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Corporate Lobby Seeks to Hinder Corporate Crime Reporting

It is clear, in the midst of a seven year corporate financial crime wave,
that the business moguls and their academic apologists, who make up the
Committee on Capital Markets Regulation (CCMG) have no sense of irony. It
is not enough that the CCMG's new report is recommending less law
enforcement and accountability after years of Republican regimes addicted
to de-regulation. The Big Boys want to make lower standards overseas an
argument for starting a race to the bottom, in order for the U.S. financial
markets to remain "competitive."

Here are some of CCMG's thirty-two recommendations, expected to be the goal
of a big lobbying effort on the Securities and Exchange Commission (SEC)
and the Congress next year:

    1. Limit how and when state enforcement agencies can pursue cases of
financial fraud on investors. This is designed to take care of any future
Eliot Spitzers, who take their oath of office seriously instead of
ceremoniously. Quite properly, the Governor-elect, present New York
Attorney General Spitzer reacted, saying: "To eviscerate the power of the
one set of regulators who did anything is absurd."

    2. Governments should sue the corporations themselves only as a last
resort and instead concentrate on the culpable officials in the company.
That will give rise to all kinds of escape hatches and internal
scapegoating by clever corporate attorneys. They do demand that companies
pay the legal expenses of the accused, however.

    3. Make it more difficult to convict defendants by requiring proof of
actual knowledge of the specific fraud, which makes it easier for
executives to get off the hook for criminal negligence. The "I didn't know"
defense is to replace "you should have known."

    4. Weaken the post-Enron Sarbanes-Oxley law, including not applying the
key section 404 on internal accounting controls to foreign companies if
they have to "meet comparable standards" in their home country. What are
"comparable standards?" This is a recipe for delay and loopholes. The
record of "equivalency negotiations" under NAFTA and the World Trade
Organization is enough to give rigorous pause to this slippery move.

    5. Stricter cost-benefit analysis to any new SEC rules than is now in
place. This it the time-dishonored technique of producing endless delays in
issuing any rules - a device that has devastated updating or declaring new
health and safety standards in the consumer, worker and environmental
areas. A corporate law firm's gold mine.

    6. CCMG wants shareholder approval for any "poison pill" defenses
against takeovers that the company officers and Boards institute.
Apparently, this change would make companies more vulnerable to the
lucrative business of mergers and acquisitions. But some investor advocates
may like this enhancement of shareholder power, along with another proposal
requiring a majority vote of shares to elect a company director.

    In a broader context, CCMG opposes giving shareholders the power to
vote on these gargantuan executive compensation packages that often amount
to looting company assets and relooting them when the executive is asked to
leave by the Board - the so-called "golden parachute."

    7. Either cap liability for auditors or give them outright immunity.
After major accounting firms profited by looking the other way in big
corporate scandals like Enron, WorldCom and the like, it takes a special
brand of commercial hubris to stake out this position.

Once auditors are immune, the CCMG wants to let outside Directors escape
liability for "corporate malfeasance," if they rely "in good faith" on the
auditors. It isn't clear what non-good faith reliance would be like.

"If you take every single step on their list," declared Barbara Roper,
director of investor protection at the Consumer Federation of America, "you
would have made it significantly more difficult to hold corporate criminals
accountable for their crimes."

These corporate criminals have looted or drained trillions of dollars from
workers, their pensions and millions of investors since 2000. Not 5 cents
on the dollar have been recovered for their victims. Many of these
recoveries have come through private litigation - investor class actions
mostly - which the Big Boys want to restrict even more than their
restrictive victory -- through the Securities Act of 1995. The more crimes,
the more they drive for privileges and immunities from the rule of law.

It is not likely that many of these measures will get through the SEC or
the new Congress, apart from some leniency for small companies under
Sarbanes-Oxley. But they will deter efforts to strengthen the corporate
criminal laws and regulations on both the corporations and, in the words of
one prosecutor, "their lying, cheating and stealing" executives and
accomplices.

For more information, visit corporatecrimereporter.com.

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