IMO, This is a MUST READ...
Dan Gillmor: Corporate sleaze carves into our trust
By Dan Gillmor
Mercury News Technology Columnist
Posted on Tue, Jun. 25, 2002
A recent message on my voicemail spoke volumes about the state of our economic system. The caller, furious at the financial shenanigans that had helped whack the value of his stock portfolio, said he hoped to get back to even someday.
Then, he said, he'd never go near the stock market again as long as he lived.
I believe he was overreacting. But the drumbeat of financial sleaze -- Tuesday's revelation of a $3.7 billion accounting fraud at WorldCom is only the latest instance -- is enough to make even an optimist worry.
The WorldCom situation is horrifying. The company announced Tuesday evening that it had treated billions of dollars of expenses as capital expenditures, thereby letting it report higher profit and more favorable cash flow than honest accounting would have allowed.
It's hard to imagine how WorldCom will survive this news. You might be tempted to say good riddance, but the fallout will be enormous.
The implications are particularly dismal for Silicon Valley and the technology community at large. Any recovery in tech and telecommunications, which continues to defy any confident predictions, will probably move further into the future.
But the impact on the overall economy may be worse. It would inevitably carve away more of the already flagging trust in the system. How much more trust can we lose?
I fear we're nearing a classic tipping point. The primary reason we didn't have a worse recession in the wake of the market downturn was that consumers kept spending. Now their confidence is dropping. The Conference Board and University of Michigan consumer-confidence indexes have both dropped in the past month, and you can almost smell the apprehension across our land and around the world.
Rational people are starting to assume something that isn't necessarily true. They're becoming convinced that the system is hopelessly, irrevocably rigged against everyday investors by a corrupt cadre of insiders in boardrooms and on Wall Street, willfully assisted by regulators and elected officials who are either corrupt themselves or simply blind.
None of this excuses the greed that turned many of those currently rational people into greedmongers themselves. Every financial bubble brings out the sharks, and the smaller fish tend to swim en masse into the killing zone.
But when every day seems to bring a new example of gross incompetence, unethical (if legal) behavior or outright fraud, we have to wonder where it will stop. How deep does this corrosion go?
What are business leaders, Congress and the Bush administration doing about all this? Not nearly enough. They don't seem to recognize the gravity of what's happening, or they're simply too cynical to do anything serious.
Cynicism is contagious in circumstances like these, and it's dangerous. The insiders who grabbed billions from investors, and who left workers and communities wounded, still have their money. Almost no one has been prosecuted, much less punished, for the vast financial crimes of the past decade. If you're rich or powerful enough, it seems, you can get away with anything.
We need visible, meaningful accountability. That means recovering ill-gotten gains. In at least some cases it means jail time. This isn't about revenge. It's about justice.
But we have to look as well at the fabric of laws protecting behavior that is clearly unethical and designed to reward insiders at everyone else's expense. Powerful interests are doing their best, successfully so far, to thwart all but the mildest changes in these shabby practices.
We could lose a lot if we don't act fast. America's once-justified bragging about having the most open, law-abiding financial system is starting to sound a bit hollow.
My voice-mail caller, I fear, speaks for growing numbers of people. If so, we risk losing a generation of investors.
I still believe in our system. I'm still a long-term investor.
But it's getting harder every day to hold onto that faith.
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Dan Gillmor's column appears each Sunday, Wednesday and Saturday. E-mail dgillmor@sjmercury.com; phone (408) 920-5016; fax (408) 920-5917.
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When will the Bernie Ebbers and the Ken Lays of the world really be held accountable for their actions..?? A little jailtime is LONG OVERDUE for folks that clearly take advantage of our system and ruin major corporations along the way...JMHO.
Scott@whenwillweseesomerealjustice.com |
