20 September 2005

Two More Corporate Criminals Get the Slammer

Former Tyco execs Dennis Kozlowski and Mark Swartz were sentenced to 8-25 years for corporate fraud yesterday. They were also fined tens of millions of dollars, and had to pay restitution of hundreds of millions.

This is the type of thing that has to happen if boardrooms are ever going to get the message that crime doesn't pay. Right now the risk-benefit balance makes it easier to commit fraud because the chances of getting caught are low enough.

But does malfeasance have to be this excessive in order to get caught? That allows far to much fraud to sneak by under the radar. More Eliot Spitzers are needed.


K. said...

i'm a big fan of Spitzer....but what sometimes results is reactionary regulation that just adds more paperwork and little actual usefulness...however, it keeps $$$ in my pocket. :)

WestEnder said...

I think that is exactly why more corporate criminals must go to jail. The deterrent effect would be more efficacious for well-educated, uppper-class people than it would for poor, screwed-up thugs.

Boardrooms have to know that if they cross the line, they're gonna get their ass kicked and might even get their mugs on a white-collar version of "Cops" someday (I'd love to see that show).

Putting these narcissistic dumb-asses in jail would obviate the need for excessive regulation, paperwork, and administration. I can live with that.

K. said...

i don't disagree. but getting congress to pass legislation that actually attaches some real punitive punishment to these jerks will be a task.

mainly because the congressmen are all linked up with the "insider" workings of big business and Wall St.

For instance, did you catch this little gem today?

"White Collar Cops" would be great - let's pitch it to Court TV.

WestEnder said...

Not being an attorney, I can't speak to whether more laws are needed for corporate malfeasance. I thought the laws exist, but the resources for enforcement are lacking, as is the political will.

Spitzer didn't need any new laws, nor did the courts when they indicted Ebbers, Rigas, Kozlowski, Swartz, or Martha (although that was a little different).

The Ebbers case is a good example because he was basically a pawn of Jack Grubman (Solomon) and Sandy Weil (Citigroup), both of whom were able to make deals to avoid prosecution. Both even got multi-million dollar bonuses.

The message has to be sent that they are not above the law. If that requires additional legislation, then so be it.

K. said...

well, you are correct there is legislation that is in place but doesn't impose very strict penalties...and normally, the bigger concern is letting the SEC go first and get rescission of the $$$. Criminal referrals in securities fraud cases are actually very rare, relative to the number of investigations conducted.

Anyway - Spitzer was a bulldog and was somewhat effective, but he really highlighted the problems and left the SEC and NYSE to enforce the majority of the problems. i'm not so sure they've done that. they've put in more regulation on the preventitive side - but i don't see "enforcement actions" being pushed like they probably should be.

I cannot speak to Grubman on the basis of attorney-client privilege. But 50% of my work arises from his research reports. Which are highly engaging reading (*yawn*) let me tell you...