FAQ on Corporate Malfeasance
Q. What's the deal with corporate malfeasance and crime?
A. It seems a growing number of major corporations conducted deceptive and fraudulent activities. These activities were carried out by corporate officers, accountants, investment banks, investment analysts, mutual funds and brokerage firms.
Q. What, exactly, does this mean?
A. These people stole from you. They lied to you and then they stole from you. They conspired to rip you off.
Q. Why should I care?
A. If you are an investor, these actions cost you money, either through increased fees or through losses caused as a result of, among other things, corporate bankruptcies.
Firms issued misleading and erroneous financial statements. They manipulated earnings reports in an effort to control stock prices. Investment analysts issued fraudulent reports. These were the big lies.
Q. But, I'm not a big time investor. So, why should I care?
A. Even if you are not an investor, these actions had an impact on you. For example, if you live in California, one company found to have engaged in corporate malfeasance, Enron, cost you a lot of money. The company unfairly raised energy prices. Again, they ripped you off: they charged you more money than they should have. They circumvented the marketplace.
Need proof? Consider the following fact: "Within days of Enron's bankruptcy California's energy prices returned to normal levels." Energy prices fell.
Q. I don't live in California. I'm not an investor, at least, not a big one. So, again, why should I care?
A. There are other reasons to be concerned. As these events have shown, greed and other unethical behavior is, like a virus, quick to spread. Accountants, CFO's, CEO's, investment banks and investment analysts, have all been contaminated. Even mutual funds. Unless inoculated, all sectors of the economy will be infected.
Just as a virus may bring about a general decline in the health of an organism, this type of infection will result in a general decline in the health of the economy. Societal fairness and justice will fall.
Q. Oh, come on. Societal fairness and justice? Yada, Yada. Bottom line it for me.
A. Here's the bottom line: unless checked, this type of behavior, this "virus" will result in higher prices and fewer jobs.
This is why you should care.
Q. Oh. But, I don't have the time (or the knowledge) to keep track of these things. Who was supposed to look out for me?
A. All kinds of people. The Securities and Exchange Commission, mainly: "the primary mission of the U.S. Securities and Exchange Commission (SEC) is to protect investors and maintain the integrity of the securities markets."
In addition, there are these things called Self Regulatory Organizations. They include market exchanges themselves, like the NYSE: "The New York Stock Exchange is the leading self-regulatory organization in the U.S. securities industry."
Other organizations, like the National Association of Securities Dealers (NASD), are also supposed to protect investors: "As the world's leading private-sector provider of financial regulatory services, NASD has helped bring integrity to the markets – and confidence to investors – for more than 60 years."
These people were supposed to look out for your interest.
They did not.
Q. How about the politicians?
A. They only act when things go bad.
At the US House of Representative, the Subcommittee on Capital Markets, Securities and Government Sponsored Enterprises"..watches over the U.S. capital markets, securities and insurance industries and government-sponsored enterprises, such as Fannie Mae and Freddie Mac. It oversees the Securities and Exchange Commission as well as the self-regulatory organizations that police the securities markets."
They depend upon the SEC, the NYSE and the NASD to do their jobs.
Q. Yeah, but this is the first time this has happened, right?
A. Uhhh, no. There were the S&L, junk bond and treasury market scandals in the 1980’s. See: Top 100 Corporate Criminals of the 1990's. The problem is growing.
Q. What can I do now?
A. Well, you can start by expressing displeasure with mutual funds, investment banks, brokerage firms and investment analysts tied to fraudulent activities. See: What you can do now.
Let others know you are concerned - write to the Federal Reserve Board (http://www.federalreserve.gov/feedback.cfm), the SEC (enforcement@sec.gov), Congress (U.S. Rep. Richard Baker, R-Baton Rouge, Chairman of the House Subcommittee on Capital Markets, has done more to protect the investing public than anyone else on Capitol Hill. Contact him at 2129 Rayburn House Office Building, Washington, D.C. 20515, (202) 225-7502 or at http://www.house.gov/baker/).
"If you have lost money due to WorldCom’s or another company’s fraudulent practices, or if you suspect fraud on behalf of your brokerage house or analyst, seek the advice of a securities fraud attorney."
Also, if you've got a retirement plan and think you have been ripped off or impacted by these events, see: ERISAFRAUD.COM
For more information, see:
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