This summer, the witch-hunt continued. Several prominent business managers were charged on numerous counts of fraud. In the course of trying to clean up corporate America, taxpayer money was wasted, and scapegoats are going to spend the rest of their lives in jail.
The trouble is that accounting laws are full of gray-area judgment calls-and our government is getting too much into the business of policing businesses.
The most prominent news was the 25-year sentence of Bernard Ebbers, the 63-year-old CEO of WorldCom Inc., for accounting fraud.
Ebbers had previously agreed to pay $5 million-nearly all his cash and personal assets-to shareholders.
What is the purpose of sending such a man to prison? He is not dangerous.
Has he not lost everything already? Why should he go sit in jail for the remainder of his life at taxpayers’ expense?
Another example of a frivolous suit brought against a corporation is the HealthSouth Corporation case. Founder Richer Scrushy was acquitted on 36 of 36 criminal accounts. Thirty-six!
You would think that before you take a huge case to court you’d make sure you had enough evidence to back at least one of 36 charges-but apparently prosecutors weren’t too worried about that.
Consequently, HealthSouth’s image and viability has been destroyed.
As health costs rise and families lose health plan coverage, why are Securities and Exchange Commission officers and district attorneys not held criminally liable for reckless accusations?
Though public trust has been shaken in the business world due to scandals like Enron, people need to understand that accounting is full of judgment calls.
Earnings reports and loss reserves are often readjusted as accountants and managers guess what they think will happen in the unknown future.
It is part of investment risk that managers will make appropriate decisions.
In 2002, the Sarbanes-Oxley law was passed. It states that companies must have an internal control structure. This law has cost a single company 55,000 hours of accountancy services to comply.
The SEC has had to extend the compliance date on this law by another year.
For something to take more than four years to reach compliance shows how arbitrary and egregious it is. Lawyers and accountants are getting rich while businesses are going under.
Accounting was designed to make business and investment more efficient. But the intervention of law has lessened transparency and interfered with decision-making processes. Now it is more difficult for stockholders to know what is going on within a company, not less.
The ultimate sign of the poor state of the American judicial system is the amount of cases that go to plea bargain-upward of 90 percent.
There is less risk in opting for a plea bargain, in which you pay a lesser penalty by assuming guilt, than in attempting to demonstrate innocence against an aggressive, win-at-all-cost prosecutor and an ignorant jury.
In a bad economy, we should be doing our best to help companies thrive-but our judicial system and bureaucratic governmental agencies are getting too involved in making rules aimed at hurting corporations.