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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?


To: Baldur Fjvlnisson who wrote (4410)9/9/2002 1:18:09 AM
From: Mephisto  Respond to of 5185
 
Will the Justice Department go after Dunlap? It seems that there many well financed
executives living it up. JMOP

See next article.



To: Baldur Fjvlnisson who wrote (4410)9/9/2002 1:21:38 AM
From: Mephisto  Respond to of 5185
 
Will Justice Department Go After Dunlap?
The New York Times

September 6, 2002

Floyd Norris


TIMING is everything. Especially in fraud.


Executives of companies accused of accounting fraud these days tend to
be treated as public enemies. They are paraded before Congressional
committees. They are arrested and put through "perp walks" while cameras record their humiliation.

And then there is Albert J. Dunlap, a man who loved his reputation as Chainsaw Al, the tough executive who fired thousands of people and bragged that he deserved the $100 million he got when Scott Paper, a company he was credited with turning around, was sold to Kimberly-Clark in 1995.

This week Mr. Dunlap settled a civil suit filed by the Securities and Exchange Commission
by paying a $500,000 fine and agreeing never to be an officer or director of a public company.
He neither admitted nor denied the S.E.C.'s claim that he masterminded an accounting fraud when he was
running the Sunbeam Corporation.

Had that fraud erupted last month, there is little doubt that there would have been the
same type of publicity that greeted the Enron, WorldCom and
Adelphia debacles. But Sunbeam's accounting blew up in 1998 and the
S.E.C. allegations were filed in the spring of 2001, when few really cared
about accounting fraud.


Mr. Dunlap's good fortune in timing did not stop there. It now turns out
that the S.E.C. believes that there was funny accounting at Scott Paper
when he was running it. That claim was made in March, when Kimberly-Clark
agreed to a cease-and-desist order barring it from further accounting
sins. The S.E.C. concluded that Kimberly-Clark had hidden losses
that emerged because Scott's preacquisition books did not reflect $99 million in
expenses.

But the S.E.C. did not emphasize the Dunlap connection, and the action
came during the height of the Enron furor. Few noticed.


To be sure, the S.E.C. did not discuss who at Scott knew of the dubious
accounting, and the commission never looked into Scott's books when Mr.
Dunlap was running the company.

But Mr. Dunlap is unique among executives of companies that collapsed
after accounting frauds in that such allegations have dogged his career.
Back in the 1970's, he was president of Nitec Paper, whose profits
amazed the owners and led them to agree to pay Mr. Dunlap $1.2 million. But
auditors concluded the profits were phony, and Nitec filed suit claiming
that Mr. Dunlap had directed an accounting fraud. Those allegations were
never proved, and Mr. Dunlap put the matter behind him by not telling
future employers he had worked for Nitec.

The question now is whether the Justice Department will bring criminal
charges in the Sunbeam case. Prosecutors will not say if they are
investigating, and neither will Mr. Dunlap's lawyer.

Fraud cases can be difficult to prove, and prosecutors may hesitate
to commit the needed resources. If he were charged, Mr. Dunlap would probably
claim, as he did at Nitec, that he was not an accountant and had no responsibility
if the accounting was wrong.

But there is little doubt that Mr. Dunlap would be facing a criminal
investigation if the Sunbeam fraud had erupted last week. If prosecutors make
no effort to build a case against him now, then one must wonder whether
it is not the crime but the public outrage that determines prosecutorial
priorities.


Mr. Dunlap fooled investors for years. Had he not succeeded in concealing his past,
he might never have risen to the top of American business. Had
the S.E.C. looked at Scott's books while he was there, perhaps he would have
been stopped earlier. But he was not.

He made his millions while fictitious profits were posted and investors
lost billions. If the Justice Department does nothing, Mr. Dunlap will live out
his golden years as a very wealthy man.


nytimes.com Copyright The New York Times Company



To: Baldur Fjvlnisson who wrote (4410)9/9/2002 2:08:07 PM
From: Mephisto  Respond to of 5185
 
Enriching managers

William Pfaff International Herald Tribune/Los Angeles
Times
Monday, September 9, 2002
iht.com

PARIS The orthodox response to the crisis of
American capitalism is to reform the system, but
reform is useless when the system itself has
failed. Enron was a scandal but also the product of
a pathological mutation in capitalism.


Most people who are not economists, probably
including most graduates of American business
schools, do not understand that the capitalist
model we now use is a recent invention.


It is not the system that created the modern
industrial economy and modern Western
prosperity. It rests on a conception of the business
corporation that became generally accepted only
in the 1970s and '80s, and was substituted for
what before was known in the United States as
"stakeholder capitalism," in which management
was considered accountable to employees and
community as well as owners.


A French economist, André Orléan, has called the
new system "patrimonial" or "owners' capitalism,"
because "all the economic actors (managers,
employees, small investors, banks, the state) are
expected to align their interests to support the
interests of the owners of the company." These
owners are the stockholders, whose interest is a
return on investment. This means that they
expect a high and rising value for the stock and a
steady increase in profits.


The theory is open to criticism for its indifference
to social issues, but is coherent. However, as the
international public has discovered in recent
months, the theory has not been practiced.
Instead, in the United States and in countries that
have adopted the American business model,
something new, "managers' capitalism," has been
substituted for owners' capitalism. This new
version of capitalism functions primarily to enrich
corporate managers as a class.


In 1941, James Burnham, a repentant Trotskyite,
published a book called "The Managerial
Revolution," which was to have a lasting effect on
economic thought and business theory. Burnham
said the old class struggle had been overturned by
the emergence of a new class, the managers, who
were replacing the old-style capitalists of classical
Marxist analysis.

Burnham said the American economy of the
1930s, shaped by New Deal government
interventions, and the economies of the Soviet
Union and Nazi Germany all were run by this new
class.

Other business theorists refined his idea, and a
general agreement emerged that the classical
capitalist as a social type had been replaced.

Companies today are rarely controlled by
individual owners or families. Pension and
investment funds have become the most
influential holders of corporate stocks, but they do
not function as old-style owners. Their sole
interest is investment return, and that is the
criterion by which they judge a corporation's
professional management.

In theory, of course, professional managers act in
the interest of the owners. It has been taken for
granted that the objective of professional
management is efficiency and the well-being of
the corporation. Yet this proves not to have been
the practice of many managers. The corporate
scandals revealed during the last year all have one
thing in common. In all of these cases, the
corporation was being run to profit its managers,
in complicity if not conspiracy with accountants
and the managers of other corporations.


Managers served complaisantly on one another's
boards and on the remuneration committees of
one another's companies. "Independent" directors
were beneficiaries of corporate business or
charity. These managers often proved indifferent
to the long-term interests of their companies,
making decisions for short-term advantage that
were predictably damaging to the company, if not
ultimately ruinous.

Their purpose seems to have been to get out in
time, with a fortune acquired at the expense of
stockholders and employees.


Since "everyone" was doing the same thing,
including persons eminent in successive
administrations in Washington, why should they
have looked upon what they were doing as
reprehensible? Employee interests were
systematically disregarded. The stock option
system tied employee pensions to company
investments, under company management, and
pension funds were frequently exploited to
management advantage, if not simply looted.

Owners' capitalism failed in practice because the
markets have so diffused corporate ownership that
no responsible owner exists. Managers exploited
that void to turn corporations into mechanisms for
their personal enrichment. This is morally
unacceptable, but it is also a corruption of
capitalism itself, and of the society in which it
functions.


International Herald Tribune Los Angeles Times
Syndicate International



To: Baldur Fjvlnisson who wrote (4410)9/14/2002 2:59:15 PM
From: Mephisto  Respond to of 5185
 
[The US and the use of Torture]

See: Message 17986103

The UN's anti-rights lobby The world body's Commission for Human Rights
is currently dominated by governments that are trying to
sweep their own human rights abuses under the carpet


"the US has over the past few years
contributed to the general erosion of the UN human rights monitoring
system.It adamantly opposed several important and promising new
human rights initiatives, notably the International Criminal Court and a
new anti-torture mechanism.

On the anti-torture protocol, the US sought to derail the creation of a
universal system of visits to places of detention, under an optional
protocol to the Convention Against Torture. Here America found itself
allied with some strange bedfellows that it normally rebukes as chronic
human rights violators -- Cuba, China, Iran, Libya, Sudan and Zimbabwe."


taipeitimes.com
By Joanna Weschler
The UN High Commissioner for Human Rights, Mary
Robinson was replaced yesterday by the Brazilian Sergio
Vieira de Mello, a longtime UN diplomat. The transition is
going to be a tricky one, because the governments that dominate the UN
Commission for Human Rights (CHR) are increasingly trying to protect
themselves -- and their allies -- from any scrutiny or criticism.

During the last annual session of the CHR, held in Geneva last spring,
the body voted one by one to ignore severe human rights violations in
such places as Russia/Chechnya, Zimbabwe, Iran and Equatorial Guinea.
For several other violators -- such as China, Algeria, Uzbekistan, Vietnam
and Saudi Arabia -- the commission couldn't even muster the will to put
their abuses on its agenda. It also cut back on several country-specific
monitoring mechanisms, compromising one of the most powerful of
human rights tools, that of naming and shaming.

This is happening, in part, because countries with vile human rights
records -- Algeria, Burundi, China, Cuba, the Democratic Republic of
Congo, Indonesia, Kenya, Libya, Malaysia, Saudi Arabia, Sudan, Syria,
and Vietnam -- command a powerful bloc within the CHR. They compose
a near majority on the 53-member body. In 2003, Zimbabwe will join
them and, unless African countries reverse an earlier decision, Libya will
chair this body for a year.

Such countries go out of their way to secure seats on the commission and
then actively work to build alliances with pliable governments. In
addition, they have developed a number of clever procedural ploys to
undermine the commission.

Their resolve to render the commission toothless is not matched by a
balancing impulse on the part of the traditional promoters of human
rights in the West. To some extent, this is because -- all rhetoric
notwithstanding -- human rights rank relatively low among these
governments' priorities. Trade often trumps human rights and
governments, especially in Europe, are often loath to jeopardize lucrative
contacts when govern-ments that violate human rights retaliate at being
criticized.


These tendencies have been compounded more recently by the war
against terrorism. Western democracies are unwilling to irritate important
allies in the counter-terrorism struggle simply because they might be
violating the rights of their own citizens.

During the past year, for the first time in its history, the US was not a
member of the commission (though it will be regaining its seat in 2003).

You might think that America's absence contributed to the CHR's sorry
state as, in the past, the US was often principled and outspoken on some
issues, in particular regarding certain specific abusive countries. But you
would be wrong.


Increasingly obsessed at the prospect of its own citizens and practices
coming under international scrutiny, the US has over the past few years
contributed to the general erosion of the UN human rights monitoring
system. It adamantly opposed several important and promising new
human rights initiatives, notably the International Criminal Court and a
new anti-torture mechanism.

On the anti-torture protocol, the US sought to derail the creation of a
universal system of visits to places of detention, under an optional
protocol to the Convention Against Torture. Here America found itself
allied with some strange bedfellows that it normally rebukes as chronic
human rights violators -- Cuba, China, Iran, Libya, Sudan and Zimbabwe.


Yet, without US support, the initiative was overwhelmingly endorsed in
late July by the UN's Economic and Social Council.

Of course, not everything in the UN's human rights picture is uniformly
bleak.

The International Criminal Court will be beginning its work soon, and
with greater international support than expected, thanks to America's
efforts to undermine it.
The universal system of visits to places of
detention is gaining ground. Even at the CHR, there has been some
recent progress, for example, on work to establish "disappearances" as an
international crime.

Here, countries with fresh memories of repressive rule, such as Latin
American and East European nations, have increasingly taken the lead in
promoting human rights initiatives and defending the principles. (Latin
America, in particular, played a pivotal role in all the situations described
above.)

All the same, manipulation by powerful countries and the foes of human
rights have left the commission in bad shape.

Vieira de Mello -- who has had a distinguished career in the UN system
and is a brilliant diplomat -- must be willing and able to draw on his own
region and on others to make sure that the UN human rights system
serves the victims rather than the violators. But he will also need to entice
the West into becoming more pro-active and the US in particular into
re-establishing its role as a constructive rather than destructive force in
human rights affairs.


Joanna Weschler, a onetime activist in Poland's "Solidarity" movement,
represents the Human Rights Watch at the UN.

Copyright: Project Syndicate



To: Baldur Fjvlnisson who wrote (4410)11/7/2002 9:20:36 AM
From: Mephisto  Respond to of 5185
 
Under fire for missteps, SEC chief quits

Stephen Labaton The New York Times
Thursday, November 7, 2002
iht.com

WASHINGTON Harvey Pitt, the embattled chief of
the U.S. Securities and Exchange Commission,
has resigned after igniting a fresh controversy over
how he handled the selection of the head of a new
accounting-industry oversight board.


Pitt announced his resignation Tuesday night just
as polling places were closing in the U.S.
congressional and local elections. For days he had
insisted he would continue to serve as long as he
had the confidence of the president.

At the same time, White House officials had
strained to keep the growing crisis at the agency
from becoming a political issue that would remind
voters of Washington's response to corporate
scandals. The officials publicly voiced support for
him but privately expressed deep anger about his
stewardship.

Administration officials said President George W.
Bush had not requested his resignation but that
the officials welcomed it, particularly because Pitt
had created a new round of political difficulties for
Republicans in the days leading up to the
election.

On Wednesday, the Bush administration
defended the president's appointment of Pitt and
his substantive performance at the commission,
the Associated Press reported.

"I don't think he went soft on the accounting
industry," said Ari Fleischer, the White House
press secretary. "There were other circumstances
that arose," he said, leading Pitt to resign.

Pitt's leadership of the agency had grown
increasingly tenuous in recent months with a
series of political missteps, including a widely
ridiculed effort over the summer to insert a
provision in corporate anti-fraud legislation that
would raise his pay and elevate his status to that
of cabinet level.

Pitt's position was further weakened last week by
a disclosure involving his role in the nomination of
William Webster, the new accounting board
chairman.

It was revealed that Pitt had told neither the White
House or the four other SEC commissioners that
he had known that Webster had headed the audit
committee of a company accused of fraud.
Webster, who had been recruited for the post by
the White House, was approved by a deeply
divided SEC, with two commissioners saying he
was unqualified for the job.

The disclosure that Pitt had withheld information
about Webster's ties to the company, U.S.
Technologies Inc., led quickly to three
investigations into Pitt's handling of the selection
of the new board. A fourth inquiry, by the SEC, is
examining Webster's work for U.S. Technologies,
which is virtually insolvent and under criminal
investigation.

"Unfortunately, the turmoil surrounding my
chairmanship and the agency makes it very
difficult for the commissioners and dedicated SEC
staffers to perform their critical assignments," Pitt
said in a letter to Bush. "Rather than be a burden
to you or the agency, I feel it is in everyone's best
interest if I step aside now, to allow the agency to
continue the important efforts we have started."

A woman who answered the phone at Pitt's
residence Tuesday evening said, "I'm sorry, we're
not taking any calls right now."

"This was his decision," said a White House
spokeswoman, Claire Buchan, referring to Pitt's
resignation. She said no interim chairman had
been selected.

In his letter to Bush, Pitt said he would leave "as
soon as I can help your staff ensure a smooth
transition of leadership."

Among the people being considered to replace
him are Richard Breeden, who was chairman of
the SEC under former President George Bush;
Michael Chertoff, the assistant attorney general in
charge of the criminal division at the Justice
Department and James Doty, a securities lawyer
who was general counsel to the SEC under
Breeden and who represented George W. Bush
before he became governor of Texas.

Also being considered are Rudolph Giuliani, the
former mayor of New York; Joseph Grundfest, a
former SEC commissioner now teaching at the
Stanford University law school; Frank Keating,
governor of Oklahoma and Frank Zarb, former
head of the National Association of Securities
Dealers.

Pitt, the 26th SEC chairman, is the second to
resign abruptly as a result of a political scandal. In
1973, G. Bradford Cook resigned 74 days after
taking office over a matter related to the Watergate
scandal that eventually brought down President
Richard Nixon. He had been accused of deleting
references from an SEC injunction to a secret
$200,000 cash contribution that a financier,
Robert Vesco, had made to Nixon's re-election
committee.


Pitt had been confirmed unanimously by the
Senate last year and was widely praised as one of
the most experienced securities lawyers in the
United States.

iht.com



To: Baldur Fjvlnisson who wrote (4410)11/7/2002 9:22:04 AM
From: Mephisto  Read Replies (1) | Respond to of 5185
 
Baldur, wherever you may be, Pitt's resignation should make you very happy! One less crook
in the Bush White House. Looks like we are stuck with the others.