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| 2003
News and Press Releases |
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HEADLINE:
A U.S. Push On Accounting Fraud
By: Alex Berenson
NYTimes.com. April 9, 2003
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EXCERPT: New emphasis at the Justice Department on accounting and securities fraud cases is already producing indictments and will almost certainly lead over the next several months to a wave of additional cases, according to prosecutors, defense lawyers and independent legal experts. Nine months after President Bush ordered the formation of a federal task force to prosecute corporate fraud, the former chief executives of Enron and WorldCom, who have come to symbolize corporate corruption, have not been charged, and may never be. But in other cases, federal prosecutors are moving aggressively to bring criminal charges for accounting gimmickry or securities fraud that in the past might not have been pursued. Prosecutors and regulators were not willing to speculate about which companies might face criminal charges, or how many new cases might be brought. And they cautioned that securities cases, especially those where companies appear to have manipulated accounting rules to inflate their earnings, can be complicated and difficult to prove. But they broadly agree - and criminal defense lawyers concur - that the Justice Department's commitment to pursuing fraud is serious, not just a public relations effort. "These have become the hot, sexy cases," said Christine A. Bruenn, president of the North American Securities Administrators Association, a group of state and Canadian stock regulators that works with the Securities and Exchange Commission and with prosecutors. "I think a lot of people have changed their focus in terms of how seriously they're taking these cases." Investigations that would once have been conducted solely by the S.E.C. now involve federal prosecutors and F.B.I. agents from the start, officials said. The commission - which in the 1990's had a difficult time persuading prosecutors outside Manhattan, Brooklyn and San Francisco to follow up on its referrals of potential fraud cases - is now working with prosecutors in offices across the country. When there are accusations of serious fraud at companies based in states where prosecutors lack experience in accounting investigations, the Justice Department is dispatching specialists from Washington to help them. All this is producing faster results. When prosecutors are convinced that they have clear evidence of fraud - as at HealthSouth, the operator of rehabilitation hospitals and clinics, or Symbol Technologies, a Long Island manufacturer of bar-code scanners - they quickly pursue indictments of midlevel and senior managers to prod them to turn in top executives. Last month, for example, Robert Asti, a vice president at Symbol Technologies, pleaded guilty to helping inflate Symbol's sales and profit. In announcing the plea, prosecutors noted that the investigation into Symbol is continuing. At the same time, the longer prison sentences provided by the Sarbanes-Oxley Law have become a strong incentive for lower-level managers to cooperate with prosecutors. With the new priority given such cases, Ms. Bruenn said she expected many more criminal indictments in the next few years. "My sense among regulators and prosecutors is that we're all rather surprised as to how much fraud is out there," she said. Joel Seligman, dean of the Washington University law school and a historian of the S.E.C., agreed. "There's been a lot more activity," Mr. Seligman said. "You've seen it in the number of indictments. You've seen it in the focus on major cases. My impression is that you have a good deal of open cases going on where you're likely to see a good deal more."
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