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-Caveat Lector-
Cracking Down on Corporate Crime, Really
By Russell Mokhiber and Robert Weissman
Here is one of the most remarkable aspects of the still-unfolding
financial scandals swirling around Worldcom, Xerox, Global Crossing,
Enron, Arthur Andersen, Tyco and a growing number of other companies:
The fraud occurred in the most heavily regulated and monitored area of
corporate activity.
If an epidemic of corporate malfeasance could occur in the financial
arena, how serious is the more general problem of corporate crime?
Consider the checks and balances in place that should have stemmed the
wave of corporate wrongdoing which has reportedly angered even American
CEO George Bush:
* Disclosure requirements for corporate financial performance are
extensive, and by far the most detailed for any element of corporate
activity.
* There is a distinct industry -- made up of accounting firms -- whose
function is to review the financial numbers, audit corporate books and
certify the validity of financial statements.
* There is another distinct industry, separate from the accountants --
this is the Wall Street investment firms -- whose function is to
scrutinize the corporate reports, interview corporate executives,
analyze market performance and provide investors with independent
evaluations of company prospects.
* There is a legal duty for corporate executives to advance the interest
of an important and powerful class of people -- shareholders -- and
significant numbers of these shareholders are increasingly organized and
assertive of their rights (including through pension funds). There is no
comparable legal duty for corporate executives to serve consumer or
worker interests, say.
* An array of Securities and Exchange Commission regulations establish
rules for financial reporting, and are backed by the enforcement power
of the agency, as well as the threat of private litigation from
shareholders in case of violation.
Other aspects of corporate activity are simply not subject to such
robust scrutiny and control.
Given what is now the apparent blatant corporate disregard for the law,
even in areas where executives are most closely watched, what should we
expect is occurring elsewhere? What's happening with consumer rip-offs,
sales of unsafe products, endangerment of workers, pollution of the
environment?
Even with inadequate law enforcement, reporting requirements or
organized countervailing institutions, we know enough to know that the
epidemic of corporate crime, fraud and abuse is at least as severe
outside of the financial arena as within.
To take just two examples from recent months: In May, drug maker
Schering-Plough signed a consent decree with the Food and Drug
Administration, agreeing to pay a record $500 million in connection with
charges that over a three-year period it produced about 125 different
prescription and over-the-counter drugs in factories that failed to
comply with good manufacturing practice. And in April, the Justice
Department announced that it collected more than $1.3 billion in 2001 in
connection with enforcement actions related to health care fraud, and
that last year 465 defendants were convicted for health-care fraud
crimes. This kind of revelation occurs regularly, but news accounts
rarely combine them -- as they are now doing with the financial scandals
-- to make clear the breadth and depth of the problem.
With the most recent round of disclosures of financial wrongdoing at
Worldcom and other companies, it no longer appears that Big Business's
Congressional allies are going to be able to block all meaningful
remedial measures, and the Bush administration is now preparing a reform
package.
If those reforms are limited to addressing financial fraud, however, the
biggest and most serious corporate criminal activity will be able to
flourish.
What we need is a full set of restraints on corporate crime. But even
small steps could significantly reduce the toll of corporate crime and
violence. Here are three measures that should be adopted this year,
before Congress recesses and momentum for corporate reform slows:
First, the Federal Bureau of Investigation should be required to compile
an annual report on corporate crime in American, to accompany its
current Crime in the United States report, which is unfortunately
confined to street crime.
Second, the federal government should refuse to do business with
companies that are serious and/or repeat law breakers, as well as deny
other privileges (for example, granting broadcasting licenses) to
corporate criminals. This would involve some new or strengthened laws
and regulations, as well more stringent enforcement of debarment,
contractor responsibility and good character laws now on the books.
States and local governments should adopt similar measures.
Third, whistleblowers and private citizens should be able to enforce
laws regulating corporate conduct. One way to facilitate this
enforcement approach would be to expand and creatively adapt the False
Claims Act, which currently enables whistleblowers to initiate lawsuits
against entities which have defrauded the government, and which reclaims
for the government every year hundreds of millions of dollars stolen by
unethical contractors.
"Cracking down on corporate crime" -- the mantra of the moment -- cannot
be limited just to financial crime, already the most policed form of
corporate wrongdoing.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor, http://www.multinationalmonitor.org. They are
co-authors of Corporate Predators: The Hunt for MegaProfits and the
Attack on Democracy (Monroe, Maine: Common Courage Press, 1999;
http://www.corporatepredators.org).
(c) Russell Mokhiber and Robert Weissman
This article is posted at:
http://lists.essential.org/pipermail/corp-focus/2002/000120.html
_______________________________________________
Focus on the Corporation is a weekly column written by Russell Mokhiber
and Robert Weissman. Please feel free to forward the column to friends or
repost the column on other lists. If you would like to post the column on
a web site or publish it in print format, we ask that you first contact us
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Focus on the Corporation is distributed to individuals on the listserve
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DECLARATION & DISCLAIMER
==========
CTRL is a discussion & informational exchange list. Proselytizing propagandic
screeds are unwelcomed. Substance�not soap-boxing�please! These are
sordid matters and 'conspiracy theory'�with its many half-truths, mis-
directions and outright frauds�is used politically by different groups with
major and minor effects spread throughout the spectrum of time and thought.
That being said, CTRLgives no endorsement to the validity of posts, and
always suggests to readers; be wary of what you read. CTRL gives no
credence to Holocaust denial and nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
========================================================================
Archives Available at:
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<A HREF="http://peach.ease.lsoft.com/archives/ctrl.html";>Archives of
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