Bainbridge links to Tom K's coverage of KPMG.  Both refer to it as the "criminalization of agency costs." 

If the KPMG partners are the agents, who are the principals?  I assumed the phrase "criminalization of agency costs" (a clever turn of phrase that I believe originated with Larry Ribstein) referred to the use of the criminal law to protect shareholders -- the implication being that the protection is unnecessary and a problem for shareholders and managers to work out among themselves.  Markets, not the government, should police accounting fraud, theft of corporate assets, etc.  I disagree, but I think I understand the argument. 

At least I thought I did.  Now I'm not so sure.  Tax fraud is not an agency costs problem.  KPMG, an advisor, sold its clients tax shelters for the benefit of the clients' shareholders.  Accounting gimmicks shift value away from creditors and long-term shareholders.  Tax gimmicks shift value away from the government.  The public, not the clients' shareholders, got hurt.  How is this an agency costs problem?

Pre-cooked phrases should not substitute for thought.  "Criminalization of agency costs," once it loses its substantive meaning, becomes as useless a phrase as "witch hunt" or "inquisition" or "corporate greed."  Sloppy writing is a sin I am sure I am guilty of as well, and I hope you will call me on it too.

In any event, the KPMG memo is good reading, as is Tanina Rostain's article on KPMG. 

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