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Former SEC Chairman Levitt on SEC, Corporate Fraud (Transcript)
2003-08-06 15:29 (New York)
Aug. 6 (Bloomberg) -- Former Securities and Exchange
Commission Chairman Arthur Levitt talks with Bloomberg's Brian
Sullivan in New York about SEC regulatory activity and the
agency's efforts to impose stiffer penalties for corporate
wrongdoing. Levitt is a Bloomberg LP board member.
(This is not a legal transcript. Bloomberg LP cannot
guarantee its accuracy.)
SULLIVAN: It is time now for our weekly segment, "Levitt at
Large." Arthur Levitt, former chairman of the SEC, current
Bloomberg board member with us. And we've been talking a lot
about fraudulent companies and how scandal will impact
policymaking going forward. And we also asked some viewers out
there if they think that executives of scandal-ridden companies
have been punished adequately.
Here's what a couple of them said:
UNIDENTIFIED MALE: I think on some hands yes, and some hands
no. What they need is a more uniform plan for what they're going
to do with these executives.
UNIDENTIFIED FEMALE: No, they haven't been punished enough
because it's the workers in a company who have lost everything.
These executives have socked away millions and millions of dollars
in their own personal bank accounts.
UNIDENTIFIED MALE: No, they haven't. They deserve the
chair. I work hard for a buck. They've got it easy.
UNIDENTIFIED MALE: Definitely not. You know, this thing
dropped out of the picture. It was news for a couple of weeks.
You know, ultimately the stockbrokers and their investments had to
suffer and these guys are probably living it fat right now.
SULLIVAN: The chair, I mean, that may be a little bit of a
harsh punishment for executives, but I think the point has been
made that three out of the four viewers basically they are saying,
you know what? No, they haven't. Why not?
LEVITT: Well, I think in the first place the SEC has brought
more charges than ever before. But they can do so much. They
can't bring criminal action. That's up to the Justice Department.
But the mood has changed in the world of regulation. What's
happened is the SEC is no longer uniformly going to accept neither
deny or admit culpability.
Commissioner Harvey Goldschmid said, this is a new era. We
are not going to openly accept those pleas. It's going to make it
tougher. We're going to be in court more often than not. But
clearly more has to be done.
Sam Waksal's in jail. Charges have been brought. Others are
going to be wearing striped suits, but clearly it's going to
require greater resources for everyone that goes to trial, and
more people will go to trial because of the SEC's new standard of
bringing charges. That requires additional trial lawyers and
additional expense.
SULLIVAN: And what you're talking about is something that
Goldschmid recently said that is very interesting. It may seem
like a small distinction and what you're talking about is that if
the SEC is going to be a lot harder on executives, they're not
going to be able to just pay a few million and say, I neither
admit nor deny any wrongdoing.
What kind of a major policy shift is this?
LEVITT: That's a huge policy shift. Now I don't think that
every instance will call for that kind of solution. But we've
never had that before, and neither admit nor deny was the rule
rather than the exception. Goldschmid is absolutely right and the
SEC is moving down the right path.
The result of that will be that miscreants will be going to
trial and will be barred from serving on boards, will endure much
tougher penalties. Clearly the SEC is moving in this direction.
I cannot disagree with many of the viewers in saying that
corporate wrongdoing has not been sufficiently punished.
SULLIVAN: Without that little clause, it may seem little,
but it's not, will it be easier for individuals, then, to sue
executives if they don't have the executive with a signed document
that says, I didn't do anything wrong.
LEVITT: Yes, it will be easier. I think that's the reason
that defendants have resisted. Anything except neither admit nor
deny. So clearly they face a double barrel impact from this new
SEC policy. And I think that's responsive to the public outcry
against corporate wrongdoing.
SULLIVAN: We've got one viewer comment very quickly here.
Recently the NASD reported a license suspension for the fraudulent
sale of mutual funds. If I stole your car and were caught I would
go to jail. Why are these advisers not put in prison in clear-cut
cases of fraud such as investing $2 million in mutual funds class
B shares all at once. That's Shawn Flavin. It's an interesting
point. How do you respond?
LEVITT: I respond to that by - criminal penalties are the
responsibility of the Justice Department. The Justice Department
is clearly moving in the right direction. Has it gotten there
yet? I don't think totally. This requires an absolute seismic
change in the way we prosecute white-collar crime.
And I think clearly we're going to see more of that. We
already have. People are in jail now. More of them will be going
to jail. More resources are going to be thrown at this. And more
people in the Justice Department now understand security fraud
that they didn't understand before except in major metropolitan
areas.
SULLIVAN: And more striped suits.
LEVITT: More striped suits.
SULLIVAN: Arthur Levitt, thank you very much. Our weekly
segment, "Levitt at Large."
***END OF TRANSCRIPT***
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