July 16, 2005
Exactly What Does CSI: Wall Street Look Like
Posted by Christine Hurt

A week after I declared that us folks at the Glom were the "if you can't say something nice people," the NYT is testing me with its Op-Ed today, Counting Corporate Crooks.  In compiling some points of constructive criticism, I'm not sure where to start.  The main opinion expressed is that the federal government should keep better statistics on white collar crime as it is committed, not merely statistics on SEC investigations or arrests.  The author paints of picture of white collar crime running rampant in US corporations while regulatory agencies turn a blind eye, only investigating crimes that are likely to result in convictions.  The author laments this situation because, in her opinion, corporate behavior that straddles the line between unethical and illegal behavior has greater negative effects than murder.

Hmmm.  First, I would like to know the statistics behind the reporter's claim that white collar criminals are more recidivistic than murderers:  "Significant time, money and manpower are spent tracking down murderers, even though statistically, they are not likely to kill again."  I'd just like to get that out of the way.

Second, how does one compile statistics on a crime that we only know is committed if an investigation uncovers it?  This conundrum is similar to attempting to compile statistics on unreported crime.  We know a murder has been committed because we either have a body or a missing person.  How do we know that white collar crime has been committed?  Unfortunately, there are those who point the finger every time the stock price goes down or a financial forecast is not met.  So, do we compile crime statistics by watching the stock ticker?  Should we have corporate coroners who can examine every stock downturn to ensure that the stock is on a "natural" decline?

Finally, the author admits that characterizing acts as criminal violations as opposed to ethical breaches is difficult, but she suggests that Sarbanes-Oxley could help:

Sure, there are obstacles. The line between what is criminal and what is unethical can be blurry: certain accounting tactics might be dubious but not illegal, and prosecutors must demonstrate criminal intent. Murder is always murder, but accounting rules change. And without a dead body, it's harder to tell how many people are getting away with your retirement account. That said, to a conscientious and curious investigator or accountant, where there's significant fraud, there's often a big bold chalk outline in the financial statements. Perhaps the Sarbanes-Oxley Act, which outlines accounting information that must be provided to the S.E.C., which then makes it available on its Web site, could help.

In the interest of not saying something nice, I'll just let that (incredibly naive and ignorant) statement lie there for awhile.

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Comments (8)

1. Posted by OldVet on July 16, 2005 @ 10:48 | Permalink

You'd have to be a fly on every wall to document all the breaches, misdemeanors, and crimes among the corporate elites. Too bad.

So many grand thefts are written off to avoid bad publicity, and the perp fired quietly. Tax cheating in business is rampant, as a matter of fact, and very little actually goes to court. Betrayal of the public trust by corporate managers who fool investors with inflated sales or profit figures is very common -witness the huge number of "restatements" by public co's since Sarbanes Oxley.

The ethical breaches and misdemeanors shake the public's faith in capitalism, though less injurious than the crimes. Who's to pay for the pension funds that collapse? Would you invest readily in a company that would stiff its own employees? Or which would bulk up its "return on assets" to get your investment dollar?


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