CORPORATE CRIME REPORTER
Was Bush's Crackdown on Corporate Fraud Successful?
20
Corporate Crime Reporter 6(1), February 2, 2006
How did federal prosecutors know that their crackdown on corporate fraud was
successful?
Deterrence? Too hard to measure.
Number of top executives thrown in jail? To few to list.
Number of corporations convicted? They all got deferred prosecution agreements.
How about politics? There you go.
Former federal prosecutors are now saying that one key measure of the success
of President Bush’s Corporate Fraud Task Force is the fact that corporate
crime was taken off the table as a political issue in the 2004 presidential
campaign.
Timothy Coleman, a former federal prosecutor with President Bush’s Corporate
Fraud Task Force, is now a partner at Dewey Ballantine in Washington, D.C.
In an interview with Corporate Crime Reporter, Coleman says that during
the 2004 campaign, “no one talked about corporate fraud.”
“Kerry and Edwards mentioned Enron and corporate crime once or twice,”
Coleman said. “In my view, the best proof that the government's efforts
have been successful is that corporate fraud was neutralized as a political
issue.” (See Interview with Timothy Coleman, 20 Corporate Crime Reporter
6(11), February 6, 2006, print edition only.)
William Mateja agrees.
Mateja is a former federal prosecutor now a partner at Fish & Richardson
in Dallas, Texas.
“It was amazing to me – and something I was proud of as point person
to the President’s Corporate Fraud Task Force – that during the
last presidential campaign and debates, there was only one tangential criticism
of the administration’s crackdown on corporate fraud,” Mateja said.
“Corporate fraud was a total non-issue. And that’s because there
was a real and substantial effort to prosecute corporate misconduct and restore
integrity in the financial marketplace.”
Mateja admits that there is a public perception that “Republicans are
beholden to big business.”
“But as a career prosecutor, I saw that this administration was committed
to doing the right thing,” Mateja said. “And it gave us the resources
to do the right thing. There was a recognition that in order to get the kind
of confidence in the financial marketplace that was needed to allow for economic
prosperity and growth, you had to have the kind of crackdown on corporate crime
that we saw and continue to see.” (See Interview with William Mateja,
19 Corporate Crime Reporter 40(12), October 17, 2005, print edition
only)
Not that politics motivated the crackdown on corporate fraud.
David Kelley, the former U.S. Attorney in Manhattan, is now a partner at Cahill
Gordon in New York.
“In the last five or six years, you had a real run on the markets,”
Kelley told Corporate Crime Reporter. “People were driven by
greed and hubris, and they came up with all sorts of creative accounting techniques
to try and cover losses and inflated earnings. And that’s what we responded
to. So, what you see is law enforcement’s response to a criminal trend.
There wasn’t a decision made by any sort of politician saying –
‘you know, I think we should go and attack white collar crime.’
Or somebody saying – ‘we should lay off white collar crime.’
Instead, prosecutors and law enforcement folks realized that there was a real
problem out there, the people were robbing investors blind, and they were lying
about it, and something had to be done. That’s not a political decision.
That’s just a pragmatic decision. It is something that has to be done.”
(See Interview with David Kelley, 19 Corporate Crime Reporter 44(10),
November 14, 2005)
Coleman says that there are other ways to measure success – like the stock
market itself.
“If you go back to the spring of 2002, a few months after the Enron bankruptcy,
when a slew of corporate scandals was breaking – Adelphia, WorldCom, Tyco,
Global Crossing, to name a few – the media was in a feeding frenzy over
allegations that the administration had been co-opted by big business and by
executives like Ken Lay of Enron,” Coleman said.
“The response was dramatic. In July 2002, Congress enacted Sarbanes-Oxley.
That same month, the President issued an Executive Order creating the Corporate
Fraud Task Force. On July 24, we arrested the five most senior executives of
Adelphia. Shortly thereafter, we began arresting executives from WorldCom.”
“The public clearly concluded that the government was cracking down on
corporate crime. For example, on July 24, 2002, the day of the Adelphia takedown,
the New York Stock Exchange had the second largest one-day increase in its history,
and the largest trading volume ever.”
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