By Steve Weinstein
By Devon Maloney
By Tessa Stuart
By Alison Flowers
By Albert Samaha
By Jesse Jarnow
By Eric Tsetsi
By Raillan Brooks
Democrats may be looking to make hay off the Bush administration's embarrassing brushes with corporate scandal, but the record shows they have little to be proud of.
One study comparing the first Bush White House with Clinton's asserts that under the Man From Hope, prosecutions of white-collar crime dropped by one-quarter and convictions by one-third. Perhaps most significantly, Clinton's Justice Department refused to act on cases referred by the EPA, the Interior Department, and other agencies. Written by Russell Mokhiber and Robert Weissman, the analysis makes clear that one business-friendly president after another set the table for today's cascading mess.
With Wall Street reeling from disclosures of cooked books, ordinary Americans are taking the hit for decades of laissez-faire governing. It's their 401(k) plans that are tanking, even as politicians complain that it's really too hard to bring criminal fraud cases against big-deal CEOs. If the execs can't be held accountable now, that's partly because corporate lobbyists spent the 1990s pushing through laws to protect business and open the way for funny-money accounting.
Measures enacted during the last Democratic administration denied investors the right to bring civil actions in state court and instead made them run a gauntlet of roadblocks at the federal level. True, Clinton did veto one egregiously pro-business measure. But by the end of his reign, the nation's statutes ensured that victims of corporations like Enron and WorldCom would struggle to get on the docket and have a much tougher time recovering damages if they ever won.
Now Congress continues to discuss reforms that are hardly more than tepid. The accounting industry will continue to set the rules, and their yo-yo in residence, SEC chairman Harvey Pitt, will continue to unenforce them. It's no wonder the high-rolling crooks smugly invoking the Fifth at Capitol Hill hearings can barely contain their glee.
The modest changes debated in Congress last week would lengthen prison terms in fraud cases, and make it somewhat easier for prosecutors to make felony charges stick. But prosecutors will still be stymied by having to meet narrow standards to keep the cases in court, and they'll face the unenviable job of convincing juries, often made up of unknowledgeable people who snooze through the complicated arguments.
As a practical matter, criminal violations require investigation by the FBI, already stretched thin by the war on terror. After September 11, Bush actually shifted agents away from white-collar crime.
The Justice Department can also take referrals from the underfunded and understaffed SEC. But Chairman Pitt, who made $3 million a year representing big firms like Merrill Lynch and such individuals as Ivan Boesky, is a free-market man who shies clear of regulation. The commission itself is stacked against even faintly resembling corporate crime busters. Two of its five posts are empty. In addition to Pitt, one other commissioner, Cynthia Glassman, is a former economist with Ernst & Young. "That means two-thirds of the agency's commissioners have ties to the accounting industry," writes Common Cause. Pitt himself has represented all five big accounting firms along with the accounting trade association.
Pitt reportedly wanted New York attorney general Eliot Spitzer to back off his landmark investigation of Merrill Lynch. Spitzer had dug into the firm and discovered analysts cheerily promoting stocks that behind the scenes they characterized as dogs. The AG benefited from the Martin Act, a state measure that makes it easier for him to bring a successful criminal complaint than for the Justice Department to take action. He can issue subpoenas, undertake discovery proceedings, and hold hearings. This year, Spitzer forced Merrill Lynch to settle the case.
While aggressive enforcement of state securities laws may turn out to be one avenue of real reform, another lies buried in a whistle-blower bill wending its way through Congress. According to Tom Devine of the Government Accountability Project, the Corporate Fraud and Criminal Accountability Act of 2002 extends whistle-blower protections to employees of publicly traded companies. This means that an employer can't harass or fire a worker like Sherron Watkins, who detailed the problems at Enron.
Legal experts say that without people like Watkins, justice is hard to achieve. "Basically, white-collar cases mostly cannot get a conviction without a witness," John Coffee, a Columbia professor and expert on securities law, told the Voice. "You can't do it all with documentary evidence."
It's bad enough that corporate swindlers like Ken Lay, who screwed Enron employees out of their retirement funds, remain at large. Even more galling is to watch moneyed lawyers make millions off bankruptcy proceedings. Seven big legal firms and one accounting concern involved in the case are billing for millions of dollars every month. While the workers scrap it out in the bankruptcy pool for the small change, these lawyers stand at the head of the line, their fees guaranteed.
Under the current bankruptcy rules, employees are the last to get any real money back on their ruined 401(k)'sexcept, that is, for a possible $4300. On the list of priorities, that symbolic sum comes well after any secured debt owed to banks and the expenses piled on by the attorneys. David Skeel, a University of Pennsylvania law professor and author of Debt's Dominion, says the rank and file is pretty much out of luck. "They're not in good shape," Skeel told the Voice. "It's clear they have a lot to lose, and they are going to lose a lot."
Divvying up the pie is the work of a creditors committee, made up of the largest creditors, and in Enron's case, according to court papers, these include such megagiants as J.P. Morgan Chase & Co., Citigroup/Citibank, and 13 othersbig banks, an insurance company, and a pipeline firm.
Legal Times reports that in the first two months of the bankruptcy proceedings, "425 lawyers and accountants and 125 other professionals billed the bankruptcy estate for nearly $18 million in fees and $1.2 million in expenses. One firm billed for the time an associate took reading the New York Timesand Wall Street Journalat $450 an hour." The top takers:
Weil, Gotshal & Manges, 14,835.5 hours in December for $6.2 million.
Milbank, Tweed, Hadley & McCloy, 1612 hours in December for $660,146 and 4120 hours in January for $2 million.
Wilmer, Cutler & Pickering, 6810 hours in December for $3 million
Dreamed up by a Houston geek calling himself Fabulous999, the video game Kaboom! calls for the kamikaze player, dressed like an Arab, to start a suicide-bombing spree in Israel, wend through Europe, and land in the U.S., killing as many women and children as possible with the click of a mouse.
Some 5000 people have voiced praise for Fabulous999 on his site, www.godfart.com. "Excellent game," wrote one. "You deserve a fucking medal," said another. "I gotta hand it to ya, any game that allows me to kill jews AND arabs is pure gold."
If they get bored with Kaboom! players can turn to other games, like NiggerHunt and Ethnic Cleansing.
One person who didn't think Kaboom! was such a laugh was AdmiralCasaba3rd, who lost his aunt and uncle when their jetliner flew into the World Trade Center. "They can never say goodbye to me or I love you because they are dead," he wrote. "It just brings up memories of the ones I have hugged and loved who are gone."
Not since the heyday of McCarthyism has there been anything like it. On its Web site, the White House tells how it is putting together the Citizen Corps, a vast network of amateur spies who tattle on any neighbors, friends, acquaintances, fellow workers, church parishioners, and family members they suspect of having terrorist ties. So far, the $230 million project includes the Citizen Corps Council, the Terrorist Information and Prevention System (TIPS), and a Medical Reserve Corps.
How will it work? The White House cites the example of Anne Arundel County, near Washington, D.C., as a model. There people are busy "taking police reports; making follow-up phone calls to victims; doing fingerprinting; helping with the neighborhood watch."
As for TIPS, it's meant to be "a national reporting system that would allow these workers, who have routines and are well positioned to recognize unusual events, to report suspicious activity to the appropriate authorities," the White House explains. Attorney General John Ashcroft says it's time for the country to turn its attention to "terrorism detection and prevention." He cites the National Sheriffs Association, which claims there are already 7500 communities actively watching their neighbors.