Professor Mike Useem of the Wharton School of Business at the University of Pennsylvania said recently that he attributed the new round of corporate scandals to the business climate of the late 1990s, a climate characterized by a complete lack of ethics. Former Federal Reserve Chairman Paul Volcker speaking at a conference at the Kellogg School of Business at Northwestern University seconded this claim. He attributed the fraudulent accounting at Enron, Tyco and elsewhere to the miasma of a lack of business ethics that was pervasive in the 1990s.
Yesterday, with the scandals now out in the open for all to see, President Bush stepped in to help restore order.
"Too many corporations seem disconnected from the values of our country. These scandals have hurt the reputations of many good and honest companies. They have hurt the stock market. And worst of all, they are hurting millions of people who depend on the integrity of businesses for their livelihood and their retirement, for their peace of mind and their financial well-being, " he declared.
Is the 1990s deceit thesis valid? Or, to put it another way, did a lack of ethics during the political sphere spill over into the world of business? If not, it at least makes the collective gnashing of teeth among the Beltway’s anti-corporate left appear hypocritical.
The dissembling by Clinton Administration officials is familiar to most people. And, ironically, some members of the Administration are continuing their government service or entering the media. For example Robert Reich, the Massachusetts Democrat gubernatorial candidate, apparently perjured himself during Congressional testimony by stating that there were no instructions for Labor Department officials to gather information deleterious to the Contract with America, which was subsequently revealed to be untrue. George Stephanopolous, ABC talk show host, received a loan from NationsBank that would have to be considered unethical. Elsewhere among Washington’s power elite, Missouri Congressman and Democratic presidential candidate Dick Gephardt, according to Insight Magazine, attempted to evade income taxes during the 1990s (which helps explain why he does not care about cutting taxes for everyone else). And former House Speaker Foley’s ethical difficulties were both corporate and governmental. Foley apparently received preferential treatment from an investment firm about IPO’s. The firm was fined by the SEC for the practice.
Fraud in government is nothing new, of course. Certainly there are fraudulent practices throughout the bureaucracy. The Department of Education is just one example. With all the controversy about corporate accounting practices, a recent audit of this venerable department revealed that $500 million dollars of taxpayer funds were either stolen or "missing." The same politicians who excoriate businesspeople have not indicated that they can prevent fraud in their own affairs.
Union corruption also is nothing new, and in the ‘90s union bosses committed their fair share of fraudulent acts. Teamster officials were convicted of corruption in an illegal scheme that involved Democratic Party officials--including current DNC chairman Terry McAuliffe. If you access the Department of Labor website you can avail yourself of the litany of union corruption cases in the 1990s.
Yet despite their crimes in the Clinton ‘90s, these left-wing representatives of the proletariat now have the gall to complain about corruption among corporate executives.
Even more incredibly, normally soft-on-crime Democrats are the ones raising the biggest cry for imprisoning corporate criminals--especially left-wing Democrats like Congressman Jay Inslee of Washington. The same Jay Inslee who voted for more funding for alternative sentencing instead of incarceration. The same Jay Inslee who is an advisor to an organization that rejects mandatory sentencing. Maxine Waters too wants to imprison corporate criminals. Maxine Waters, who in June 1997, as the Chair of the Congressional Black Caucus, issued a statement requesting diversion from the criminal justice system for criminals. Maxine Waters who one year ago introduced a bill to eliminate mandatory sentencing. Maxine Waters who, with her city in smoking ruins following the riots of 1992, celebrated the anti-white, anti-Korean racist orgy of violence in Los Angeles as a "rebellion."
Obviously these Democrats and others of their ilk are two-faced when it comes to their beliefs in imprisoning criminals. They believe that incarceration is not productive--unless it involves capitalist criminals.
At least President Bush is consistent with his law-and-order policies. The President believes, "When a company uses deception -- deception accounting to hide reality, executives should lose all their compensation -- all their compensation -- gained by the deceit."
As President Bush said in his speech, "The lure of heady profits of the late 1990s spawned abuses and excesses. With strict enforcement and higher ethical standards, we must usher in a new era of integrity in corporate America." President Bush stricter law enforcement included, "I'm also proposing tough new criminal penalties for corporate fraud. This legislation would double the maximum prison terms for those convicted of financial fraud from five to 10 years."
Fraud characterized the business environment of the Clinton ‘90s. Let’s hope that Bush’s speech yesterday marks the end of that decade of deceit.