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Why the States are embarrassing the Feds

Posted By Barry Ritholtz On August 28, 2003 @ 8:04 am In Current Affairs | Comments Disabled

First, the handwringing. Solemn, serious soliloquies.

Then comes angst: “This will interfere with our methodical case building process.”

Next up, a discussion of State versus Federal jurisdiction.

Finally, some announcer will — sigh — talk about the local political ramifications of State Attorney Generals.

Overlooked in all of this will be the gradual decay of Federal Enforcement and Prosecutions at nearly every level, and for a bewildering variety of issues and transgressions.

What was once a feared and mighty arm of the government has become a vast bureaucracy overmatched by corporate legal departments. Opponents of enforcement have spent millions of dollars lobbying to have enforcement laws relaxed. Though mostly successful, on the occasions when they would run into trouble on that end, they shifted gears, lobbying successfully to have department budgets cut and headcounts reduced.

They even managed to get their own defense attorneys — i.e., think Harvey Pitt as SEC Chairman — appointed as the head of the watchdog agencies.

Undermanned, underbudgeted and undermotivated, the federal agencies charged with enforcing securities laws, anti-trust laws and fraud prevention have simply been outgunned by the lawyers on the other side.

Of course NY State Attorney General Elliot Spitzer went after the corruption on Wall Street; The SEC, NYSE and NASD all turned a (mostly) blind eye to what was going on, and what is still going on. After all, who wants to interrrupt a rally?

Worldcom (perhaps Worldcon is a better name) was one of the biggest corporate frauds in the history of mankind. Before Oklahoma ran out of patience, indictments for the ringmasters were few and far between. Any first year law student could have figured out how to indict the people behind 12 billion dollars worth of fraudulently reported revenue. What on Earth is taking the Feds so long?

How is it possible that Ken Lay, CEO and creator of the force that was Enron, has yet to be indicted? This was the biggest scam of all times, the ultimate Ponzi scheme. Are we living in some episode of the Twilight zone? It’s simply embarrassing.

They may have to move the trials of both Bernie Ebbers and Ken Lay to new Zealand, because that’s the only place where a conviction is not guaranteed.

Of course, that’s if they ever get indicted . . .

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Update:
There’s legal, and then there’s shady: A new report, titled “Executive Excess” details the specific CEOs personally had the greeatest profits from layoffs, pension shortfalls, and tax dodges:

CEOs at companies with the largest layoffs, most underfunded pensions and biggest tax breaks were rewarded with bigger paychecks, according to a new report, “Executive Excess 2003: CEOs Win, Workers and Taxpayers Lose.”

Median CEO pay skyrocketed 44 percent from 2001 to 2002 at the 50 companies with the most announced layoffs in 2001, while overall CEO pay rose only 6 percent. These layoff leaders had median compensation of $5.1 million in 2002, compared with $3.7 million at the 365 large corporations surveyed by Business Week.

You can download the PDF “Executive Excess” Report [1] here.

Pointer courtesy of Dave Callaway [2]


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URL to article: http://www.ritholtz.com/blog/2003/08/why-the-states-are-embarrassing-the-feds/

URLs in this post:

[1] “Executive Excess” Report: http://www.ufenet.org/press/2003/EE2003.pdf

[2] Dave Callaway: http://cbs.marketwatch.com/news/story.asp?guid=%7B18E709BC%2DDBFF%2D4AEC%2D8B24%2DF55BC87383ED%7D&siteid=mktw

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