February 2004
Seven Days of White Collar Crime in America
by Al Hanners
Employees who cheat by cooking the books at major companies exacerbated stock prices and are the under-reported causes of the stock market crash.
Did you lose money in the stock market crash? If you did, then this article is of local interest.
Perhaps the most prevalent crime in American is credit card theft, and it’s merely winked at by credit card companies. While that is a very serious crime, it is not covered in this article because it deserves adequate treatment by itself. This article is about major companies that cooked the books.
When I was young, there was a saying that if you were going to steal something, you should steal a million dollars. That was then, this is now. Today, a million stolen through white-collar crime is small potatoes. Now the amounts stolen through prevalent unethical and illegal business practices in a single business often are in the billions, and the total stolen from other investors in the United States is almost beyond comprehension.
Worst of all, our federal government is doing little to rectify the wrongs. Interestingly, the main legal activist is the Attorney General of New York State where the New York Stock Exchange is located. Unfortunately, the New York Attorney General can penalize but can’t rectify the cause. For starters, blame so-called economists. They preached that the economy would benefit by awarding stock options to a CEO who ran a company efficiently and profitably. The economists either didn’t think or didn’t care to consider profitability for whom, the investors or the executives who could cook the books.
The main reasons for current major white-collar crime were the rise in popularity of mutual funds, the increase in conglomerates that led to blurring of what investors actually own, and the rise of greed and the decline in morality in America. Quick now. Do you own an interest in a tobacco company? And do you own an interest in the $10 billion pornography industry in America? Are you sure? Do you really own some G.E. or Time Warner stock? And didn’t you buy the mutual fund solely on the expectation of making a profitable investment?
After the Enron and WorldCom scandals had simmered down in the media, I came to understand that white-collar crime by major companies was far more prevalent that I had realized. It seemed that some alleged crime came to light, at least to me, just about every day. But was that the real situation, or was I biased? So for seven days I recorded scandals new to me that I noticed in the media. Moreover, probably many other people also do not realize the depth of white-collar crime in America, so I decided to share with Whatcom Watch readers the seven days just before I wrote this article. Here they are:
11/27/03 Bellingham Herald T-Mobile workers to get a $4.7 million settlement for back wages due.
11/2703 Bellingham Herald Morgan Stanley agreed last week to a $50 million settlement required by the Securities & Exchange Commission.
12/2/03 Wall St. Journal Invesco. Market timers were not only permitted by Invesco but even encouraged by Invesco to make special deals with hedge funds. Civil fraud charges are expected.
12/2/03 Wall St. Journal Kirk Kerkorian is expected to testify today that Daimler-Benz defrauded investors in its 1998 merger with Chrysler.
12/3/03 Wall St. Journal Richard S. Strong, who founded Strong Financial in 1974, resigned as CEO. The New York Attorney General’s office is considering filing criminal charges.
12/3/03 Wall St. Journal Hollinger International, Inc. invested in a venture capital fund and a conservation magazine linked to outside directors Richland Perle and Henry Kissinger. Investigations by Hollinger uncovered $32.5 million in unauthorized payments to Lord Black and other executives.
12/3/03 Wall St. Journal The rejection by France of another offer from U.S. prosecutors in the Executive Life case set the stage for a criminal trial in which France would be the defendant. The case has become a major thorn in U.S.-French relations that were already strained by disputes over Iraq.
12/3/03 The Pentagon announced it will delay a $17 billion plan to acquire 100 aerial tankers from Boeing in light of alleged but undisclosed unethical conduct. §
