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To: RR who wrote (53423)	7/1/2002 1:00:40 PM
From: stockman_scott	Respond to of 65232

In Nothing We Trust By Paul Maidment Forbes 07.01.02 NEW YORK - "In God We Trust," it says on the back of a dollar bill. That may be the only bit of trust left in the U.S. financial system. Enron. Andersen. Tyco. Qwest. Global Crossing. Adelphi. Now WorldCom. Or should that be WorldCon? Where can anyone have any confidence in the probity of corporate America if a company's accounts aren't worth the paper they are printed on? As Francis Fukuyama argues in Trust: The Social Virtues and the Creation of Prosperity, high levels of trust facilitate economic interaction and lower transaction costs, thus encouraging development of large-scale corporations which help a society compete in the global economy. Low trust entails higher transaction costs, as suspicious people protect themselves with negotiations, detailed contracts and lawyers. Development lags accordingly. There is nothing inherently trustful about business. That is why there are rules. Accounting rules, corporate governance rules, antitrust rules, anti-corruption rules, rules of contract and property. Capitalism couldn't work successfully without them. The system is based on everyone--investors, executives, consumers and employees--making informed decisions based on information they can trust. Fraud undermines capitalism just as much as theft by violence. That is why companies have to file financial statements in standard formats that comply with generally accepted accounting principles. That is why stock exchanges require information that could affect a stock's price to be disclosed to all investors simultaneously. Insider trading is illegal for a reason. But the system only works if the penalties outweigh the potential gains from breaking the rules. In the tech bubble years they simply didn't. The numbers were so big, the enforcement so lax that the temptation became too great for too many top executives who started treating their companies like personal piggy banks. Help yourself to stock options. Keep the share price high to cash in. Keep the earnings growing to keep the stock price up. Just do what it takes to get the numbers to come out right. Smart accountants write accounting rules. So hire even smarter ones to get around them. And everyone was getting rich so it seemed no one cared. Now, like Claude Rains in Casablanca, Americans from the president downwards are shocked, shocked, to find improper accounting was going on here. The solution is straightforward. Sure, some already proposed technical changes would help: stronger auditing rules and a Glass-Steagal-like separation for accounting firms of auditing and consulting; tougher corporate governance rules to ensure the rotation of auditors and that non-executive directors act as the guardians of shareholders' interests--not as management's cronies. More radically: modify the purely rules-based accounting of the U.S. to include the principles-based accounting used elsewhere in the world. But more important: Make the rules we do have stick and the penalties for breaking them effective deterrents. Case in point: The SEC's lawyers and accountants have been investigating WorldCom for three months. Still, it took the company to 'fess up publicly to its accounting misdeeds for the agency to file charges. The SEC's chairman, Harvey Pitt, himself a former Wall Street lawyer, is now writing to the chief executives and financial officers of America's 1,000 largest companies asking them to certify the accuracy of their company's financial accounts. If those accounts turn out to be false, top execs could end up in jail, he says. If all CEOs were to face serious jail time for fraud if their accounts were bogus and were sure they had little chance of getting away with cooking the books, you'd find trust in the numbers and corporate America restored faster than you can spend that dollar bill. A previous generation of white-collar crooks learned that lesson the hard way. The abuses of the junk bond era came to an end once the likes of Michael Milken were put behind bars. That lesson needs to be taught to a new generation. forbes.com

To: RR who wrote (53423)	7/1/2002 2:26:28 PM
From: stockman_scott	Respond to of 65232

More heads roll in corporate scandals By Mike Tarsala, CBS.MarketWatch.com Last Update: 12:53 PM ET July 1, 2002 SAN FRANCISCO (CBS.MW) - More CEOs are working around the house and playing more golf because of corporate scandals that have banished them from their corporate offices. There were 197 chief executives who left their posts in the second quarter, down 14 percent from the same period last year, says John Challenger, chief executive of the outplacement firm Challenger, Gray & Christmas. But unlike last year, most of those who left in Q2 either gave no reason for their departure, or resigned due to dismal performance or suspicion of wrongdoing, he says. In June alone, only a quarter of the CEOs who left their posts did so because of an announced retirement, Challenger said. Fewer than 10 percent died or found a new job elsewhere. "More CEOs are being pushed out due to the attention on CEOs and their accounting practices," Challenger said. "We are seeing more CEOs leaving under a cloud of suspected and/or substantiated wrongdoing." Challenger says that a growing number of corporate boards are running out CEOs without any explanation to shareholders. He says it's for both legal and public relations reasons. A number of boards gave CEOs "golden parachute" clauses in their contracts that require company payouts when they are terminated. "Companies don't want to risk anything right now," he says. "They're being very careful about how they position these departures." High-profile CEOs who left their companies in a trail of scandal in the past three months include Bernard Ebbers, of WorldCom (WCOME: news, chart, profile), who faces a congressional committee hearing and an SEC investigation due to the company's accounting fraud; Tyco International's (TYC: news, chart, profile) boss Dennis Kozlowski, who was indicted on charges he evaded more than $1 million in sales taxes; and Joe Nacchio of Qwest Communications (Q: news, chart, profile), who resigned following an SEC investigation and a stock nosedive. Very few CEOs, like August Busch III of Anheuser-Busch (BUD: news, chart, profile), who retired in June, stepped down after a long career. A year ago, the bursting technology bubble drove the CEO exodus, Challenger says. Executives left as start-up companies ran out of investment-bank funding and went out of business. Now, CEOs are suffering the wrath of angry shareholders at much larger companies who are fed up with dismal returns. Some are facing pressure from board members and regulators amid revelations of lax financial controls and in some cases, outright fraud. Challenger says that the technology industry again suffered the most CEO turnover in June, with 12 executives leaving their post. It was followed by the service and health sectors, with 10 departures each. Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com.

To: RR who wrote (53423)	7/1/2002 7:11:58 PM
From: stockman_scott	Respond to of 65232

Corporations desert war on terrorism By MARK SHIELDS SYNDICATED COLUMNIST Monday, July 1, 2002 President Bush has been direct: The battle against terrorism will be long and costly in U.S. treasure and suffering. In response to Bush's blunt words, dozens of U.S. corporations have gone AWOL in their country's current war by buying a Bermuda corporate address -- while never moving so much as a filing cabinet -- just to avoid taxes on profits they earned here. Yes, U.S. troops will sleep tonight thousands of miles from their families and wake tomorrow, again, in harm's way. Yes, this nation will spend an additional $48 billion on national defense and appropriate $38 billion for homeland security, and much more to rebuild New York City. When the going got tough, these corporate citizens got going to the tax havens where, in a time of war, they chose not to pay the U.S. taxes they owed, but still to have their factories, families and fortunes defended by U.S. Marines. These corporate "ex-patriots" seeking welfare for the wealthy may have no shame. But they do have defenders in power in Washington. Rep. Richard Armey, R-Texas, the House majority leader, asserted on the public record that these companies were not deserters, but "quite rightly" taking advantage of a loophole in the tax law. He compared their fictitious moves offshore to an American family moving to Florida to cut their tax bill. Of course, no U.S. citizen has the option of keeping the priceless rights and privileges of U.S. citizenship while simultaneously claiming Bermudan citizenship to avoid paying his income taxes. Sen. Charles Grassley, R-Iowa, for one, thinks Armey is dead wrong. Grassley has joined Senate Finance Committee Chairman Max Baucus, D-Mont., in pushing a bill to close the loophole. The true patriot recognizes and honors the duty and the responsibility she owes to her country and to her countrymen. The IRS estimates that these corporate parasites annually rob the United States Treasury of $70 billion in taxes And who makes up the difference? The cops, and firefighters, and nurses, and teachers, and Mom and Pop small-business owners do. They don't have a corporate counsel to file the necessary legal papers for a "move" to tax-free Bermuda or Barbados, but they do have the sons and daughters who bravely answer their nation's call to serve. They play by the rules. They obey the law. They pay their taxes. They love their country. The fight to bring these AWOL-deserter companies against their will back to justice is led in the House by Rep. Richard Neal, D-Mass., a formidable inside player on the Ways and Means Committee who has regularly worked with Republicans. Neal's district includes many Reagan Democrats. What does Neal say to them? "Paying your taxes is patriotic. ... These corporations want 'Made in the U.S.A.' on their products, but they don't want U.S.A. on their corporate address." Neal is confident that mounting pressure will force the Republican House to take up the issue, and an experienced vote-counter, he is sure his bill will win 300 votes on the House floor. If these corporate wartime deserters cannot be brought to justice, isn't it time to throw in the towel and -- out of our collective gratitude for all that they do for us -- take the rich off the tax rolls altogether? ------------------------------------------------------ Mark Shields is a commentator on PBS' "The NewsHour with Jim Lehrer" and on CNN's "Capital Gang." Copyright 2002 by Creators Syndicate. E-mail: cre8ors@aol.com