Ken Lay of Enron Indicted and Arrested
By Andrew L. Jaffee, July 8, 2004
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Enron’s ex-Chairman of the Board has been indicted and arrested on charges connected with his former company’s implosion in 2001. Corporate executives at Enron engaged in all sorts of financial manipulations to pump up the company’s stock price. They created complex “partnerships” to hide company debt from shareholders. Lay was urging his employees to buy company stock just three weeks before Enron reported its worst financial results in history. In 1998, Enron’s share price was at about $20. By 2000, it hit $90. By 2001, the company’s stock was worthless. Enron’s collapse wiped out billions in shareholder value and employee pensions. Democratic Presidential hopeful John Kerry had earlier this year claimed (prevaricated) that
They [the Bush Administration] have looked the other way while corporate crooks in corner office suites have defrauded everyday investors and destroyed the retirement savings of workers.
Funny. This quote can no longer be found on Kerry’s website. First of all, most of these “corporate crooks” started cooking their financial books before George W. Bush became president. Secondly, most of the “corporate crooks” that Kerry speaks of are either in jail, indicted, or currently in the crosshairs of justice officials. One of the reasons it has taken awhile for justice to catch up with these guys is the slick and complicated nature of the financial manipulations they used. They didn't intend to get caught. They used nuances in financial laws to try to hide what they were doing. Because of the complexity of accounting standards and laws (sometimes politically motivated), it is not always easy to prove wrongdoing. Nonetheless, the Bush administration’s war on corporate fraud has had great successes.
Enron’s former CEO, Jeff Skilling, was handcuffed and taken into a federal courthouse to hear charges that he cooked his company’s books while simultaneously selling company shares (“insider trading”). Enron's former Chief Accounting Officer was indicted on January 22. The company’s former CFO, Andrew S. Fastow and his wife Lea pled guilty to fraud charges on January 15. Fastow is now serving a ten-year jail sentence. Several other Enron employees have been arrested/charged and one even committed suicide.
Bernie Ebbers, former CEO of the now bankrupt WorldCom, was indicted for telling lies to shareholders and to the Securities and Exchange Commission (SEC). Ebbers presided over the doctoring up of WorldCom financial statements to the tune of $11 billion dollars. WorldCom’s ex-chief financial officer, Scott Sullivan, pled guilty to “creative” accounting practices that inflated the company’s revenues in an attempt to boost the company stock price. A slew of other crooks are in trouble.
Tyco’s former CFO Mark Swartz and CEO Dennis Kozlowski are both on trial for bilking their own company out of $600 million. According to CNN.com, Kozlowski spent $2 million of employee/shareholder funds on a party for his 40th birthday
… which featured an ice sculpture of Michelangelo's David spewing vodka from his penis and a birthday cake in the shape of a woman's breasts with sparklers mounted on top.
Another former Tyco official, Frank Walsh, was charged with fraud.
Today, Adelphia Communications' founder John Rigas and son were convicted of conspiracy, securities fraud, and bank fraud for stealing from and misleading their own investors.
And how could I forget to mention Martha Stewart? I haven’t. Martha was convicted in March for taking a tip from an insider at another company, and selling shares in that company before us little guys in the public had a chance to sell their shares. It just so happens that that insider is Sam Waksal, former CEO of ImClone, and now spending 7+ years in prison for his own insider selling.
Other changes are taking place in the American economic landscape. For example, many of the mutual funds in which fraudulent stock manipulations occurred have either fessed up voluntarily, or been forced by regulators to make reparations to their shareholders and change their way of doing business.
But have you heard John Kerry mention any of the successes in the war on corporate fraud? I haven’t. Ken Lay is now in FBI custody despite accusations that he and President Bush are “close friends.” The truth is that while Clinton was president, all sorts of scandals took place; while Bush has been president, these scandals have been cleaned up. So much for Kerry’s hot air.