This week, separate trials are scheduled to begin for two of the more prominent names on the government’s list of pinstriped bad boys: Bernard Ebbers, former head of WorldCom, and Dennis Kozlowski, former CEO of Tyco International. Except for the upcoming trial of former Enron executives Kenneth Lay and Jeff Skilling, most of the marquee names will have had their day in court.
Experts say the trials already completed – and the jail sentences under way – have had a big impact on corporate behavior. Lawyers for white-collar defendants say that CEOs are now pressuring underlings to state earnings accurately. Thanks to Martha Stewart, executives are more aware of the dangers of lying to prosecutors. Corporate leaders also know that Congress now requires them to personally vouch for their companies’ earnings statements.
In short, greed hasn’t disappeared, but the path to riches is more likely to follow the legal road map.
“The government has largely accomplished its goal of changing corporate conduct in a major and significant way,” says Kirby Behre, a former federal prosecutor who is now a partner at Paul, Hastings, Janofsky & Walker in Washington.
The change in attitude goes beyond the boardroom. Judges are now inclined to take corporate misdeeds more seriously. And the general public, which makes up juries, believes that white-collar crime is a serious offense. “The bottom line is that it’s more perilous to be criminal defendants in a white-collar case than ever before,” says Mr. Behre.
Despite these changes, the Securities and Exchange Commission will not have to start laying off its investigators. For example, only last week, the SEC charged Google, the online search firm, and its general counsel with violations of securities laws involving $80 million. Both settled the suit, agreeing to cease and desist from such behavior.
On the same day, the watchdog sued nine men who worked for the food giant Royal Ahold for allegedly signing false audit confirmations and sending them to the company’s auditors. According to the SEC, the amounts totaled at least $700 million for fiscal years 2001 and 2002.
“The only thing the government can do with a heavy enforcement budget is slow down the pace of fraud but never erase it,” says Christopher Bebel, a former SEC counsel and federal prosecutor. “The government is never going to have the capacity to bring a halt to fraud because greed … will motivate businesspeople to cut corners in order to line their own pockets.”