This week marked the beginning of two high-profile criminal trials, the cases against Dennis Kozlowski, former head of Tyko International, and Frank Quattrone, former head of Credit Suisse First Boston's vanunted technology investment banking group.
More than a year ago, President Bush called for a crackdown on corporate crime.Since then, a few executives have gone to trial for such conventional wrongdoing as charging exorbitant personal expenses to their businesses, or engaging in insider trading, or destroying evidence. And a very few have been found guilty and gone to jail.
The perp walks and courtroom dramas may eventually satisfy the public's thirst for villains. But they divert attention from the vast tide of executives and professionals who designed, promoted, and executed these scams. And they don't even touch the really big frauds -- the complex deals and multiple transactionsthat were hidden behind so many layers of dummy corporations and fraudulent ploys that government prosecutors haven't been able to lay a hand on major players. Why do you suppose charges still haven't been brought against Enron's most senior executives?
It's easy to catch a few CEOs whose hands were in the cookie jars. But the larger abuses haven't been touched. New laws and regulations have been issued but the reforms are full of holes. Conflicts of interest are still endemic. In a recent survey of professional money managers, more than two-thirds said they were skeptical that the reforms would prevent future scams. And most thought the new anti-fraud provisions, ineffective. The head of the SEC's enforcement division recently warned of a "conflicts of interest crisis" on WallStreet that continues to threaten small investors.
Wall Street and the White House know the public wants some heads to roll, and maybe a few will. But the vast system that supported and encouraged these abuses is still in place, as are most of the people who participated in them. Unless or until we have new laws that prevent conflicts of interest -- such as a requirement that a majority of corporate directors be independent, and be nominated and elected by investors -- nothing fundamental will change.
