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Time to add a new wing to Corporate Hall of Shame

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By ROBERT TRIGAUX, Times Business Columnist

© St. Petersburg Times
published June 30, 2002


The corporate rogues' gallery grows day by day. WorldCom. Enron. Xerox. Global Crossing. Arthur Andersen. Tyco. ImClone. Adelphia.

Their motto: "How will I scam thee? Let me count the ways."

With such intense competition, we could use a Hall of Shame.

This year's Destruction of Investor Confidence award belongs to WorldCom. The Rampant Corporate Fraud medal belongs to Enron. The Too Much Is Never Enough Compensation winners are Tyco's Dennis "Tax Dodger" Kozlowski and Enron's Andy "What Conflict of Interest?" Fastow.

The Rip Van Winkle Board of Directors award is a tie between Enron and Adelphia. The Spineless and Brainless Accounting trophy is Andersen's, hands down. And the Fiddling While Rome Burns certificate goes to Securities and Exchange commissioner Harvey "What, Me Worry?" Pitt.

Enron cut 4,000 jobs after it was forced to restate its earnings. Another 8,500 lost their jobs at Andersen as its accounting clients began defecting. Tyco announced 15,000 job cuts in February. Thanks to what may be the largest accounting fraud in U.S. history, WorldCom began cutting 17,000 last week. That makes 44,500 people who lost jobs not because of a weaker economy but mostly because their corporate leaders were busy manipulating the company stock price higher for their own gains.

More job cuts will occur as additional fraud emerges. So heavy is the recent volume of scandals reported in the business sections of newspapers that the "Doonesbury" comic strip has devoted the past week to lampooning the subject.

Now come reports that even foreign investors, who long viewed the United States as the safest of national havens, are disillusioned by our business scandals and are pulling back. In a recent Merrill Lynch survey, 60 percent of fund managers said the U.S. market had the second-worst quality of earnings in the world.

Is anybody in charge? Who will step up and snap this cycle of Gumby accounting and casual corruption? We hear that Washington's top watchdogs are shocked and demanding tough action. But we learn later how powerful business lobbyists snuffed out all but the weakest of real accounting reforms.

Our climate of business ethics is enough to make us cry, or, in the case of Martha Stewart's insider trading drama, laugh in disbelief.

In the spirit of comic relief (and with apologies to Abbott and Costello's famous "Who's on first?" baseball routine), imagine this top-level exchange between two reluctant regulators on U.S. business practices: President Bush and SEC Commissioner Pitt.

BUSH: Now look, Harvey, I'm the head of the free world. The only way we're going to clean up this business mess and get on with our war on terrorism is to find out who's doing what in corporate America. So go ahead and tell me some of their names.

PITT: Yes sir, Mr. President. We have Who's at WorldCom, What's at Enron, I Don't Know's at Global Crossing.

BUSH: That's what I wanna find out.

PITT: I say Who's at WorldCom, What's at Enron, I Don't Know's at Global Crossing.

BUSH: You know the fellows' names?

PITT: Certainly!

BUSH: Well, then who's at WorldCom?

PITT: Yes!

BUSH: I mean the fellow's name!

PITT: Who!

BUSH: The guy at WorldCom!

PITT: Who is at WorldCom!

BUSH: Now whaddya askin' me for?

PITT: I'm telling you, Who is at WorldCom.

BUSH: Hmmm. Is the SEC investigating WorldCom?

PITT: Absolutely.

BUSH: Who is a target of that investigation?

PITT: Well, naturally!

BUSH: When you complete that investigation, who will be named?

PITT: For sure. Why not? He's in charge.

BUSH: Who is?

PITT: Yes.

BUSH: All I'm tryin' to find out is, what's the guy's name at WorldCom.

PITT: Oh, no -- wait a minute, don't switch 'em around. What is at Enron.

BUSH: I'm not askin' you who's at Enron.

PITT: Who is at WorldCom.

BUSH: I don't know.

PITT: He's at Global Crossing -- now we're not talkin' 'bout him.

BUSH: Now, how did I get to Global Crossing?

PITT: You mentioned his name!

BUSH: If I mentioned his name, who did I say is at Global Crossing?

PITT: No -- Who's at WorldCom.

BUSH: Never mind WorldCom. I want to know what's the guy's name at Global Crossing.

PITT: No -- What's at Enron.

BUSH: I'm not askin' you who's at Enron.

PITT: Who's at WorldCom.

BUSH: I don't know.

PITT: He's at Global Crossing.

BUSH: Yikes! You got other names?

PITT: Oh yes!

BUSH: The CEO at Tyco?

PITT: Why.

BUSH: I don't know, I just thought I'd ask you.

PITT: Well, I just thought I'd tell you.

BUSH: All right, then tell me who's the guy at Tyco.

PITT: Who is at WorldCom --

BUSH: Stay away from WorldCom! I wanna know what's the Tyco guy's name.

PITT: What's at Enron.

BUSH: I'm not askin' you who's at Enron.

PITT: Who's at WorldCom.

BUSH: I don't know.

PITT and Bush: Global Crossing!

BUSH: This is ridiculous. All I really wanted to know is who's at WorldCom. Why? I don't know. He's at Global Crossing and I don't give a darn!

PITT: What was that?

BUSH: I said I don't give a darn!

PITT: Oh, he's at Xerox.

BUSH: Clear as crystal, Harvey. Keep up the good work at the SEC.

PITT: Any time, Mr. President.

* * *

We can forgive President Bush if he's been a bit preoccupied. He urged Congress this weekend to act on his proposals to improve accountability, and he will do so again in a July 9 speech on Wall Street.

But does he really mean it? Here's one test of Bush's resolve. After his administration worked to water down proposals in Congress, how far will Bush move toward backing tough new laws against corporate abuses and conflicts of interest on Wall Street and at accounting firms?

And when will Pitt, former attorney for big corporations and accounting firms, start doing his job of oversight?

There are some hopeful signs. Wednesday, Pitt said CEOs and chief financial officers of the 1,000 largest U.S. companies will be required to personally attest to the soundness of their financial statements.

Most of those companies should have nothing to worry about. A small minority -- at most 5 percent -- of American businesses engage in financial shenanigans, estimates James Stack, president of market analysis company InvesTech Research. The bad news is those 5 percent are pursuing bigger frauds (witness WorldCom's fudging its books by $3.8-billion) and more extreme scams than in the past.

Slowly, corporations are starting to shift from aggressive to conservative accounting. That's good for the market. But it will mean more pain from writedowns and profit readjustments in the short term.

Accounting firms have a long, long way to go before they regain credibility. A new survey by the Yale University School of Management and the Gallup Organization says that 25 percent of corporate heads lack confidence in the accuracy of audits produced by their own accounting firms.

Quicker action would help -- a lot -- to offset growing cynicism by investors.

While shareholders screamed bloody murder after the Enron collapse, the WorldCom scandal has been met with apathy. That muted response could be "a sign of deepening near-term investors' disinterest, but also a growing disenchantment of a whole generation of investors toward equities," Standard & Poors' investment committee warned last week.

How bad is it? A Pew Forum survey this spring found that Americans now think more highly of Washington politicians than they do of business executives.

Need I say more?

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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