CORPORATE CRIME REPORTER
Was Bush's Crackdown on Corporate Fraud Successful?
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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