The U.S. government's top securities regulator, Harvey Pitt of the Securities and Exchange Commission (SEC), Friday vowed a vigorous campaign against the corporate fraud that has sent stock prices sharply lower over the past four months.
Mr. Pitt told a nationwide radio audience that corporate executives and accountants who have broken the law will go to jail. The former law professor who became the government's top market regulator one year ago said unethical, fraudulent behavior will not be tolerated.
He said the scale of the fraud that has recently been uncovered is unprecedented. "The magnitude of the corporate implosion we have been witnessing is staggering," he said. "Second, it's occurred at a time when more Americans than ever have been invested in the stock market, causing unprecedented financial losses for ordinary citizens."
Speaking at the National Press Club, Mr. Pitt said President Bush will sign into law probably by the end of next week, the corporate crime-fighting legislation that is being rushed through Congress. In addition to tougher laws, Mr. Pitt pledged tougher enforcement that will send corporate wrong doers to jail. "It's so easy to articulate the right position. But it is much harder to be able to implement those philosophical approaches," he said. "We need real CEOs and real CFOs (chief financial officers), real accountants, going to jail where they have been guilty of perpetrating a fraud."
Mr. Pitt said the crisis of confidence in financial markets has deeply affected the investing public. This wave of corporate fraud began at the end of last year when the Enron Corporation went into bankruptcy after revelations that its executives had lied on financial statements. Then, Enron's auditor, Arthur Andersen, was convicted of obstruction of justice, forcing the collapse of that once venerable accounting firm. More recently, WorldCom, the second biggest U.S. telecommunications company, admitted to financial irregularities and is expected to soon declare bankruptcy.