The world is drowning in corporate fraud
This from Jeffrey D. Sachs at The Cap Times (Madison, WI):
“The world is drowning in corporate fraud, and the problems are probably greatest in rich countries — those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.
“Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs.
“There is, however, scant accountability. Two years after the biggest financial crisis in history, fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return.”
Corruption pays in American politics as well. The Florida governor, Rick Scott, was CEO of a major health care company known as Columbia/HCA. The company was charged with defrauding the U.S. government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion. The FBI’s investigation forced Scott out of his job. But a decade after the company’s guilty pleas, Scott is back as a “free-market” Republican politician.
When President Obama wanted somebody to help with the bailout of the U.S. auto industry, he turned to a Wall Street “fixer,” Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.
Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country’s oil fields — access worth billions of dollars. When Nigeria’s government charged Halliburton with bribery, the company settled out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney.
Impunity is widespread — indeed, most corporate crimes go unnoticed. The few that are noticed typically end with a slap on the wrist, with the company — meaning its shareholders — picking up a modest fine. The real culprits at the top rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.
Commenter #headline says it all:
“Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions … enabled by this hidden system are now so vast as to threaten the global economy’s legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments’ inability politically — and sometimes even operationally — to impose taxes on the wealthy.”