctory," but SEC officials promise that the fact that Bush's father was president at the time had nothing to do with it.
Vice President Dick Cheney: Halliburton, the company Cheney ran between 1995 and the time he started working for Bush, is currently under investigation by the SEC for illegal accounting practices.
Secretary of the Army Thomas White: As the former head of Enron's energy-trading department and an 11-year Enron employee, White may have known about the accounting tricks that led to Enron's disastrous collapse. White only left Enron in May 2001; the division he headed now appears to have hidden more than $500 million in losses.
SEC Chairman Harvey Pitt: Appointed with the express approval of Enron CEO Ken Lay, many prominent Democrats and Republicans (Senate Majority Leader Tom Daschle and Senator John McCain, for example) have called for Pitt to resign. Pitt was the accounting industry's lead lobbyist until only a few years ago; his work was key in watering down proposed SEC regulations that would have strengthened auditors' independence. Pitt also continued to meet with several former clients after he was appointed SEC Chair, which further blurred the line between Pitt's old job as a lobbyist and his new one as a supposed enforcer.
Larry Thompson, Deputy Attorney General and head of Bush's Corporate Fraud Task Force: In a bizarre twist, even the leader of Bush's new white-collar crime task force has ties to corporate fraud. While he was a board member of Providian Financial Corporation, state and federal police investigated Providian for gouging consumers. The company ended up settling the cases and investigations for more than $400 million.
These are just a few of the Bush Administration officials with ties to corporations that are in hot water. Those with corporate ties (although not necessarily to criminal ones) in the upper echelons of the Bush Administration include Treasury Secretary Paul O'Neill, former CEO of Alcoa; Defense Secretary Donald Rumsfeld, former CEO of General Instruments; Commerce Secretary Don Evans, who ran the oil company Tom Brown; Secretary of the Navy Gordon England, who worked for General Dynamics; and Secretary of the Navy James Roche, who worked for defense contractor Northrup Grumman.
posted by dejah420 at 11:25 AM on August 2, 2002
Amen brother!
"CORPORATION, n. An ingenious device for obtaining individual profit without individual responsibility."
--Ambrose Bierce, The Devil's Dictionary
WorldCom, Enron, Tyco, and Adelphia (to name a few) could cost the United States over a trillion dollars this year. That's a fifth of the Gross Domestic Product.
The Bush Administration has been widely described as the most business-friendly administration in American history. Since Eisenhower's presidency, no president has had more than one former chief executive in his cabinet; Bush has four. At lower levels, an overwhelming proportion of the appointees come from backgrounds in business rather than public service or academia.
White House spokespeople have long argued that the depth of business experience reflected in Bush's cabinet allows for an intimate understanding of the corporate world and a corresponding ability to make the necessary fixes. But many of the former businesses of Bush's appointees have histories of fraud and corporate crime. There are serious questions about whether the administration is sufficiently distanced from the recent scandals to offer real solutions.
Here's a rundown of the corporate connections (and past wrongdoings) of Bush's top brass:
President George W. Bush: Bush himself has recently come under attack for his actions as a director of Harken Energy, a small oil company in Texas. After Bush sold millions of dollars' worth of stock shortly before bad news sent the price plummeting, the SEC opened an investigation. As economist Paul Krugman put it, the investigation was "peculiarly perfunctory," but SEC officials promise that the fact that Bush's father was president at the time had nothing to do with it.
Vice President Dick Cheney: Halliburton, the company Cheney ran between 1995 and the time he started working for Bush, is currently under investigation by the SEC for illegal accounting practices.
Secretary of the Army Thomas White: As the former head of Enron's energy-trading department and an 11-year Enron employee, White may have known about the accounting tricks that led to Enron's disastrous collapse. White only left Enron in May 2001; the division he headed now appears to have hidden more than $500 million in losses.
SEC Chairman Harvey Pitt: Appointed with the express approval of Enron CEO Ken Lay, many prominent Democrats and Republicans (Senate Majority Leader Tom Daschle and Senator John McCain, for example) have called for Pitt to resign. Pitt was the accounting industry's lead lobbyist until only a few years ago; his work was key in watering down proposed SEC regulations that would have strengthened auditors' independence. Pitt also continued to meet with several former clients after he was appointed SEC Chair, which further blurred the line between Pitt's old job as a lobbyist and his new one as a supposed enforcer.
Larry Thompson, Deputy Attorney General and head of Bush's Corporate Fraud Task Force: In a bizarre twist, even the leader of Bush's new white-collar crime task force has ties to corporate fraud. While he was a board member of Providian Financial Corporation, state and federal police investigated Providian for gouging consumers. The company ended up settling the cases and investigations for more than $400 million.
These are just a few of the Bush Administration officials with ties to corporations that are in hot water. Those with corporate ties (although not necessarily to criminal ones) in the upper echelons of the Bush Administration include Treasury Secretary Paul O'Neill, former CEO of Alcoa; Defense Secretary Donald Rumsfeld, former CEO of General Instruments; Commerce Secretary Don Evans, who ran the oil company Tom Brown; Secretary of the Navy Gordon England, who worked for General Dynamics; and Secretary of the Navy James Roche, who worked for defense contractor Northrup Grumman.
posted by dejah420 at 11:25 AM on August 2, 2002
great comment, dejah420!
These assholes are going to continue pillaging the country until the People call for another constitutional convention to fix the kind of structure that allowed us to get into this mess in the first place.
Either that, or the whole structure just collapses around our heads and we end up with total lawless chaos. Whee.
posted by beth at 11:32 AM on August 2, 2002
These assholes are going to continue pillaging the country until the People call for another constitutional convention to fix the kind of structure that allowed us to get into this mess in the first place.
Either that, or the whole structure just collapses around our heads and we end up with total lawless chaos. Whee.
posted by beth at 11:32 AM on August 2, 2002
Well, Beth, another constitutional convention. What would be your suggestions?
Oh, and Tirade....there is a very simple solution to the problem of disparity in the availability of quality council, pay DAs and public defenders more! Pay disparity between public and private sector is ABSURD. Especially with the high cost of a legal education. No one who serves as a DA or a Public Defender expects to make the same as a partner at a private law firm. They do however expect to be compesenated at high levels than unionized teachers.
posted by pjgulliver at 11:41 AM on August 2, 2002
Oh, and Tirade....there is a very simple solution to the problem of disparity in the availability of quality council, pay DAs and public defenders more! Pay disparity between public and private sector is ABSURD. Especially with the high cost of a legal education. No one who serves as a DA or a Public Defender expects to make the same as a partner at a private law firm. They do however expect to be compesenated at high levels than unionized teachers.
posted by pjgulliver at 11:41 AM on August 2, 2002
Aren't preventive measures more appropriate than punishments for these crimes?
What do you propose, we arrest all the CEO's before they commit more crimes?
No, I was thinking more along the lines of good regulatory laws that prevent the possibility of such abuse. You know, the kind we had for 65 years that worked so well against this type behavior, from the Depression until Raygun started the war against good government. Perhaps we need to re-institute these laws and admit that regulation and government actually can do good things. I realize you're ideologically and vehemently opposed to government and regulation but perhaps you should occasionally take a deep breath and consider the wisdom of lessons learned from history and how they might serve us without re-learning them and in the process losing our collective asses to greedy corporatists and market fundmentalists.
posted by nofundy at 11:54 AM on August 2, 2002
What do you propose, we arrest all the CEO's before they commit more crimes?
No, I was thinking more along the lines of good regulatory laws that prevent the possibility of such abuse. You know, the kind we had for 65 years that worked so well against this type behavior, from the Depression until Raygun started the war against good government. Perhaps we need to re-institute these laws and admit that regulation and government actually can do good things. I realize you're ideologically and vehemently opposed to government and regulation but perhaps you should occasionally take a deep breath and consider the wisdom of lessons learned from history and how they might serve us without re-learning them and in the process losing our collective asses to greedy corporatists and market fundmentalists.
posted by nofundy at 11:54 AM on August 2, 2002
dejah420 you point out a lot of good facts to show bias. However, any 10B and 10b-5 fraud charges and/or RICO charges that would be brought by the SEC or any number of causes of action that could be brought by CFTC are not brought by high-level officials. Any potential charges against Enron or Halliburton will be investigated and brought by low-level bureaucrats. These people have been with the SEC or CFTC for decades and have no political ties to those at the top. In fact, a great deal of resentment brews between low-level bureaucrats and high-level appointees (bureaucrats view people like Mr. Pitt as interlopers and carpet baggers). Keeping this in mind, a backlash often occurs and the bureaucrats want to sting hated upper-level appointees. It would seem the Bush Administration’s ties might actually increase the likelihood of charges against Enron or Halliburton, if investigations turn anything up. (Especially in the case of Halliburton, the only evidence that we know is that Chaney made a lot of money and SEC wants know about it, lest we forget that the presumption of innocence and the burden the prosecution has to prove its case beyond a reasonable doubt)
All this talk is very premature. Like I stated before, in mass fraud cases, like the one alleged against Enron, take up to a decade or more to investigate and file. An example: I know a person who was convicted of embezzling from a pension fund (along with RICO charges). The FBI investigated that person for 10 years! 10 years! And that's only one person that was involved in a relevantly simple scheme to steal. Now applies that to any alleged wrongdoing Enron and the hundred of people involved billions of documents. It will take an extremely long time to do interviews, study records and formulate legal arguments. Especially for a case like this, the SEC or CFTC investigators and prosecutors need to very precise and careful. Folks this isn't politics; it's legal fact.
By the time any charges are made Bush will be long gone from White House.
I know some out there what instant justice, but that’s foolish. Let the government’s law do their job. Let them craft a good case. It takes time. It may be the case where the SEC brings bar-bones charges very quickly and then investigates a lot more and adds charges as they go. But even that takes years and years to know the full extent of things.
Does wealth truly create a double standard for prosecution under our legal system?
Absolutely. You have to ask? Have you been living abroad the last 30 years?
Wealth only levels the playing field. But so what? Everybody has the right to a defense. Some are able to battle the government on more fair grounds.
posted by Bag Man at 11:57 AM on August 2, 2002
All this talk is very premature. Like I stated before, in mass fraud cases, like the one alleged against Enron, take up to a decade or more to investigate and file. An example: I know a person who was convicted of embezzling from a pension fund (along with RICO charges). The FBI investigated that person for 10 years! 10 years! And that's only one person that was involved in a relevantly simple scheme to steal. Now applies that to any alleged wrongdoing Enron and the hundred of people involved billions of documents. It will take an extremely long time to do interviews, study records and formulate legal arguments. Especially for a case like this, the SEC or CFTC investigators and prosecutors need to very precise and careful. Folks this isn't politics; it's legal fact.
By the time any charges are made Bush will be long gone from White House.
I know some out there what instant justice, but that’s foolish. Let the government’s law do their job. Let them craft a good case. It takes time. It may be the case where the SEC brings bar-bones charges very quickly and then investigates a lot more and adds charges as they go. But even that takes years and years to know the full extent of things.
Does wealth truly create a double standard for prosecution under our legal system?
Absolutely. You have to ask? Have you been living abroad the last 30 years?
Wealth only levels the playing field. But so what? Everybody has the right to a defense. Some are able to battle the government on more fair grounds.
posted by Bag Man at 11:57 AM on August 2, 2002
Well, Beth, another constitutional convention. What would be your suggestions?
Uh, hmm. Such a question requires a huge amount of thought and reflection and likely a book-length reply.
I'll add it to my to-do list. No guarantees on delivery date. Sorry.
posted by beth at 12:01 PM on August 2, 2002
Uh, hmm. Such a question requires a huge amount of thought and reflection and likely a book-length reply.
I'll add it to my to-do list. No guarantees on delivery date. Sorry.
posted by beth at 12:01 PM on August 2, 2002
I'm all for healthy skepticism but your post is just baselessly cynical. it may not be what you want to hear, but Thomspon is right. There *are* major differences between Enron, Adelphia, Worldcom, and Halliburton. (Halliburton, incidentally, is still being investigated and hasn't been formally charged, and I have no problem with innocent until proven guilty.) What Worldcom did was clearly wrong, and there's absolutely no excuse Sullivan could give that would allow anyone to give him the benefit of the doubt. Most of the stuff that was covered in the mainstream press about Enron might seem sketchy to someone with no understanding of accounting and SEC reporting requirements, but the actual things they got in trouble for were barely on the wrong side of a very wide gray line. The level of malicious intent required to do what Enron did was fairly low. Worldcom was a sort of "reckless disregard" for the obvious. There's a big legal (and moral) difference.
posted by lizs at 12:03 PM on August 2, 2002
posted by lizs at 12:03 PM on August 2, 2002
No, I was thinking more along the lines of good regulatory laws that prevent the possibility of such abuse. You know, the kind we had for 65 years that worked so well against this type behavior, from the Depression until Raygun started the war against good government.
If you're talking about deregulation, that process started on Jimmy Carter's watch. Not that Reagan didn't take it to a whole 'nother level, mind you.
posted by MrBaliHai at 12:09 PM on August 2, 2002
If you're talking about deregulation, that process started on Jimmy Carter's watch. Not that Reagan didn't take it to a whole 'nother level, mind you.
posted by MrBaliHai at 12:09 PM on August 2, 2002
This is correct, complex fraud (10B and 10b-5) cases often take upto 10 or 15 years to bring.
Bag Man, I'd buy this line if we didn't see such amazing alacrity in rounding up folks from Adelphia and WorldCom. Even Andersen went to trial very quickly for their complicity in the Enron affair.
posted by mkultra at 12:09 PM on August 2, 2002
Bag Man, I'd buy this line if we didn't see such amazing alacrity in rounding up folks from Adelphia and WorldCom. Even Andersen went to trial very quickly for their complicity in the Enron affair.
posted by mkultra at 12:09 PM on August 2, 2002
Lizs, I disagree with you entirely. Enron clearly engaged in fictitious trading in California in an attempt to game the market, which was a clear violation of California ISO and PX rules. This gaming (and simlar fraud commited by other energy trading companies) is ultimately going to cost the rate payers of California billions of dollars, and has thrown into disrupte the entire principle behind this. What is EVEN worse is that Secretary of the Army White was in charge of the division of Enron responsible for these activites. Whether or not White specifically authorized the gaming of the California mess, he should have know what was going (the California elec. crisis was the biggest energy news of 2000/2001, would you really have me believe that an Enron official in charge of that division would not be paying attention to what his workers were doing?) If he didn't know what was happening, he's incompitent, and should be dismissed as well.
posted by pjgulliver at 12:10 PM on August 2, 2002
posted by pjgulliver at 12:10 PM on August 2, 2002
Seems all you need are the right political connections and an adequately complex scheme to defraud investors and employees
Bogus...see what happens down the line before you say this.
Perhaps. I don't claim any expertise in the area and was paraphrasing an expert on this type of law who was discussing these very companies on the Lou Dobbs show. He seemed to think that the punishments are meaningless since it's nearly impossible to prosecute these laws. It's partly that juries just don't get it (too complex) and the big money lawyers exploit that fact by severly muddying the waters every chance they get. 20 years, 40 years, who cares since they're not going to jail anyway?
To add to the difficulty we have the White House immediately weakening the new law passed (define a whistle blower?) and the Federal law enforcement officers hamstrung by offshore hanky panky and our good legislators encouraging said bad behavior in exchange, again, for enough money. We're assuming you have the money and political connections to get the money disbursed into the proper pockets. This is, in my opinion, a failure of both our system of government and our systems of trade/exchange.
posted by nofundy at 12:15 PM on August 2, 2002
Bogus...see what happens down the line before you say this.
Perhaps. I don't claim any expertise in the area and was paraphrasing an expert on this type of law who was discussing these very companies on the Lou Dobbs show. He seemed to think that the punishments are meaningless since it's nearly impossible to prosecute these laws. It's partly that juries just don't get it (too complex) and the big money lawyers exploit that fact by severly muddying the waters every chance they get. 20 years, 40 years, who cares since they're not going to jail anyway?
To add to the difficulty we have the White House immediately weakening the new law passed (define a whistle blower?) and the Federal law enforcement officers hamstrung by offshore hanky panky and our good legislators encouraging said bad behavior in exchange, again, for enough money. We're assuming you have the money and political connections to get the money disbursed into the proper pockets. This is, in my opinion, a failure of both our system of government and our systems of trade/exchange.
posted by nofundy at 12:15 PM on August 2, 2002
Even Andersen went to trial very quickly for their complicity in the Enron affair.
Actually, Andersen went to trial for obstructing justice -- the case hinged on destroyed documents. The case was not about fraud (at least in the financial sense). Needless to say, a far less complicated case. In addition, it's wrong to say that Andersen went to trial "for their complicity" in the Enron affair. They were tried for their own conduct in destroying documents -- it had nothing to do with their actual accounting practices vis-a-vis Enron.
posted by pardonyou? at 12:20 PM on August 2, 2002
Actually, Andersen went to trial for obstructing justice -- the case hinged on destroyed documents. The case was not about fraud (at least in the financial sense). Needless to say, a far less complicated case. In addition, it's wrong to say that Andersen went to trial "for their complicity" in the Enron affair. They were tried for their own conduct in destroying documents -- it had nothing to do with their actual accounting practices vis-a-vis Enron.
posted by pardonyou? at 12:20 PM on August 2, 2002
An example: I know a person who was convicted of embezzling from a pension fund (along with RICO charges). The FBI investigated that person for 10 years!
An example of what, exactly? Government inefficiency? Are you actually proposing this as some sort of justification?
posted by rushmc at 12:21 PM on August 2, 2002
An example of what, exactly? Government inefficiency? Are you actually proposing this as some sort of justification?
posted by rushmc at 12:21 PM on August 2, 2002
The level of malicious intent required to do what Enron did was fairly low.
Now THAT comment is just baselessly cynical, as you are wont to phrase such biased conjecture! Or did you mean it as humor? I never claimed to not have an opinion, I do claim to want to hear the opinions of others and thank you for yours.
posted by nofundy at 12:25 PM on August 2, 2002
Now THAT comment is just baselessly cynical, as you are wont to phrase such biased conjecture! Or did you mean it as humor? I never claimed to not have an opinion, I do claim to want to hear the opinions of others and thank you for yours.
posted by nofundy at 12:25 PM on August 2, 2002
Enron clearly engaged in fictitious trading in California in an attempt to game the market, which was a clear violation of California ISO and PX rules.
I'm not sure where you're getting the "clearly" bit from, as that's not what Enron got nailed for, and there are plenty of other energy companies that do the same thing - it *is* gaming the market, but it's not, strictly speaking, fictitious trading. this is one of the issues I was referring to that was covered extensively by the mainstream press and doesn't sound good, (and is an issue) but isn't actually what Enron got in trouble for. What you're talking about is a major problem, but it's not necessarily illegal and it's really indicative of systemic problems with existing utility regulations. (Enron's actual demise was precipitated by illegal ownerships structures in their [sketchy but perfectly legal] off balance sheet entities.)
incidentally, there are several other industries that have perfectly legal tactics for incestuous industry trading that have similar effects on the financials of participating companies. Telecom companies rent bandwidth from each other for unused dark fiber and book as revenue. Legitimate trading, but if you can't discount the financials for those trades, it certainly obscures the real condition of the company. Same thing happened with dot coms that were bartering ads during the tech boom. they booked the ads as revenue, but there was no little real value creation, and the prices could be artificially raised. (i.e., i'm bartering my ad for your ad, and no actual cash is changing hands, so i tell you i'm charging you some ridiculous amount, and you do the same with me. we both book the revenue, and the expense the cost at much lower levels.) In both cases you're talking about industry-wide problems, and you're seeing plenty of investigations in both sectors (i.e. Qwest, AOL/TW). You won't, however, necessarily see people being led away in handcuffs everytime this happens, because what they're doing may warrant an investigation for unorthodox accounting procedures, but that doesn't mean it's necessarily illegal (although many reformists - including me - would argue that it should be.)
i work as an equity analyst (buy side - stock picking for hedge funds) so it massively hurts my ability to judge these companies when they do perpetrate fraud. talk to an energy analyst about enron and what you're referring to as 'fictitious' energy trading, however, and they'll tell you that it's a common practice.
posted by lizs at 12:46 PM on August 2, 2002
I'm not sure where you're getting the "clearly" bit from, as that's not what Enron got nailed for, and there are plenty of other energy companies that do the same thing - it *is* gaming the market, but it's not, strictly speaking, fictitious trading. this is one of the issues I was referring to that was covered extensively by the mainstream press and doesn't sound good, (and is an issue) but isn't actually what Enron got in trouble for. What you're talking about is a major problem, but it's not necessarily illegal and it's really indicative of systemic problems with existing utility regulations. (Enron's actual demise was precipitated by illegal ownerships structures in their [sketchy but perfectly legal] off balance sheet entities.)
incidentally, there are several other industries that have perfectly legal tactics for incestuous industry trading that have similar effects on the financials of participating companies. Telecom companies rent bandwidth from each other for unused dark fiber and book as revenue. Legitimate trading, but if you can't discount the financials for those trades, it certainly obscures the real condition of the company. Same thing happened with dot coms that were bartering ads during the tech boom. they booked the ads as revenue, but there was no little real value creation, and the prices could be artificially raised. (i.e., i'm bartering my ad for your ad, and no actual cash is changing hands, so i tell you i'm charging you some ridiculous amount, and you do the same with me. we both book the revenue, and the expense the cost at much lower levels.) In both cases you're talking about industry-wide problems, and you're seeing plenty of investigations in both sectors (i.e. Qwest, AOL/TW). You won't, however, necessarily see people being led away in handcuffs everytime this happens, because what they're doing may warrant an investigation for unorthodox accounting procedures, but that doesn't mean it's necessarily illegal (although many reformists - including me - would argue that it should be.)
i work as an equity analyst (buy side - stock picking for hedge funds) so it massively hurts my ability to judge these companies when they do perpetrate fraud. talk to an energy analyst about enron and what you're referring to as 'fictitious' energy trading, however, and they'll tell you that it's a common practice.
posted by lizs at 12:46 PM on August 2, 2002
The Bush Administration has been widely described as the most business-friendly administration in American history.
I think that's a misnomer. If you favor one business over another, the label needs to be more specific. Also, in your Enron post, dejah, you are leaving out the Clinton administration involvement.
You know, the kind we had for 65 years that worked so well against this type behavior, from the Depression -nofundy
Oh, so you're a New Dealer. Nevermind that the boom and bust cycle which has caused a lot of economic trauma is perpetuated by the Federal Reserve toying with interest rates, something FDR loved. Nevermind that he based his economic policies on false Keynesian economic models and the idea that an "era of enlightened administration" (an oxymoron) would take the power from the evil corporations and give it to the government to properly redistribute wealth. How noble. It also explains why you have such a large axe to grind when it comes to anything involving corporations.
Also, I don't think you can make a quantifiable link between the deregulation of an industry (meaning getting rid of whatever government run monopoly existed) and the corporate accounting fraud today. I think there is much more to this story than a simple 1+1=2. Please be more specific in your implications of Reagan with the scandals of today, if you want them to stand.
posted by insomnyuk at 12:53 PM on August 2, 2002
I think that's a misnomer. If you favor one business over another, the label needs to be more specific. Also, in your Enron post, dejah, you are leaving out the Clinton administration involvement.
You know, the kind we had for 65 years that worked so well against this type behavior, from the Depression -nofundy
Oh, so you're a New Dealer. Nevermind that the boom and bust cycle which has caused a lot of economic trauma is perpetuated by the Federal Reserve toying with interest rates, something FDR loved. Nevermind that he based his economic policies on false Keynesian economic models and the idea that an "era of enlightened administration" (an oxymoron) would take the power from the evil corporations and give it to the government to properly redistribute wealth. How noble. It also explains why you have such a large axe to grind when it comes to anything involving corporations.
Also, I don't think you can make a quantifiable link between the deregulation of an industry (meaning getting rid of whatever government run monopoly existed) and the corporate accounting fraud today. I think there is much more to this story than a simple 1+1=2. Please be more specific in your implications of Reagan with the scandals of today, if you want them to stand.
posted by insomnyuk at 12:53 PM on August 2, 2002
from the Depression until Raygun started the war against good government.
Funny, I consider that to be the most shameful period of American history, the front end of which the last vestiges of the founder's intent were done away with. If your version of good government is gone, (and sadly I do not think that is true), then so much the better. I hope it never returns.
posted by thirteen at 1:17 PM on August 2, 2002
Funny, I consider that to be the most shameful period of American history, the front end of which the last vestiges of the founder's intent were done away with. If your version of good government is gone, (and sadly I do not think that is true), then so much the better. I hope it never returns.
posted by thirteen at 1:17 PM on August 2, 2002
An example: I know a person who was convicted of embezzling from a pension fund (along with RICO charges). The FBI investigated that person for 10 years!
An example of what, exactly? Government inefficiency? Are you actually proposing this as some sort of justification?
I AM NOT JUSTIFYING ANYTHING!
Rushmc, I am showing how even a seemingly simple fraud case can take a long time to investigate and bring. Why did it take so long? Well it's not inefficiency. For this one person many witnesses and accomplices had to be interviewed, patterns of behavior needed to be documented and recorded and hundreds (even thousands) of documents need to be studied. Then all of that needed to be reviewed by prosecutors and a decision to prosecute had to be made. Then the state needed to weigh its options and ask itself some questions, like: Does the relevant case law support a charge based on the evidence and fact that have been gathered? Can we win this case?
Now multiply that by a factor of million or so (or more) to reach the complexity of what occurred at Enron. To do the same due diligence and investigation it will take a lone time.
How am I justifying anything? Just explaining away some misconceptions about why instant justice can't happen. Would you rather the state put together a shabby case and never have a chance to win?
Even Andersen went to trial very quickly for their complicity in the Enron affair.
Andersen was charged with obstruction of justice for destroying documents. This was a simple criminal charged with is completely independent from charges of stock fraud that would arise from Andersen’s consulting and auditing of Enron.
who cares since they're not going to jail anyway?
I'd bet someone will end up in "ClubFed." Further, a fraud conviction will bring millions of dollars of fines. And if that's not enough, those convict of fraud are often bared from pursuing business they used to defraud people. So if you loose you loose your freedom, money and livelihood.
posted by Bag Man at 1:45 PM on August 2, 2002
An example of what, exactly? Government inefficiency? Are you actually proposing this as some sort of justification?
I AM NOT JUSTIFYING ANYTHING!
Rushmc, I am showing how even a seemingly simple fraud case can take a long time to investigate and bring. Why did it take so long? Well it's not inefficiency. For this one person many witnesses and accomplices had to be interviewed, patterns of behavior needed to be documented and recorded and hundreds (even thousands) of documents need to be studied. Then all of that needed to be reviewed by prosecutors and a decision to prosecute had to be made. Then the state needed to weigh its options and ask itself some questions, like: Does the relevant case law support a charge based on the evidence and fact that have been gathered? Can we win this case?
Now multiply that by a factor of million or so (or more) to reach the complexity of what occurred at Enron. To do the same due diligence and investigation it will take a lone time.
How am I justifying anything? Just explaining away some misconceptions about why instant justice can't happen. Would you rather the state put together a shabby case and never have a chance to win?
Even Andersen went to trial very quickly for their complicity in the Enron affair.
Andersen was charged with obstruction of justice for destroying documents. This was a simple criminal charged with is completely independent from charges of stock fraud that would arise from Andersen’s consulting and auditing of Enron.
who cares since they're not going to jail anyway?
I'd bet someone will end up in "ClubFed." Further, a fraud conviction will bring millions of dollars of fines. And if that's not enough, those convict of fraud are often bared from pursuing business they used to defraud people. So if you loose you loose your freedom, money and livelihood.
posted by Bag Man at 1:45 PM on August 2, 2002
Actually, the questions raised by the Haliburton or Enron debacle is probably more of incompetence. This Washington Monthly article (posted elsewhere in Mefi too) best articulated the incompetence question. Either secretary White knew about what was going on in his department in Enron in which case he would (in a best case scenario) be guilty of some really really unethical practices, or he didn't know - in which case he was incredibly incompetent. From what I have read in the media so far, it is at least likely that he did not pay too much attention to the actual work in his department.
Similar troubling questions persist re: Halliburon. I should think that by the nineties enough information was available for anyone in a boardroom in corporate America not to want to touch a company having anything to do with Asbestos. From that light, Haliburton's merger with Dresser industries in Cheney's watch seems inexplicable. What were they on?
I agree though that there is a lot of difference between what Adelphia dis and what Enron did. What the Rigases did in Adelphia was incredibly stupid and showed complete disconnect with the rest of the world. How enron robbed everybody is a lot more complex. Washington Post did a very good job of explaining it in a series of special reports last week.
-off topic
I found the following conversation from that series completely surreal and had to share:
In the first year of LJM's existence, the (Enron) board didn't ask for details on Fastow's income (from LJM)... In October 2000, the board asked its compensation committee to get the answer. LeMaistre, head of the committee, chose a roundabout route, asking Enron's compensation director to provide the outside income of all top executives. He said he hadn't singled out Fastow because he didn't want to start office gossip. He didn't get the information, so he asked again. When that attempt failed, LeMaistre gave up, he told Senate investigators.
Even as October wore on and the furor over Fastow's partnership deals grew, LeMaistre remained timid about confronting the young executive about how much money he'd made from LJM. He sought out Enron's general counsel, James V. Derrick, for advice in adopting just the right tone. Derrick prepared a polite script for LeMaistre: "We very much appreciate your willingness to visit with us."
Armed with the script, LeMaistre telephoned Fastow and posed the question: How much?
It was $45 million, Fastow said.
LeMaistre wrote in the margin of his script: "incredible."
/off topic
posted by justlooking at 5:10 PM on August 2, 2002
Similar troubling questions persist re: Halliburon. I should think that by the nineties enough information was available for anyone in a boardroom in corporate America not to want to touch a company having anything to do with Asbestos. From that light, Haliburton's merger with Dresser industries in Cheney's watch seems inexplicable. What were they on?
I agree though that there is a lot of difference between what Adelphia dis and what Enron did. What the Rigases did in Adelphia was incredibly stupid and showed complete disconnect with the rest of the world. How enron robbed everybody is a lot more complex. Washington Post did a very good job of explaining it in a series of special reports last week.
-off topic
I found the following conversation from that series completely surreal and had to share:
In the first year of LJM's existence, the (Enron) board didn't ask for details on Fastow's income (from LJM)... In October 2000, the board asked its compensation committee to get the answer. LeMaistre, head of the committee, chose a roundabout route, asking Enron's compensation director to provide the outside income of all top executives. He said he hadn't singled out Fastow because he didn't want to start office gossip. He didn't get the information, so he asked again. When that attempt failed, LeMaistre gave up, he told Senate investigators.
Even as October wore on and the furor over Fastow's partnership deals grew, LeMaistre remained timid about confronting the young executive about how much money he'd made from LJM. He sought out Enron's general counsel, James V. Derrick, for advice in adopting just the right tone. Derrick prepared a polite script for LeMaistre: "We very much appreciate your willingness to visit with us."
Armed with the script, LeMaistre telephoned Fastow and posed the question: How much?
It was $45 million, Fastow said.
LeMaistre wrote in the margin of his script: "incredible."
/off topic
posted by justlooking at 5:10 PM on August 2, 2002
Sorry, I managed to mangle the WP link in my previous post.
posted by justlooking at 5:20 PM on August 2, 2002
posted by justlooking at 5:20 PM on August 2, 2002
For this one person many witnesses and accomplices had to be interviewed, etc.
I'm not questioning the need for a thorough investigation, and acknowledge that that takes time. But you cannot possibly justify a time period like 10 years. Would you accept the same kind of delay for murder suspects to come to trial? Muggers? Shall we drag ALL cases out to the Nth degree until the system breaks down entirely and no case is ever tried? If it legitimately takes the system that long, the system is broken and needs to be streamlined and overhauled. Either way, justice is not done. Justice delayed is justice denied.
posted by rushmc at 6:09 PM on August 2, 2002
I'm not questioning the need for a thorough investigation, and acknowledge that that takes time. But you cannot possibly justify a time period like 10 years. Would you accept the same kind of delay for murder suspects to come to trial? Muggers? Shall we drag ALL cases out to the Nth degree until the system breaks down entirely and no case is ever tried? If it legitimately takes the system that long, the system is broken and needs to be streamlined and overhauled. Either way, justice is not done. Justice delayed is justice denied.
posted by rushmc at 6:09 PM on August 2, 2002
Funny, I consider that to be the most shameful period of American history, the front end of which the last vestiges of the founder's intent were done away with.
Well, we already know that you live in a shack in the mountains, thirteen, from where no foreigners and poor people can affect your happy, delusionary existence. How are the 1770s, by the way?
posted by riviera at 6:08 AM on August 3, 2002
Well, we already know that you live in a shack in the mountains, thirteen, from where no foreigners and poor people can affect your happy, delusionary existence. How are the 1770s, by the way?
posted by riviera at 6:08 AM on August 3, 2002
Well, we already know that you live in a shack in the mountains, thirteen, from where no foreigners and poor people can affect your happy, delusionary existence. How are the 1770s, by the way?
I am really not sure how to respond. Fiction in response to opinion. I imagine I have at least as much experience with foreigners and poor people as you do, and probably a great deal more. I have no problem with anyone. If anything I believe in more freedom and liberty than you do, so why don't you play nice?
posted by thirteen at 8:33 AM on August 3, 2002
I am really not sure how to respond. Fiction in response to opinion. I imagine I have at least as much experience with foreigners and poor people as you do, and probably a great deal more. I have no problem with anyone. If anything I believe in more freedom and liberty than you do, so why don't you play nice?
posted by thirteen at 8:33 AM on August 3, 2002
Also.
How are the 1770s, by the way?
I imagine not so good, there was a invading British army that needed beating.
posted by thirteen at 8:36 AM on August 3, 2002
How are the 1770s, by the way?
I imagine not so good, there was a invading British army that needed beating.
posted by thirteen at 8:36 AM on August 3, 2002
If it legitimately takes the system that long, the system is broken and needs to be streamlined and overhauled.
rushmc, your concern about the time that trials take is a valid concern. However I happen to disagree that the judicial process should be streamed lime. The accused in a criminal trial does have a right to a "speedy trial" (one that starts in 60 days). However, there are many reasons why it may not be in the best interest of society or the accused to force people into speedy trials, but I think the following two are the most compelling.
First, you must think of the due process rights of the accused. With out adequate time for the defense to investigate and time for the accused to file motions, etc. people will be ill-prepared for trial. Rushing people into trial cuts down on the time for the accused to take the necessary steps to make sure his or her due process right are being adequately ensured. With out proper time to ensure due process rights, the state could very easily rush people into trials and convict them quickly on trumpeted up charges.
(On the flipside, as I noted before, added time allows the prosecution to build a solid case before the arrest and then during pre-trial activity. Our legal system works best when both sides have the time to informed, accurate and prepared to give judges the right info. to make proper rulings of law and juries the right info. to make correct findings of fact.)
Second, delaying a trial is a very effective tool for the accused to use battle the prosecution. Overtime witness loose memory, documents disappear and/or fungible evidence (blood, tissue, organic fibers) become less reliable. Given the relative power the prosecution always possesses (the state has virtually unlimited resources, man power and money to prosecute any case) the accused needs to use all the tools at his or her disposal.
It almost seems like you are willing to trade speed for the rights of accused. That's a tradeoff I'd never want.
A note: All the pre-trial stuff really does not "clog" the judicial system. Judges who decide preliminary motions and other pre-trial matters are often not the same judges who preside over trials. Hence filing a lot pre-trial motions or even getting a judge to listen to requests by the state pre-arrest will have little or no affect on speed of trials that are already being tried.
posted by Bag Man at 9:55 AM on August 3, 2002
rushmc, your concern about the time that trials take is a valid concern. However I happen to disagree that the judicial process should be streamed lime. The accused in a criminal trial does have a right to a "speedy trial" (one that starts in 60 days). However, there are many reasons why it may not be in the best interest of society or the accused to force people into speedy trials, but I think the following two are the most compelling.
First, you must think of the due process rights of the accused. With out adequate time for the defense to investigate and time for the accused to file motions, etc. people will be ill-prepared for trial. Rushing people into trial cuts down on the time for the accused to take the necessary steps to make sure his or her due process right are being adequately ensured. With out proper time to ensure due process rights, the state could very easily rush people into trials and convict them quickly on trumpeted up charges.
(On the flipside, as I noted before, added time allows the prosecution to build a solid case before the arrest and then during pre-trial activity. Our legal system works best when both sides have the time to informed, accurate and prepared to give judges the right info. to make proper rulings of law and juries the right info. to make correct findings of fact.)
Second, delaying a trial is a very effective tool for the accused to use battle the prosecution. Overtime witness loose memory, documents disappear and/or fungible evidence (blood, tissue, organic fibers) become less reliable. Given the relative power the prosecution always possesses (the state has virtually unlimited resources, man power and money to prosecute any case) the accused needs to use all the tools at his or her disposal.
It almost seems like you are willing to trade speed for the rights of accused. That's a tradeoff I'd never want.
A note: All the pre-trial stuff really does not "clog" the judicial system. Judges who decide preliminary motions and other pre-trial matters are often not the same judges who preside over trials. Hence filing a lot pre-trial motions or even getting a judge to listen to requests by the state pre-arrest will have little or no affect on speed of trials that are already being tried.
posted by Bag Man at 9:55 AM on August 3, 2002
Judges who decide preliminary motions and other pre-trial matters are often not the same judges who preside over trials. Hence filing a lot pre-trial motions or even getting a judge to listen to requests by the state pre-arrest will have little or no affect on speed of trials that are already being tried.
In federal courts - where any Enron-related prosecutions would be tried - pretrial motions and such are typicially heard by so-called "magistrate" judges, who are in effect junior judges. They are not lifetime appointees, not confirmed by the Senate, and they handle only matters of limited severity (for example, speeding prosecutions in federal parks).
When the cases go to trial, it's the full blown District Judge who hears the case - limetime appointee, confirmed by the Senate, the whole nine yards.
posted by mikewas at 4:24 PM on August 3, 2002
In federal courts - where any Enron-related prosecutions would be tried - pretrial motions and such are typicially heard by so-called "magistrate" judges, who are in effect junior judges. They are not lifetime appointees, not confirmed by the Senate, and they handle only matters of limited severity (for example, speeding prosecutions in federal parks).
When the cases go to trial, it's the full blown District Judge who hears the case - limetime appointee, confirmed by the Senate, the whole nine yards.
posted by mikewas at 4:24 PM on August 3, 2002
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This is correct, complex fraud (10B and 10b-5) cases often take upto 10 or 15 years to bring.
Seems all you need are the right political connections and an adequately complex scheme to defraud investors and employees
Bogus...see what happens down the line before you say this.
posted by Bag Man at 10:38 AM on August 2, 2002