Opportunity for Corporate Fraud Has Shrunk -- but It's Still There--WaPo

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http://www.washingtonpost.com/wp-dyn/content/article/2006/01/25/AR2006012502043.html?referrer=email


By Carrie Johnson and Ben White
Washington Post Staff Writers
Thursday, January 26, 2006; Page D01

Despite new laws and regulations, companies still face enormous pressure to meet short-term financial goals, creating a powerful motive for accounting fraud. Outsized executive compensation grows by the year, offering another rich incentive to cook the books. And there is no certainty that Congress will continue to fund regulatory budgets at current levels.

The grades (on corporate governance report cards filled out by experts) suggest that the greatest improvement has been in the regulation of the behavior of accountants who serve as gatekeepers to the markets. New York Attorney General Eliot L. Spitzer said the profession has been "scared straight" by fallout from the scandals, which included the death of accounting firm Arthur Andersen LLP and a $456 million deferred prosecution settlement by KPMG LLP last year.

Each of the experts stressed that crooks bent on stealing from a company will still take their chances and some will succeed. Regulators can never pass laws that will force executives to act with integrity -- or force investors to do their homework before they buy stock.

The outcome of the Enron trial could have a more profound impact on attitudes among corporate executives in the long run than the regulatory changes, said Harvey J. Goldschmid, a law professor and former SEC official.

"Deterrence is very important, and this trial is of large consequence for that reason," Goldschmid said.

[Burried News]

1. Eliott Spitzer (NY State) has 1/10th the staff of the SEC - not to

mention the Federal Reserve, Treasury Dept and FBI. Who has done the most to bring the perpetraitors to justice?

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2. Not To Mention How Overworked Patrick Fitzgerald Is

Our legal system is crashing under the weight of the total abandonment of law in government and business.