The WorldCom con is just the latest caper in what Ralph Nader is rightly calling a "corporate crime wave." And it's a big one.
But the list of big ones is growing frighteningly long: Adelphia, Computer Associates, Dynegy, Global Crossing, ImClone, Kmart, Lucent, MicroStrategy, Merrill Lynch, Network Associates, Qwest Communications, Tyco International, to name a round dozen.
And I wasn't even counting Enron and Arthur Andersen.
The first query for the coroner's inquest here is this: is this a case of a relatively few bad apples falling to the ground after a jumbo stock market bubble, or is it tree rot, a systemic infection of the corporate world and the police assigned to it?
Fortune Magazine offers a fine example of the latter view in "System Failure" by veteran financial writer Joseph Nocera. He writes:
"Phony earnings, inflated revenues, conflicted Wall Street analysts, directors asleep at the switch — this isn't just a few bad apples we're talking about here. This, my friends, is a systemic breakdown. Nearly every known check on corporate behavior — moral, regulatory, you name it — fell by the wayside, replaced by the stupendous greed that marked the end of the bubble. And that has created a crisis of investor confidence the likes of which hasn't been seen since — well, since the Great Depression."
A confident exposition of the bad apple theory came from Newsweek economic columnist Robert J. Samuelson in his essay, "The Search for Scapegoats." In his view:
"Since its peak in March 2000, the stock market has lost about a third of its value, or almost $6 trillion, according to Wilshire Associates. Everyone would like to think that these immense losses — painful to individual investors and possibly threatening to the economy — are someone else's fault. And now, suitable culprits seem to have emerged: Wall Street and corporate America, whose greed and dishonesty allegedly rigged the market.
"Hardly a day passes without some new scandal, whether of dubious accounting practices, illegal (or unethical) trading by insiders or dishonest stock advice. Americans were, it seems, duped. Companies overstated profits. Brokerage houses issued misleading reports. The wealthy played small investors for suckers ... Alas, this is mostly myth-making. Every financial mania ends with a search for a scapegoat. But finding a scapegoat and discovering the truth are often two different things."
I am an agnostic in this debate. And, frankly, I am not well qualified to weigh in. But I know one surprising convert to the "systemic" view and he's very well positioned to opine. My father.
It would be tough to find a bigger booster of American capitalism than Dad (something that drove me nuts in high school and college, of course). He runs a small manufacturing business in the Midwest that was founded in the 1880's. He's been there since the 1940's and is there right now. He's been an enthusiastic and adept stock investor for more than five decades.
And he's scared stiff to be in the market because he thinks the books are cooked and players are crooks.
This is not an unsophisticated investor. Or a Democrat. Or a conspiracy theorist. Or a man who believes in government regulation. I know plenty of people in all those categories who think the fix is in too.
So at this point, it may not much matter rather it's the tree or the apples. When my Dad and Ralph Nader agree, well, something is really rotten. It's not clear if President Bush is ready to declare war on corporate terrorism. It is clear that a lot of people are terrorized.
Dick Meyer, a veteran political and investigative producer for CBS News, is Editorial Director of CBSNews.com. He is based in Washington.
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Against the Grain
By Dick Meyer