The Solution to Corporate Crime

Is apparently to make it impossible to prosecute:

Frustrated with laws and regulations that have made companies and accounting firms more open to lawsuits from investors and the government, corporate America — with the encouragement of the Bush administration — is preparing to fight back.

Now that corruption cases like Enron and WorldCom are falling out of the news, two influential industry groups with close ties to administration officials are hoping to swing the regulatory pendulum in the opposite direction. The groups are drafting proposals to provide broad new protections to corporations and accounting firms from criminal cases brought by federal and state prosecutors as well as a stronger shield against civil lawsuits from investors.

Although the details are still being worked out, the groups’ proposals aim to limit the liability of accounting firms for the work they do on behalf of clients, to force prosecutors to target individual wrongdoers rather than entire companies, and to scale back shareholder lawsuits.

Under these new proposals, Arthur Andersen and Enron would not be liable- just Skilling and Lay. I see how that would solve the problem (/sarcasm), although it does make lots of sense. Now that most Americans invest in the stock market, it seems like a pretty good time to pull the rug out from under us and remove protections for redress when they screw us. After all, accountability is not a strong point for the past few years. And don’t worry, CEO’s- a plan is being crafted even if the Republicans lose the House:

To alleviate concerns that the new Congress may not adopt the proposals — regardless of which party holds power in the legislative branch next year — many are being tailored so that they could be adopted through rulemaking by the S.E.C. and enforcement policy changes at the Justice Department.

Then the Justice Department, without these obligations, can focus on issues that really matter to Republicans. Like porn.

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56 replies
  1. 1
    Fountainhead says:

    I think we should trust the corporations. The free market always works for the betterment of everyone. Ayn Rand said so!

  2. 2
    jcricket says:

    Wow, shocker. The solution to corporate crime, government malfeasance, etc. is to eliminate the laws. No laws? No crimes! Wheee! (that’s the sound of my 401k going down again).

    I’m really not surprised. Republicans use the same type of reasoning in their arguments for getting rid of environmental regulations, malpractice lawsuits, business and/or estate taxes, etc. According to Republicans the only problem with the American economy today is too much regulation. It’s the Libertarian (big L) agenda, but without any rhetoric about how the private sector will police itself.

    For Republicans, it’s never a problem that the hundreds of millions of non-CEOs and non-Congresspeople get screwed when their pensions and 401ks are decimated, our shared environment is permanently despoiled, or the average citizen has no means to hold a hospital or business accountable for malpractice, sexual harassment or failing to keep the mines safe.

    My personal opinion is that I don’t think it’s “just the current Republicans”. Nearly every burden or risk has been shifting onto individuals and away from corporations for the past 20-30 years. While I’m willing to buy the idea that there is a level of regulation that does actually discourage innovation and new businesses (see: why there are few startups in places like the Netherlands, with its guaranteed lifetime employment). But much like the Laffer curve, I seriously doubt we’re any danger of being on the part of the curve where we’re over-regulated.

    It’s all just corporate whining (because they can, and they’re rich). In WA State a couple of rich business-people have been trying to de-regulate the state forever, with no success. And during that time Seattle and surrounding areas have turned from a second-tier city to a first-tier city for growth in biotech, technology, wine with multiple first-class Universities and a growing population.

  3. 3
    demimondian says:

    Yeah, but jcricket, we can vote for Reichart over Burner, since he opposes the esta…oops, sorry, death…tax.

    Seriously, all rational agents seek to privatize benefits and socialize costs. Corporate boards are no less rational than any other agents, and they view lawsuit risk as a significant cost. They seek to socialize that cost, by pushing it to taxpayers. The answer, of course, is for taxpayers groups to push the cost back onto the corporations. We’ve been pretty good at that in the past, and I don’t see any reason to believe that we can’t keep being good at it now.

  4. 4
    KC says:

    Ah, same ‘ole song and dance from this administration. One day, a lot of people are going to wake up and figure out how much they’ve been screwed by these guys. I only hope it’s because a Democratic Congress demands answers to for this stuff.

  5. 5
    Zifnab says:

    Nearly every burden or risk has been shifting onto individuals and away from corporations for the past 20-30 years.

    It’s the politics of personal responsibility. Which is to say, it’s the politics of “if you were stupid enough to buy Enron stock, then you deserve what you get”. Class action lawsuits and prosecution at the state and fedearl level have been the ban of quite a few industries – asbestos, cigerettes, and nuclear power to name a few – and if these industries are going to thrive again, they need the freedom to do business without any responsibility of their own.

  6. 6
    jcricket says:

    Yeah, but jcricket, we can vote for Reichart over Burner, since he opposes the esta…oops, sorry, death…tax.

    I don’t get to vote in that one (I’m not on the east side), but I hope Reichart goes down. He’s not personally all that objectionable, but I think anyone voting for Republicans anywhere is just giving them more “numbers” (and Reichart regularly acts as a “number” when the big boys need him).

    BTW, from the polling I’ve seen I-920 is going to fail (so sorry, Blethen and Selig). So one can only hope that they sell their businesses and move out of state. I’d be happy to lose people that have no interest in giving anything back to the community they claim to care about. Let’s keep the Gates’, Allens, etc.

    Perhaps next the estate-tax opponents will start calling it the “murder-your-family” tax, because it requires you murder your family or they’ll have to pay taxes on their inheritance.

    Seriously, all rational agents seek to privatize benefits and socialize costs.

    Yes, I’m not surprised that corporations are attempting to foist the costs of doing business off onto us, just that we seem so willing to buy their line of reasoning. I just can’t see why it’s so hard for the average person to understand the following: Services (that you want) cost money. That money comes from tax revenue. Someone has to pay that tax revenue. It can either be zillions of individuals, hundreds of businesses, or some mixture of both. Shift it all towards individuals and we’ll each be paying a lot more in taxes (while those whose main income is corporate profits, will be paying comparatively less).

    The same is true with regulations. Someone will have to pay for the malfeasance, when it happens (and it will). Should it be spread across all of us (including non-directly-affected victims), or mainly paid by the people and corporations that did the crimes?

    Corporations (rationally) are seeking to spread the burdens of everything onto us, and we need to start fighting back. They’re no more entitled to guaranteed success than we are, which is the very concept of a “level playing field”. I’m pretty certain the deck is stacked strongly in their favor, and I don’t see why we’re so intent on pushing more risk onto ourselves.

    I blame the Libertarians and their snake-oil, personally.

  7. 7
    Respectful Dissent says:

    I think it’s pretty clear that this administration in some ways hopes to achieve much by over-reaching. They’ve implemented so many mind-numbingly bad policies and changes in the basic contract between governed and governors that it will take years to repeal all the buffoonery, and the Democrats (if they win) will be fought every step of the way. The administration may have caused a political backlash, but when it’s over, they’ll still have made significant inroads into transforming the character of American government.

  8. 8
    Walker says:

    Just wait. When the MBSs implode and financial institutions like WaMu go under this will be news again. The only reason Fannie Mae didn’t turn into another Enron (despite accounting that was comparably corrupt) is that the bill has not come due yet.

    2Q2007. That’s where the good money is on the financial sector hitting the fan.

  9. 9
    jcricket says:

    I’ll repeat what I wrote in another thread about how I think the American political system works:

    … Republicans fuck everything up. Public gets fed up and elects Democrats. Democrats claw their way to just about fixing the things Republicans broke and getting the country/economy headed the right way. People feel good. Republicans prey on their greed and short-memories and say, “Yeah, things are ok, but wouldn’t they be better if you had lower taxes and why do we need all those regulations?”. People vote for Republicans. Republicans fuck everything up…

    Lather, rinse, repeat.

    The “fixing” that Democrats do certainly isn’t sexy, and they get called busy-bodies, nanny-statists, accused of having no agenda or being vindictive (amazing amount of projection there, but anyway) – but it works.

    William Buckley is fond of saying that conservatives don’t offer solutions, they offer approaches. He’s certainly right about the first part, and if you add the word “implausible but fun sounding” to his second part, he’s right too.

  10. 10
    jcricket says:

    2Q2007. That’s where the good money is on the financial sector hitting the fan.

    And if Democrats are in charge of either the House or Senate wanna take bets on Republicans trying to blame them, despite controlling all three branches of the government?

    It’s the Clinton recession, which led to the Bush recovery, which led to the Democratic recession of 07, right?

  11. 11
    Walker says:

    And if Democrats are in charge of either the House or Senate wanna take bets on Republicans trying to blame them, despite controlling all three branches of the government?

    I asked just this question in a thread a few weeks back. The 2007 recession is going to be bad. I think you can count on the Democrats being blamed (even though this is already in motion) if they win.

  12. 12
    Tsulagi says:

    You would expect nothing more nor less from the party of personal responsibility than to demand the same level of accountability and integrity from their campaign contributors that they demand of themselves.

    Even though they’ve held the Treasury open as a 24-hour all-you-can-eat-and-carry buffet for their A-listers, enough is never enough. Expect far more in the next two years before The Decider takes up permanent residence near Cindy’s uterus.

  13. 13
    jcricket says:

    The 2007 recession is going to be bad. I think you can count on the Democrats being blamed (even though this is already in motion) if they win.

    The truth, between you and me, is that Presidents have little control over the economy at large. There are far greater macro-economic forces, both domestic and international, that swamp any impact a President can have with a tax change here or there.

    For example, I think the Bush tax cuts are mainly responsible for the deficit increasing, and the Fed is somewhat responsible for the housing market’s frothy state. But I do not think either is responsible for the market’s recovery or its coming fall (except in the sense that there should be a tightening of credit standards to prevent some of the downsides of the coming housing market crash).

    Over time, I do believe that political policies are responsible for whether or not deficits grow or shrink, whether corporate entities are held responsible for their malfeasance (and thereafter stop doing things that decimate peoples’ 401ks), and whether a majority or minority of citizens end up participating in economic growth or are sheltered from the worst of economic falls.

    But if Republicans want credit for economic recovery, then it’s also their fault for any slowdowns and the f’ed up GAO reports. And Bill Clinton gets credit for massive surpluses, tax revenue increases and the economy’s wonderful state, with only a minor hit for the recession that started when Bush took office (ground work may have been laid in 98 and 99, but there was no recession as defined by economists until after Bush took office).

  14. 14

    I hope they do get these laws passed. They’ll destroy any incentive that anyone has to invest any money in an American-based corporation. The greedy CEOs will find themselves managing corporations without investors.

    Corporations will cease to exist, and Marxism will ensue. Proving the the neocons and Bushites never abandoned their Trotskyite origins.

  15. 15
    Thomas says:

    Of course John Cole, traditional Republican, is in favor of ever-increasing regulatory burdens on publicly-held corporations. That’s always been the Republican position, as well as the Democratic position, and it’s only recently that the Bush administration and their lackeys in Congress moved away from that. Now it’s one more reason to vote against them. The fact that folks from Brookings and people like Bill Daley (Clinton’s Commerce Secretary) are participating in this is yet more evidence of how far to the left our supposedly “conservative” masters have become.

    John, did you oppose the prosecution of Arthur Andersen before you favored it? What about the policy set forth in the Thompson memorandum? The one the courts have stricken down as a violation of constitutional rights? Do you support it, or oppose it? Which efforts to shred the constitution does John Cole support? Who knows? He sure doesn’t–he’s a partisan moron who goes on and on and on about things he is incapable of actually understanding.

  16. 16

    Investing in unregulated corporations is about as sensible as investing in street action, like the numbers game or the local bookie shop. About as likely to pay out, and about as likely to be legal.

    Of course, in a Marxist state, organized crime tends to have itself a cushy little niche. Just look at the Soviet Union or China.

  17. 17
    Zifnab says:

    The “fixing” that Democrats do certainly isn’t sexy, and they get called busy-bodies, nanny-statists, accused of having no agenda or being vindictive (amazing amount of projection there, but anyway) – but it works.

    The difference between Democrats and Republicans? Democrats can make it more than two decades without getting caught jamming both limbs elbo deep inside the cookie jar.

    Also, before you start handing out halos, there’s been no shortage of corruption in the Democratic Party in the past 40 years. Mafi connections and corrupt unions and subsidizing the rich are all hallmarks of the 60s and 70s that caused people to turn from one set of swindlers to another. Hopefully, the Democrats have had enough time in the desert to clean themselves up. That’s all we can really hope to bank on.

  18. 18
    demimondian says:

    Thomas — traditional Republicans recognize the value of governmental regulation. They, being, you know, fundamentally conservative, influenced by such wild-eyed lunatics, as, say Edmund Burke, remember that there are crooks out there, and that corporate entities can engage in tortuous behavior, just as individuals can.

    If the corporate veil is to be protected in the presence of dishonest corporations, then the assets of those entities need to be available to those who are harmed. If that kills a corporate entity, then that is Schumpeterian creative destruction at work.

  19. 19
    tBone says:

    He sure doesn’t—he’s a partisan moron who goes on and on and on about things he is incapable of actually understanding.

    All you need now is a ticket booth and a concession stand to go along with that projector.

  20. 20
    Steve says:

    John, did you oppose the prosecution of Arthur Andersen before you favored it? What about the policy set forth in the Thompson memorandum? The one the courts have stricken down as a violation of constitutional rights? Do you support it, or oppose it? Which efforts to shred the constitution does John Cole support? Who knows? He sure doesn’t—he’s a partisan moron who goes on and on and on about things he is incapable of actually understanding.

    It’s like Darrell’s stupider cousin. He won’t actually take a position himself, but he’ll come in here and take cheap shots at other people’s positions all day.

    I’m grateful to people like Thomas, though, for confirming to John that his divorce from the Republicans was the right thing to do. Gee, adopt one position that isn’t reflexively pro-corporate, and you get slimed as a “partisan moron.” Yeah, I bet John misses being in your club.

  21. 21
    TenguPhule says:

    Thomas’s answer to Corporate Crimes: Blame Cole.

    Seriously, any idiot who trusts for profit organizations to do the right thing should go back and study American history BEFORE the Democrats pushed for the laws and regulations that mandate they follow at least minimal standards on wages, environment and safety. Thomas may want to eat cat food in his old age, but the rest of us like being able to punish crooks and liars who screw with the public trust.

  22. 22
    Tulkinghorn says:

    In any case, it is not our stock market anymore. It belongs to the hedge funds, and they just let us play there.

  23. 23
    Thomas says:

    demi, I don’t think you’ve disagreed with me. Unless you mean that you support indicting an entity that won’t be convicted but will be killed as a result of the indictment. I don’t support that–but Cole does.

    Steve, I’m saying that John doesn’t even know what the issues are, so he can’t even begin to take a position on them. Bill Daley–the slow one in the family–knows more about this stuff than John does. And he is a partisan moron, for taking what he believes to be a reflexively antiRepublican position, when in fact he’s taking on the good folks at Brookings.

    Tengu, I’ll let you stew in your ignorance. I’m assuming you’ve given these issues about as much thought as Cole has.

  24. 24

    Could someone please tell me why I’d want to invest money in a corporation answerable to no one, with no oversight on any level whatsoever, where the CEO is as likely to embezzle my funds and run off to Barbados with a sexy blonde the day after giving himself a 400% raise as he is to zealously manage my financial investment? Would anyone in their right mind place money in such a financial crap shoot?

    Not me. If I had to choose between Enron II and the neighborhood bookie, I’d take the neighborhood bookie. At least he already knows that if he doesn’t pay out the big winners, word’ll get around fast and he’ll be out of business. Evidently, America’s CEOs haven’t figured this out yet.

    Or are we saying that this is a problem the corporations will solve through self-policing, through amendments to their bylaws or articles of incorporation that somehow hold the corporate management accountable to federal oversight which no longer exists. Is that supposed to be a serious solution to this problem?

  25. 25

    demi, I don’t think you’ve disagreed with me. Unless you mean that you support indicting an entity that won’t be convicted but will be killed as a result of the indictment. I don’t support that—but Cole does

    .

    Evidently, corporations, as “artificial persons,” are the only people NOT subject to capital punishment at the federal level. That should make everyone sitting on death row pretty jealous- if they’d only been a corporation instead of a living, breathing, mortal person, they could’ve killed 50 times as many people, yet rested secure in the knowledge that law-and-order GOPers would never have permitted their demise.

    How very reassuring for investors, as well, to know that they can invest their life savings in a ravenous criminal psychopath who deceitfully consumes the finances of others without a care in the world for the legal ramifications- since shareholder lawsuits are limited, and prosecutors are hamstrung, the beast may take a knock or two to the head but will never, ever be put down no matter how many lives it destroys.

    Corporate America- Cerberus in a business suit. Invest away, America! A return on your investment is somewhat likelier than if you put thousands of dollars in the Powerball, and anyway, it’s only your retirement! If you find yourself penniless and living in the gutter, take heart- your Social Security account is in the good hands of a privatized firm investing it in the stock market and operating along similar principles to the corporation that just screwed you over… Oh, fuck, nevermind. You’re screwed.

  26. 26
    jcricket says:

    Or are we saying that this is a problem the corporations will solve through self-policing, through amendments to their bylaws or articles of incorporation that somehow hold the corporate management accountable to federal oversight which no longer exists. Is that supposed to be a serious solution to this problem?

    According to Libertarians, there is apparently some as-of-yet-unknown mechanism that will do exactly this. That in the absence of regulations requiring them to not screw the little person, or not despoil the environment, they will do so on their own accord because it’s “better for business”. In fact, somehow they will be more incented to do so.

    Yes, this is seriously the Libertarian argument.

    I would argue that Republicans, on the other hand, don’t have such an argument. That is, they don’t care because they believe: A) The little man will get his when trickle-down economics starts working; B) Pollution and environment destruction is a myth (or it’s not really that harmful); C) Regulations harm business competitiveness, and must therefore be opposed at all costs.

    I’m not sure which is worse, the Libertarian in his make-believe ivory tower* who at least pretends to care or the Republican who is open that he doesn’t.

    * This reminds me of a philosophy called “Maternal Thinking”, part of which argued that if we had, for example, solved WWII with negotiating, it would have been better long term for relations between races/religions. Nice idea (I can’t argue that honest negotiations aren’t a better way than violence to solve conflict), but would have resulted in there being no Jews or gypsies left to enjoy the new-found “good relations”, for one.

  27. 27
    jcricket says:

    How very reassuring for investors, as well, to know that they can invest their life savings in a ravenous criminal psychopath who deceitfully consumes the finances of others without a care in the world for the legal ramifications-

    One of the most curious things it that the “rabid free-marketeers” seem not to understand that the market runs best when investor confidence is high (read: average people pour money into the market). Investor confidence is high when people are convinced there is a level playing field, which is a result of corporations all playing by the same rules. Just compare exchanges: AMEX vs. NYSE – which would you rather have your money in?

    I can virtually guarantee that if Enron-esque debacles happened every day, 401k participation would plummet.

    Or look back at the scandal that caused FASB to require statement of cash flows along with income statements for quarterly/annual reporting? Does anyone think the markets or consumers are worse off because of this “added regulatory burden”?

    The standards boards (FASB, IASB, SEC, FTC, etc.) actually do consumers and the markets a favor. Sure, they occasionally overstep, and certain issues are complex (how exactly should options be accounted for), but the solution is not to get rid of them, but to improve any individual regulations that aren’t serving their purpose.

  28. 28
    Thomas says:

    Asshole, entities like Arthur Andersen actually are the only “people” subject to capital punishment even when their conviction is thrown out on appeal. You do know the Arthur Andersen story, don’t you: 28,000 people thrown out of work because of a conviction that was unanimously (!) reversed by the Supreme Court, and increased market concentration and market power for the remaining big accounting firms. Is that what you support?

    Why would anyone suppose that complete deregulation is what’s being discussed? Because you don’t know the issues?

  29. 29
    RSA says:

    Back to an earlier point by demimondian:

    Seriously, all rational agents seek to privatize benefits and socialize costs. Corporate boards are no less rational than any other agents, and they view lawsuit risk as a significant cost.

    I think, in general, that people have a hard time understanding issues related to expected cost, utility, and so forth. A corporation has experts that can quantify risks in monetary terms, but it’s much harder for individuals to do, which implies that they’re not going to be making equally good decisions. We wouldn’t be facing a potential disaster in the housing market due to adjustable rate mortgages, for example, if people were doing a good job in understanding risk.

  30. 30
    Steve says:

    You do know the Arthur Andersen story, don’t you: 28,000 people thrown out of work because of a conviction that was unanimously (!) reversed by the Supreme Court, and increased market concentration and market power for the remaining big accounting firms.

    How many people are out of work because of the massive fraud that Andersen helped Enron perpetrate? I handled any number of securities fraud cases against Andersen, and I know what their corporate culture was like. Look the other way, keep issuing those clean audit letters, and the fees will keep rolling in. Andersen was culpable in more frauds than I can count.

    You realize that the Supreme Court decision related solely to allegations of document shredding after Enron’s problems became known, right? Andersen was hardly cleared of responsibility in connection with Enron’s fraudulent accounting practices. Nope, year after year, they kept telling the public that everything was just fine at Enron, that the state of the company’s finances was strong. So please don’t try and make them out to be some kind of corporate martyr.

    It’s terrible what happened to all the people at Andersen, of course. As usual, it’s the folks at the top who are responsible for the wrongdoing, and it’s the innocent folks down at the bottom who take it in the chops. But you know, every year there are thousands of families that end up in poverty because the breadwinner goes to prison, and I never see Republicans acknowledge this as a big problem, for some reason. I never see them say that we need to make it harder to prosecute breadwinners so that their families don’t end up suffering. But we must protect the corporations at all costs!

    And he is a partisan moron, for taking what he believes to be a reflexively antiRepublican position, when in fact he’s taking on the good folks at Brookings.

    This is classic – you assume based on nothing at all that John is taking this position simply out of anti-Republican partisanship, and then you try to play gotcha because a center-left think tank agrees with the Republican position in some respects. Gee, maybe you could just be wrong about John’s partisan motivation, considering he’s never bought into this pro-corporate cheerleading even back when he was busy voting twice for Bush?

  31. 31
    Thomas says:

    Steve, I didn’t say that AA was clean. That’s not what the debate is about. The debate is about whether the standards for indicting accounting firms, among others, need to be looked at, because the firm goes under even when the government is wrong. (Given your line of work, perhaps if I used the example of Milberg Weiss you might find the argument more persuasive?)

    Brookings is leading the effort, not agreeing with the Republican position.

  32. 32
    RSA says:

    The debate is about whether the standards for indicting accounting firms, among others, need to be looked at, because the firm goes under even when the government is wrong.

    Your concern for artificial persons is touching, especially given the Republican party line on the infallibility of the government in the war on terror. If it helps, think of indicted accounting firms as artificial enemy combatants.

  33. 33
    Thomas says:

    RSA, given your undue concern for enemy combatants, I assume you’re on board for the reforms. Or do you, like so many, have concern only for our enemies?

    The debate isn’t about artificial persons, but about the real people injured when the government indicts organizations.

  34. 34
    RSA says:

    RSA, given your undue concern for enemy combatants, I assume you’re on board for the reforms. Or do you, like so many, have concern only for our enemies?

    Are you talking about Americans? What percentage of Americans do you think have concern only for our enemies? I don’t happen to know any, but that may just be me. And I’m not sure what you mean by reforms in this context.

    I’d be open to the idea of reforms in government indictments of accounting firms, but here’s the thing–the government’s being reversed in this case, by itself, doesn’t necessarily mean that the process should be changed (and I don’t have the expertise to judge whether it should be changed or not). What should be changed, to preserve whatever benefit that regulation brings to this area?

  35. 35
    Steve says:

    The debate is about whether the standards for indicting accounting firms, among others, need to be looked at, because the firm goes under even when the government is wrong.

    It’s one thing to say the standards should be toughened, that prosecutors should be more judicious in making the decision to prosecute. I happen to agree that the hardball tactics outlined in the Thompson memorandum went way overboard.

    But it’s another thing to ask Congress to grant auditing firms some form of blanket legal immunity from criminal prosecutions. If anything, auditing firms have gotten away with far too much. If I can show you that 1 or 100 or 1000 people have been wrongfully convicted of murder and their lives destroyed, would you say we need to make it harder to convict people of murder?

    It’s not clear to me that we have a problem here, that there’s some explosion of prosecutions against auditing firms. We have one high-profile case where the defendant was most likely guilty, but the judge screwed up and gave a jury instruction that was too prosecution-friendly, so the verdict got overturned. While I don’t doubt that the Justice Department was eager to make an example out of Andersen, I still don’t see them indicting firms willy-nilly.

    As someone who’s worked in this field for many years, I can say with confidence that if more auditing firms had to perform their work with fear of a potential criminal prosecution in the back of their mind should they cross the line, we would ALL be better off as a result of this deterrent effect.

  36. 36

    Yes, this is seriously the Libertarian argument.

    It’s utopian garbage. Just like Marx’s vague assurances in “The German Ideology” that after the Revolution everyone could go fishing, hiking, and camping whenever they felt like it. Whoopity-fucking do, anyone can do that anytime they want. It’s the starvation that’s the issue, not the summer camp.

    I’m not sure which is worse, the Libertarian in his make-believe ivory tower* who at least pretends to care or the Republican who is open that he doesn’t.

    It’s all about “fuck you, I got mine.” The Libertarians are as starry-eyed as the Marxists, but at least neither group disdains the poor as much as the GOP does.

    One of the most curious things it that the “rabid free-marketeers” seem not to understand that the market runs best when investor confidence is high (read: average people pour money into the market). Investor confidence is high when people are convinced there is a level playing field, which is a result of corporations all playing by the same rules. Just compare exchanges: AMEX vs. NYSE – which would you rather have your money in?

    That’s because they’re short-sighted and greedy. Same reason they support endless tax cuts, failing to consider that many of the social ills they confront 10-20 years down the road are sparked by the spending cuts made to accommodate those same tax cuts. It’s all about me, now. Fuck you, poor people, I got mine. Fuck you, tomorrow, today I’ve got mine.

    The standards boards (FASB, IASB, SEC, FTC, etc.) actually do consumers and the markets a favor. Sure, they occasionally overstep, and certain issues are complex (how exactly should options be accounted for), but the solution is not to get rid of them, but to improve any individual regulations that aren’t serving their purpose.

    A perfectly rational, sane, sensible statement. You must be a Democrat. Why do you hate America, Commie?

    Asshole, entities like Arthur Andersen actually are the only “people” subject to capital punishment even when their conviction is thrown out on appeal. You do know the Arthur Andersen story, don’t you: 28,000 people thrown out of work because of a conviction that was unanimously (!) reversed by the Supreme Court, and increased market concentration and market power for the remaining big accounting firms. Is that what you support?

    Boo hoo. I’m sure the Gambino crime family creates lots of legitimate jobs through its front companies and Mob-owned businesses- maybe we shouldn’t let the FBI do asset forfeitures, because thousands of non-Mafia employees will lose their jobs.

    Don’t sweat it, though- after your deregulation ideas kill the free market, and we enter a Marxist system, we’ll have full employment. Those 28,000 Arthur Andersen employees can all work in a tractor factory or something. Or maybe they can get jobs in the secret police, they’ll probably be on the lookout for a few good men.

    Why would anyone suppose that complete deregulation is what’s being discussed? Because you don’t know the issues?

    Oh, I see. You just want to FUNCTIONALLY deregulate, while maintaining a facade of regulation to dupe the rubes into continuing to shell out funds for this con game. My mistake, but my substantive points still stand. Eventually, investors will catch on to the fact that “regulation” and “oversight” are meaningless once you defang the government. Then we’ll all take our money down to the guy who works in the betting parlor.

    RSA, given your undue concern for enemy combatants, I assume you’re on board for the reforms. Or do you, like so many, have concern only for our enemies?

    This is some quality spoofing, man. You really do have to exploit opportunities in spoofing the way a tank commander exploits openings on the battlefield. No one can spoof in a vacuum, you have to take your “opponents'” statements and run with them for all they’re worth. Good show, man, good show. You seem pretty experienced at this sort of thing.

  37. 37
    jcricket says:

    No Steve, the solution is never for these firms to clean up their act. The solution is always to remove the governments powers to force-a-cleanup, eliminate the ability to punish the non-cleaner-uppers and reduce visibility into the state of cleanliness within corporations.

    BTW, your argument about 1000 people wrongfully convicted or murder is an argument in favor of making it harder to (at least) impose the death penalty. I certainly wouldn’t object to a change in regulations that spelled out clearer standards of evidence when imposing harsh business-ending sanctions.

    But it’s simply a non-starter to say that no business entity, no matter how heinous its corporate crimes, should ever be punished severely enough to be put out of business. Corporate personhood and limited liability should come with some limitations. Moreover, they call it punishment for a reason, and it’s unfortunate that the rank-and-file might lose their jobs along the way, but far worse (as you point out) happen to us if corrupt corporations continue to get away with their malfeasance and nothing more than a slap on the wrist.

  38. 38
    jcricket says:

    A perfectly rational, sane, sensible statement. You must be a Democrat. Why do you hate America, Commie?

    C’mon Asshole, that’s all you got after your 2-minute hate ™ today?

    BTW, I am trying to hasten the demise of America by supporting gays, science-based approaches to taxation & medicine, forward-thinking social policy and diplomatic foreign policies because when America ends, the Rapture will come. You’d think more Republicans would be on my side.

  39. 39

    But it’s another thing to ask Congress to grant auditing firms some form of blanket legal immunity from criminal prosecutions. If anything, auditing firms have gotten away with far too much. If I can show you that 1 or 100 or 1000 people have been wrongfully convicted of murder and their lives destroyed, would you say we need to make it harder to convict people of murder?

    That’s a great point. But you’re arguing with a spoof, Steve. A damn good one, too. I tip my hat to this guy.

  40. 40
    Thomas says:

    RSA, well, that post’s a start. What should be changed? Let’s have a debate on the propositions made, for starters. The Times article says that the “proposed policies would emphasize the prosecution of culpable individuals rather than corporations and auditing firms.” They would emphasize one rather than the other, but apparently they wouldn’t bar either option. Do I think that shift would be good? Probably, on balance–because and even though it would help the AAs and Milberg Weiss’s of the world. Indictments of firms pose many risks, and the government needs to be careful to get the balance of factors right.

    Steve, is there a proposal to eliminate criminal liability for firms? The Times article doesn’t support that assertion. You never said what you thought of the Milberg indictment. Did you think it was a good idea? (It’s possible you’ve benefitted from the indictment, and if that’s the case, fair enough.) I think the standards for indictment of firms, AA and Milberg alike, should be made tougher, but that in some cases indictment is appropriate.

  41. 41
    Steve says:

    I certainly wouldn’t object to a change in regulations that spelled out clearer standards of evidence when imposing harsh business-ending sanctions.

    Well, the other side of the argument is that when it comes to a business like an auditing firm whose most important asset is its reputation for integrity, an indictment effectively IS a business-ending sanction. Even if the prosecution is total bullshit, what public company is going to bother dealing with the stigma of hiring that auditor, when they could just as easily pick another major firm?

    It’s a legitimate point. But the answer is to realize that there isn’t a major problem with bogus prosecutions, and that the world keeps turning even though wrongful criminal indictments of individuals can ruin lives and careers as well. At the end of the day, I’m far from convinced that even Andersen was wrongfully indicted, and they’re supposed to be the poster child for this argument.

  42. 42

    C’mon Asshole, that’s all you got after your 2-minute hate™ today?

    Sorry. It’s been a long day. I’m too tired to spoof these fuckers.

    BTW, I am trying to hasten the demise of America by supporting gays, science-based approaches to taxation & medicine, forward-thinking social policy and diplomatic foreign policies because when America ends, the Rapture will come. You’d think more Republicans would be on my side.

    I bet God doesn’t regulate corporations in Heaven. Nope, Kenneth Lay’s up there right now, sipping mai tais at Jesus’s elbow, reaping millions from the souls of the rubes trapped in the Inferno. THAT’s the kind of Afterlife a real American aspires to!

  43. 43

    Well, the other side of the argument is that when it comes to a business like an auditing firm whose most important asset is its reputation for integrity, an indictment effectively IS a business-ending sanction. Even if the prosecution is total bullshit, what public company is going to bother dealing with the stigma of hiring that auditor, when they could just as easily pick another major firm?

    Fuck it, let’s just have all auditing done by the state/federal governments. That’ll please Thomas, since then no one will get fired or have their career ruined if a couple bad apples at the top accept a bribe. And corporations won’t have to worry about shopping around for firms anymore, since everyone has the same auditor. Problem solved. (Well, not really, but…)

  44. 44
    Steve says:

    Steve, is there a proposal to eliminate criminal liability for firms? The Times article doesn’t support that assertion. You never said what you thought of the Milberg indictment. Did you think it was a good idea? (It’s possible you’ve benefitted from the indictment, and if that’s the case, fair enough.) I think the standards for indictment of firms, AA and Milberg alike, should be made tougher, but that in some cases indictment is appropriate.

    I hope I didn’t say there was a proposal to eliminate the possibility of criminal liability altogether. I guess I chose my words poorly, because I said “blanket legal immunity” when what I meant was “blanket legal immunity under certain circumstances.” I don’t know the specifics of what’s being proposed, but I feel pretty strongly that this is an issue that should be handled as a matter of Justice Department policy, as opposed to Congress stepping in and redefining the law to benefit auditing firms.

    I’m not a competitor of Milberg any more, but I feel they got what was coming to them, not that we weren’t kicking their ass long before the indictment came down. I guess in my mind, it shouldn’t be that hard to draw the line between cases where the corporation itself is being run in a pervasively criminal manner, and where there’s just a few bad apples acting wrongfully with respect to their clients.

    All I can say from my own experience is that when we filed fraud cases against Enron and its ilk, Andersen was by far the most common auditor we encountered. As far as I’m concerned, they got rich by abusing the public trust for far too long, and they got what was coming to them. Yes, it’s undeniable that the impact is often worse for the people at the bottom and their families than it is for the bigwigs who can get cushy jobs elsewhere, but you can’t let a criminal enterprise stay in business because you’re excessively concerned about letting the janitor keep his job.

  45. 45
    Steve says:

    Fuck it, let’s just have all auditing done by the state/federal governments.

    Well, as much as we liberals love central planning, I confess it never occurred to me to nationalize the auditing industry. I guess between mergers and prosecutions, we’re already close to the day when everyone will have to go to the same auditor anyway. Still, one obvious problem with putting the government in charge of auditing is that your 2006 financials wouldn’t get reviewed until 2009 or so.

  46. 46
    Thomas says:

    asshole, that’s nice work. Yep, me and the folks at Brookings want to deregulate everything. I guess that’s because I’m a libertarian dupe, or a poor-hatin’ Republican. The guys at Brookings favor it because they want to immanentize the eschaton, and think they can bring about a Marxist utopia only if they thoroughly discredit the market. You figured us out. If it weren’t for you meddling kids, we’d have gotten away with it.

    I love the devotion to ideas here. If it’s more complicated than a bumper sticker, you folks can certainly misinterpret it to fit on one. Good crowd.

    jcricket, what’s a “science based” approach to taxation?

  47. 47
    Thomas says:

    Steve, I think Milberg is used as often as AA is as a poster child for the DoJ policy issue, and that’s why I’ve mentioned it repeatedly. That’s a case in which the indictment has nearly killed the firm (the firm’s protestations to the contrary notwithstanding).

    I think what’s being proposed is precisely what you’d support–a change in DoJ policy, not a change in the law. John noted that in the original post, as a demerit. Since you understand the issue, you’ll recognize how off base that original charge was.

  48. 48

    Well, as much as we liberals love central planning, I confess it never occurred to me to nationalize the auditing industry. I guess between mergers and prosecutions, we’re already close to the day when everyone will have to go to the same auditor anyway. Still, one obvious problem with putting the government in charge of auditing is that your 2006 financials wouldn’t get reviewed until 2009 or so.

    I’m sure Thomas will love that. No one can call your company crooked if they can’t prove it for another 18 months or so. It’s a sweet deal, really.

    asshole, that’s nice work. Yep, me and the folks at Brookings want to deregulate everything. I guess that’s because I’m a libertarian dupe, or a poor-hatin’ Republican. The guys at Brookings favor it because they want to immanentize the eschaton, and think they can bring about a Marxist utopia only if they thoroughly discredit the market. You figured us out. If it weren’t for you meddling kids, we’d have gotten away with it.

    I don’t think that’s your intentional goal. I think your intentional goal is to have an amusing spoof conversation on a blog. I’m totally down with that, I’ve done it hundreds of times myself. (This ain’t my real name, ya know. My real name is Faruk Alatan, a name as common in America as Thomas. Why, we might even have gone to school together, you and I!)

    But the real people who assert your argument don’t have that intent either. They’re short-sighted morons who ignore the long-term consequences of their short-term smash-and-grab act. Which is pretty much the Republican Party in a nutshell, on any issue- destroy the environment to make some money, fuck tomorrow. Go to war in Iraq to gin up support for the 2002 and 2004 elections, plus make some more money for Halliburton; fuck the future, or if the country descends into civil war. (And don’t even think about the dead and wounded for long enough to say “Fuck them.”) Deregulate corporations, defang government oversight agencies, and fuck the consequences when no one wants to invest in these unstoppable theft-monsters anymore. Fuck tomorrow, we’ve got today. Fuck you, I’ve got mine. The mentality is easy to understand.

    But don’t worry. Meddling kids won’t stop it. Your boy Bush will still probably get to fuck everything up, since enough Democrats will cross the aisle to vote for the CEOs’ lobbying dollars. (Another fun investment of shareholders’ money- political lobbying of tangential value to the corporation, completely legally defensible under the business judgment rule. Huzzah! Fuck you, investors!)

    I love the devotion to ideas here. If it’s more complicated than a bumper sticker, you folks can certainly misinterpret it to fit on one. Good crowd.

    So far, all I’ve heard you say is that deregulation is good, and regulation is bad. When I called you on it, you said you weren’t in favor of total deregulation. Odd, considering how all you’ve presented me with so far is a bumper sticker.

    It’s okay, though. We’re all spoofers and ex-spoofers, here. We should all meet up and grab a beer or two one of these years. We just need to agree on a time, a date, and a city…

  49. 49
    Steve says:

    Steve, I think Milberg is used as often as AA is as a poster child for the DoJ policy issue, and that’s why I’ve mentioned it repeatedly. That’s a case in which the indictment has nearly killed the firm (the firm’s protestations to the contrary notwithstanding).

    I never thought I would see the day when conservatives would rally to the defense of Milberg Weiss, although I generally wouldn’t think of them as a particularly sympathetic case either. I must be missing something – aren’t we talking about allegations of pretty obvious criminal conduct (no “judgment call” defense available like with AA), sanctioned at the highest levels of the firm?

    I’d also note that due to the nature of the industry, individual indictments of Milberg’s senior partners would probably wreck their business just as effectively.

    I think what’s being proposed is precisely what you’d support—a change in DoJ policy, not a change in the law. John noted that in the original post, as a demerit. Since you understand the issue, you’ll recognize how off base that original charge was.

    The article makes it sound like legislation is Plan A, and a change in enforcement policy is Plan B or C. This fits with what I would view as a logical lobbying strategy.

  50. 50
    Thomas says:

    asshole, there’s a long list of people mentioned in the Times article. Let me know which ones are the short-sighted morons in on the smash and grab. I assume you’re starting with the Brookings guys and moving on from there. Maybe John Coffee?

    One problem from Sarbanes Oxley and the recent regulatory environment is that foreign companies don’t want to list their securities in the US anymore. They’re listing in London and elsewhere instead.

    We are talking about that same Milberg. There are some partners who are in trouble, but that needn’t mean–might mean, but need not necessarily mean–that the firm itself is in trouble. And I don’t believe that indictments of individual partners would have nearly the effect that the indictment of the firm did. It may be that the indictment was the right choice. The question for future cases is only whether DoJ gave enough consideration to the consequences of indicting the firm rather than individuals, and where the presumption should be in the analysis.

    I read the article to say that changes in SEC rules and DoJ enforcement policy were plan A.

  51. 51
    Steve says:

    Sarbanes-Oxley definitely has room for improvement. No argument there.

  52. 52

    asshole, there’s a long list of people mentioned in the Times article. Let me know which ones are the short-sighted morons in on the smash and grab. I assume you’re starting with the Brookings guys and moving on from there. Maybe John Coffee?

    Well, not this guy, spoof:

    “This is an escalation of the culture war against regulation,” said James D. Cox, a securities and corporate law professor at Duke Law School. He said many of the proposals, if adopted, “would be a dark day for investors.”

    Professor Cox, who has studied 600 class action lawsuits over the last decade, said it was difficult to find “abusive or malicious” cases, particularly in light of new laws and court decisions that had made it more difficult to file such suits.

    The number of securities class action lawsuits has dropped substantially in each of the last two years, he noted, arguing that the impact of the proposals from the business groups would be that “very few people would be prosecuted.”

    He sort of refutes pretty much everything you’ve just said, doesn’t he? But yes, Coffee sounds like a jackass. When you pack the SEC with industry hacks, AND you remove the right of private investors to sue, the corporations are pretty much untouchable, aren’t they? You know, sort of like virtually every post-Enron industry in Bush’s America has proven to be.

    Anyone who thinks that making corporations untouchable is good, in the long run, for investment in American corporations either stands to reap short-term financial gain from the idea, or is a moron hack regurgitating the idea without thinking it through, or is a spoof. Like you.

    Sarbanes-Oxley definitely has room for improvement. No argument there.

    Knee-jerk legislation usually has those problems, though. Just look at the PATRIOT Act.

  53. 53
    jcricket says:

    jcricket, what’s a “science based” approach to taxation?

    You know, an approach that doesn’t begin and end with the fundamentals of a tax policy based on a curve drawn on the back of a napkin with no numbers on the axes.

    A science-based approach to taxation is one that makes a hypothesis, follows up my marshalling facts and examples, and then, after the policy is implemented, following up again to see if the hypothesis is correct.

    A faith-based approach is continuing to push some hypothesis despite years of contradictory evidence. Or over-simplifying the economy to a point where anything you did must be the cause (not just correlated) with any increase in tax revenue. Or moving to private tax-collection because the “government is always the problem”, despite the evidence that the government can collect more tax revenue, at less expense and without the side-effects of siccing private debt collectors on our citizens.

    Science is not just biology or chemistry. It’s the application of the scientific method itself.

    If you don’t like the word scientific, let’s call it the “pragmatic approach” as opposed to the “ideological approach”

  54. 54
    Thomas says:

    jcricket, I suppose you want repeatable experiments? I say we run the 1990s with marginal taxes set where they are now. How about that?

    Not everyone who supports low taxes is a classic supply sider, you know.

    asshole, no, Professor Cox disagrees with, among others, Professor Coffee. As is his right. But, at least in the argument, he doesn’t refute anyone. I’m guessing you don’t understand any of the issues, so there’s not much point in continuing, is there spoof?

  55. 55

    asshole, no, Professor Cox disagrees with, among others, Professor Coffee. As is his right. But, at least in the argument, he doesn’t refute anyone. I’m guessing you don’t understand any of the issues, so there’s not much point in continuing, is there spoof?

    No, there’s not much point debating a useless, humorless spoof who refuses to discuss any substantive point whatsoever, and serves no purpose other than to enable GOP talking points and generate churn.

    But I do it anyway, as a sort of penance for my own days of spoofiness. See you on the other threads. No hard feelings, maybe someday we can meet up and have coffee and pie or something.

  56. 56
    Thomas says:

    asshole, if you’re still reading you might enjoy this article in today’s WSJ, from noted right-wingers Chuck Schumer and Mayor Bloomberg:

    To Save New York, Learn From London
    By CHARLES E. SCHUMER and MICHAEL R. BLOOMBERG
    November 1, 2006; Page A18

    In recent months, there has been a lot of media chatter about the possibility of London taking over New York’s position as the world’s financial capital. Such speculation, although overblown, has focused our attention on a broader and legitimate concern: Unless we improve our corporate climate, we risk allowing New York to lose its pre-eminence in the global financial-services sector. This would be devastating both for our city and nation.

    One of the engines of growth for the U.S. economy, the financial-services industry in New York has long possessed significant comparative advantages over London and all other cities. These advantages include the broadest, most efficient and liquid capital markets in the world, and a concentration of the world’s biggest financial firms — which have a much larger presence here than anywhere else. This city dominates global private-equity markets, secondary trading markets, and mergers and acquisitions.

    New York has unparalleled quality of life and cultural diversity, which global companies increasingly seek, as well as a dynamic labor market — our unemployment rate is lower than the nation’s. Taken together, these advantages explain why New York’s financial-sector employment numbers are greater than any other city’s.

    Yet while New York remains the dominant global-exchange center, we have been losing ground as the leader in capital formation. In 2005 only one out of the top 24 IPOs was registered in the U.S., and four were registered in London. London is gaining ground in other areas too, but it is not only London we need to worry about. Next year, more money will be raised through IPOs in Hong Kong than in either London or New York.

    We cannot ignore these warning signs. That is why New York has hired a consulting firm, which will issue a report in November identifying the specific variables that are negatively impacting our financial-services industry and recommending an action plan to correct them.

    Based on the work completed so far, there are four factors that bear close attention: globalization of the capital markets, overregulation, frivolous litigation and incompatible accounting standards. The first factor is beyond our control; advances in technology and communication are allowing capital to flow more freely, making it much easier to locate financial activities anywhere in the world. But we can, and must, do something about the other three factors to maintain and expand our competitive edge.

    First, what lessons can we learn from other nations’ regulatory systems? Currently, there are more than 10 federal, state and industry regulatory bodies in the U.S. The British have only one such body. Industry experts estimate that the gross financial regulatory costs to U.S. companies are 15 times higher than in Britain. Beyond cost savings, the British enjoy another advantage: While our regulatory bodies are often competing to be the toughest cop on the street, the British regulatory body seems to be more collaborative and solutions-oriented.

    With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined. Since its passage, auditing expenses for companies doing business in the U.S. have grown far beyond anything Congress had anticipated. Of course, we must not in any way diminish our ability to detect corporate fraud and protect investors. But there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.

    Second, what lessons can we learn from other nations’ legal environments? The total value of securities class-action lawsuits in the U.S. has skyrocketed in recent years, to $9.6 billion in 2005 from $150 million in 1997. The U.K. and other nations have laws that far more effectively discourage frivolous suits. It may be time to revisit the best way to reduce frivolous lawsuits without eliminating meritorious ones.

    Third, what lessons can we learn from other nations’ experiences with international accounting standards? Most European and Asian countries have already begun to adopt international accounting standards, which businesses tend to prefer over the American system. Yet we have set no timetable for doing the same.

    In the last quarter of the 20th century, we achieved an almost exquisite balance between regulation and entrepreneurial vigor in American financial markets. We learned that too much regulation stifles entrepreneurship, competition and innovation; while too little regulation creates excessive risk to industry, investors and the overall system.

    This delicate balance has been upset by technological advances, making it much easier to locate financial-services activities anywhere in the world. As a result, foreign markets may be tempted to lower regulatory requirements to achieve a temporary competitive advantage. Though deregulation may help some countries gain more business in the short term, over the long term it could hurt the stability and reliability of the global marketplace.

    New York cannot afford to lose its place as the global leader in financial services. We have to carefully redefine this balance of innovation and regulation. That is what we seek to do over the next several months.

    Our ability to do that, and to answer these three questions, will determine the future of New York — and, in many ways, the nation. If we do not rise to the challenge, the speculation that New York is losing its pre-eminence in the global marketplace will become more than just chatter.

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