Jun. 30, 2002
Outrageous Indeed
By J. Barlow Herget
RALEIGH - When President Bush decried the recent WorldCom collapse as “outrageous," he sounded like Capt. Renault in the movie "Casablanca," shouting, "I’m shocked, shocked, to find gambling is going on in here!" as he pocketed his winnings.
It is outrageous what big shot business people have done to the rest of us. And so far, none of them has gone to jail even though the latest bookkeeping-buggery at Xerox is more than three years old.
The President along with legislators of both parties may genuinely be outraged at the stunning level of personal and corporate greed, but they shouldn’t be surprised. They’re part of the problem, thanks to our rotten system of financing political campaigns.
Maureen Dowd of "The New York Times," put it this way: "Nervous that the stench of mendacious and felonious Big Business will cling to Republicans, the President is speaking out loudly against the latest robber barons. Mr. Bush must condemn deep-picketed corporations that gave him the money to get elected president so he can be re-elected and protect corporations’ deep pockets."
To be fair, Dowd could say it about Democratic leaders such as Sen. Joseph Lieberman, D-CT, too. Lieberman, the Democratic nominee for vice president in 2000, has stalled legislation that would give regulatory agencies such as the Securities and Exchange Commission (SEC) the authority to clean up the accounting industry.
The stench is spreading. Researcher Becky Ogburn compiled this list in the News & Observer of recent corporate misdeeds: Enron, October 2001; Global Crossing, January 2002; Dynergy, April 2002; Adelphia Communications, April 2002; ImClone, June 2002; and now WorldCom, June 2002. Her list didn’t include some ripe leftovers, such as Tyco International, Waste Management and Xerox.
A recent PBS Frontline television investigation with Pulitzer Prize winner Hedrick Smith was titled "Bigger than Enron" and showed why. The stories deaden the spirit and stoke our anger. Enron’s Ken Lay scooped up millions of dollars in sweetheart deals knowing his employees, and investors, would go broke or lose millions. WorldCom’s ex-CEO Bernard Ebbers loaned himself $408 million, telling journalists, "Our accounting, to the best of my knowledge, is absolutely clean." And Tyco’s ex-chief, Dennis Kozlowski continues to live the limousine life while his company is driven into the dirt.
These are people who do not feel your pain. And the pain is very real for many Americans.
To date, over 17,000 WorldCom employees have lost their jobs, including 220 in Raleigh. Other trusting souls have seen retirement savings, home care for aging parents or children1s college education funds vanish in the headlines.
Like the poor in St. Matthew’s gospel, the crooked rich, too, we will have always. The challenge now is to improve the system that allowed these bums to thrive.
"The New Republic’s" Jonathan Chait explained it this way:
"Corporations hire accounting firms to inspect their balance sheets and offer prospective investors their seal of approval. The trouble with this arrangement is that accounting firms also perform lucrative consulting work for the same companies they audit (in fact, auditing represents only around one-quarter of accounting firms’ business with their clients). Arthur Andersen examined Enron’s books while taking in $27 million in fees for other services."
Former SEC Chairman Arthur Levitt tried to reform corporate audits. He tried to ban accounting firms from doing other business with the same corporations they audit. Makes sense.
Arthur Andersen and other large accounting firms fought back fiercely. They did so holding "thank you" notes from key Congressional committee chairmen who received thousands of dollars in campaign contributions. Lieberman, for instance, received $11,500 in contributions from Arthur Andersen in the past. Another beneficiary was former Senate Banking Committee chairman Phil Gramm, R-TX. Levitt lost.
(His replacement, New York attorney Harvey Pitt, hardly inspires confidence as an SEC reformer. He was the guy who spearheaded the accountants’ lobbying effort against Levitt.)
Congress may yet act. The White House finally has offered a plan. But this is a campaign year, and the money is flowing. Bush himself already has raised an unprecedented $100 million in campaign money.
Unless Americans change how candidates raise funds or change how candidates use the public airwaves for political debate (they pay through the teeth, now) we can only "follow the money." It is a proven guide to where we’re going.
Barlow Herget is a businessman and writer who served two terms on the Raleigh City Council.
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