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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (44879)	1/20/2006 3:41:17 PM
From: shades	Respond to of 116555

No Slowdown In White-Collar Fraud Charges Seen In 2006 . By Judith Burns Of DOW JONES NEWSWIRES SAN DIEGO (Dow Jones)--Don't look for any slowdown this year in criminal prosecution of white-collar fraud, a former federal prosecutor said Friday. "Will the frenzy stop? I'm afraid not," said Mary Jo White, a former U.S. Attorney for Manhattan, now a partner with the law firm of Debevoise & Plimpton LLP in New York. In remarks to a Northwestern University Law School conference here, White said she sees no abatement in the "prosecutorial frenzy" against corporate fraud despite some recent high-profile setbacks, including the acquittal last June of former HealthSouth Corp. (HLSH) Chief Executive Richard Scrushy. "The government tends not to take losses very well," and brought new criminal charges against Scrushy last fall, White noted. Prosecutors scored some big victories in other white-collar criminal cases, as former WorldCom Chief Executive Bernard Ebbers, former Tyco International Ltd. (TYC) CEO Dennis Kozlowski and former Adelphia Communications Corp. (ADELQ) CEO John Rigas were convicted and sentenced to between eight and 25 years in prison. In another win for prosecutors, former Enron Corp. (ENRNQ) Chief Accounting Officer Richard Causey agreed to plead guilty and testify in the upcoming trial of former Enron top executives Kenneth Lay and Jeffrey Skilling. White called the rash of criminal cases against white-collar frauds "an accident waiting to happen" as prosecutors "wanted to get in on the act" as corporate scandals emerged. Criminal indictments against companies themselves can be deadly, as seen in the conviction of Arthur Andersen, Enron's former outside audit firm, on a single criminal charge of obstructing justice, White pointed out. As an alternative, prosecutors used a "deferred prosecution agreement" against Big Four accounting firm KPMG LLP for allegedly marketing illegal tax shelters. In such agreements, prosecutors charge companies with criminal violations but agree not to pursue the case provided the company meets certain conditions. KPMG's deferred prosecution agreement, which ends in December, required it to pay $456 million in fines, penalties and restitution, turn over certain documents, and appoint former SEC Chairman Richard Breeden as an independent monitor of its tax practice. White-collar crime cases aren't a slam-dunk, said White, since complex accounting frauds often are harder to prove than a bank robbery and can bore juries if there isn't "a sexy smoking gun." Nevertheless, she estimates the government has a 90% success rate in obtaining guilty pleas or convictions in white-collar crime cases. Securities and Exchange Commission enforcement-division director Linda Thomsen, who spoke to the same group, said the high success rate shows criminal prosecutors are correctly charging wrongdoers. "You don't get a 90% success rate unless you are carefully evaluating the facts," said Thomsen, who gave the usual disclaimer that she was speaking for herself, not the SEC. The SEC typically settles the vast majority of its own civil fraud charges against individuals and companies, but is finding itself in court more often now than in the past. David Bayless, a partner with the law firm of Morrison & Foerster LLP in San Francisco, who addressed the same group, said that as the SEC's settlement demands have ratcheted up, some individuals see little benefit to settlements and are instead taking their chances in court. "If you've got a good case, don't hesitate to take it to trial," Bayless recommended. Thomsen said SEC litigators "are delighted to go to trial," and have a strong track record, winning eight of their last 10 trials.