There's been an unprecedented wave of corporate fraud in the United States this year. Accounting irregularities have brought three large companies, Enron, Arthur Anderson and WorldCom, to their knees. The government appears to be changing their approach to this wave of business scandals.
The American public has been bombarded with news of top officials of Enron and WorldCom enriching themselves while lower level employees were losing their retirement savings and even their jobs. In February when top Enron executives declined to answer questions from members of Congress, some interpreted their silence as culpability but said there was little chance that the wrongdoers would go to jail.
But more recently there have been signs that things are changing. On July 24 the owners of the failed Adelphia cable television company in Pennsylvania were led away in handcuffs and charged with securities fraud. A week later the chief financial officer of WorldCom, Scott Sullivan, and his deputy were handcuffed and brought into a New York court on fraud charges.
And on August 21, a key former executive at Enron, Michael Kopper, pleaded guilty in a criminal court in Houston to money laundering and fraud. Mr. Kopper gave evidence regarding his boss, chief financial officer Andrew Fastow, in a complex web of illegality that enriched corporate insiders while defrauding investors.
News reports said that government prosecutors are gathering evidence for going after the former chief executives of both Enron and WorldCom. Those individuals, Jeffrey Skilling and Kenneth Lay of Enron, and Bernard Ebbers of WorldCom, have not yet been charged. They continue to maintain extravagant lifestyles even though their business reputations are in tatters.
In a speech last week in California, President Bush expressed delight that the corporate leaders were being charged.
"And that's what happening," he said. "We can not let a few, and I emphasize a few, set the tone for the many who are decent, honorable citizens of our country, who take care of their shareholders, who are good to their employees, who tell the truth."
Enron, the energy trading company based in Houston, continues to operate even though it has sought protection from its creditors by declaring bankruptcy. With former Enron executive Kopper now cooperating with prosecutors, experts say it is just a matter of time before others are charged. The current chief executive of Enron, Stephen Cooper, fully supports the government's criminal investigation.
"I think this [the Kopper plea agreement] is the first step in the unfolding of the investigations that the company has been cooperating with for months," he said. "And I think it is a good first step and hopefully if others are held accountable and responsible for the meltdown [of the company], I think that will be a good thing."
At this stage about all that can be said with certainty is that a steadily increasing stock price was central to the deal making expansion that characterized both Enron and WorldCom. The stock price was the currency that both companies used to finance their many acquisitions. With the stock market enduring turbulence throughout 2001 and particularly after September 11, finance officers were under immense pressure to bend the rules and to maintain the stock price. But the schemes failed, the stock prices collapsed, and the companies descended into bankruptcy - Enron in December 2001, WorldCom in June 2002.