Corporate wolves feed on an overly docile flock
By Froma Harrop / Syndicated columnist / Seattle Times / July4, 2002
IN the old West, when a cowboy was caught cheating at cards, little time elapsed between the discovery and retribution. Bang. Bang. Even an honest but skilled poker player like Doc Holliday had to keep his gun at the ready to deal with sore losers.
We live in less-violent times, and no one would suggest that swindled stock investors inflict physical harm on the business crooks who cleaned them out. But at least they could get mad.
Some of the bigger players are reaching for their lawyers. The little guys, on the other hand, just slink away from the gaming table. They seem strangely docile given their beating at the hands of corrupt CEOs, devious accountants and double-dealing stock analysts. Retail investors have lost just about all the gains they've made since 1995, which is about the time the little guys entered the game.
The only thing the little guys can do now is band together in numbers sufficient to terrify the politicians. I refer to the anti-regulation conservatives who have allowed corporate America to run amok.
President Bush seems to think that if he delivers the scalps of a few errant CEOs, the suckered masses will go home happy. He wants to cut them off at the pass — before they holler for muscular new regulations and sadistic bureaucrats to enforce them.
Securities and Exchange Commissioner Harvey Pitt, meanwhile, issued a call for frontier justice. "I'm outraged," he said on NBC's "Today." "Criminal charges may be too good for the people who brought about this mess." But whatever you do, don't regulate them.
Bush is especially concerned for the welfare of stock options. Stock options created fortunes for even mediocre executives at unexciting companies. Talk about loaded dice. No matter how a company performed, stock option deals could be written to enrich corporate chieftains beyond their gilded dreams.
The plutocrats have been good to Bush, and they want Bush to be good to them. They want him to keep intact the house rules that have served them so well.
Companies don't report stock options as an expense, as they do other executive compensation. Fed Chairman Alan Greenspan wants that to change. Bush does not. "Alan Greenspan is very smart," Bush said, before opposing Greenspan's plan to reform these accounting practices.
Conservatives continue to fight off numerous efforts to tighten regulations covering corporate behavior. Some try to pin the scandal on a decline in morality. Others point to crumbling stock prices as evidence that the market is working. According to the divine plan, stupid investors are supposed to lose their shirts.
How long Bush and friends can hold the fort with this kind of defense remains to be seen. The corporate corpses continue to pile up, and the causes of death become more exotic with every passing day.
Pretending that this is a few-bad-apples problem was a lot easier when it was only Enron. Since Enron, there's been Tyco, ImClone, Adelphia Communications, Dynergy, Global Crossing and now the king of the con artists, WorldCom.
The masterminds at Enron had the decency to hide their fraudulent partnerships under a cloud of complicated dealings. WorldCom, on the other hand, insulted us all with a simple scheme to hide billions in expenses. Any first-year accounting student could have found the problematic bookkeeping in short order.
I suspect that our casino culture has softened up the little guys for the kill. Here you have people who had ample practice playing the slot machines on Indian land and state lotteries. While the speculative bubble expanded, the stock market seemed like a slot machine programmed in the player's favor. Some might regard their stock losses as just an unlucky break.
The little guys have to catch on eventually. Hanging the bad boys high will act as a deterrent only until the next bull market makes people stop caring how they got the money. Most company execs are honest, Bush says. Fine. Trust but verify.
Respectable casinos regularly examine the dice for "irregularities." Bush thus far shows little interest in reviewing the dice or checking the roulette wheels for magnets. Only regulators can keep the game relatively honest. I bet you double or nothing that Republicans will pay for their passivity at the polls.
Scandals don't always come home to roost for some of those involved
By Bloomberg News / July 2, 2002
BOCA RATON, Fla. — The accounting scandals coursing through corporate America have destroyed many dreams. Not so the multimillion-dollar dream homes being built for executives of WorldCom, Enron, Global Crossing and other companies.
High-echelon executives, even those on the way down, seem to take literally the expression "A man's home is his castle."
Scott Sullivan, ousted as WorldCom's chief financial officer last week after the company said it inflated profits by nearly $4 billion, is building a mansion on a $2.45 million waterfront lot in Boca Raton, complete with a private lagoon and boathouse.
The Mediterranean-style estate, with a two-story porch facing an hourglass-shaped swimming pool, is under construction in a gated community where homes sell for $2 million to $8 million.
When Enron Chief Financial Officer Andrew Fastow was fired in October, construction crews were working on his 11,400-square-foot house on a $1.1 million lot in the River Oaks section of Houston. They still are.
Meanwhile, the company filed for bankruptcy protection in December and almost half of its employees have lost their jobs.
Global Crossing has also declared bankruptcy and fired workers. That hasn't interfered with the $15 million remodeling project at Chairman Gary Winnick's $90 million estate in Los Angeles' Bel Air section.
"We saw a lot of this in the dot-com bust — executives building palaces fit for sultans while running their businesses into the ground," said Christopher Lane, senior managing director of Welling & Woodard, a management consulting firm in San Francisco.
"Today the goal is to advance their own net worth, not to protect the interests of shareholders."
Martha Stewart, chief executive of Martha Stewart Living Omnimedia, is under investigation by the U.S. House Energy and Commerce Committee for alleged insider trading related to shares of ImClone Systems.
Stewart has denied wrongdoing. Her homemaking projects include renovating two houses on a 153-acre farm bought two years ago for about $15 million in Bedford, N.Y. She has said she also plans to build a 4,500-square-foot home and a barn on the estate.
A spokeswoman for Stewart didn't return a call for comment. |
