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Showing posts from October, 2006

Guilty Defendants (You know who you are) The Best Defense May not be the Most Expensive

Floyd Norris of the New York Times recently posted in his Notions on High and Low Finance blog an excellent commentary about Jeff Skilling’s $70 million defense in the Enron fraud in a post entitled “The Worthless $70 million Defense.”

He wrote in part:

“Jeffrey Skilling’s $70 million defense got him 24 years in prison and an order to forfeit $24 million.”
With regards to other corporate scandals he wrote:

“HealthSouth and CUC International, admitted there was a scandal, but insisted they were victims of crooked subordinates. Sometimes the defense worked, sometimes it did not.”
I posted the following thoughts on his blog in response to his commentary:

My Comment and Advice to Guilty Defendants (You Know Who You Are):The exposed criminal’s “best defense that money can buy” is the truth. A person must take full responsibility for their actions and hold themselves fully accountable without any excuse. They should never rationalize their criminal conduct.About 20 years ago after 18 years invol…

The Private Securities Litigation Reform Act of 1995: The Unintended Consequence of "Pay to Play"

The Private Securities Litigation Reform Act of 1995 in effect gave large institutional investors (such as large public pension funds) more power in the selection of the lead plaintiff’s counsel in class action securities litigation.

One unintended consequence the law has created is at least in appearance and possibly in practice is a “pay to play” situation.

Certain class action law firms funnel political contributions to politicians who serve as fiduciaries or politicians who appoint various fiduciaries to the large public pension plans who often exert considerable influence in the selection of lead counsel.

As a result, other law firms who are “less politically connected” that are vying to be appointed lead counsel are at a disadvantage due to the political contributions of competing law firms. These law firms who do not make such political contributions may be able to represent shareholders interests more effectively and economically.

We have seen an increasing concentration of power …

Skilling's Sentence: What It is Good For and What Is Still Required

White collar crime while not a violent crime can be in many ways more brutal in the collective harm in inflicts on our society. White collar crime harms not only the company and its direct victims (shareholders, employees, and company creditors) but the integrity of our financial markets.

When there is any doubt as to the reliability of financial information the collective market capitalization of our public companies suffer resulting in lost wealth such as reduced pensions benefits to retirees, higher costs of capital, and higher costs of debt. Higher costs of doing business reduce employment and taxes. Therefore, white collar crime is a scourge that destroys our economic fabric.

The sentencing of Jeffrey S. Skilling to 24 years and 4 months in prison recognizes these important facts. White collar crime must be taken seriously for what it is – a brutal crime which inflicts collective harm on the innocent and often inflicts collateral damage on society.

However, while we must hold white …

Spreading the Message

The competition of ideas makes our great democracy stronger. It is our duty as citizens to seek out the best ideas from both sides of a debate so we can continue progressing as a society. Debate can be passionate without being personal. Spirited and positive debates are the cornerstones of our democracy. We should not fear alternative ideas but should carefully consider them on their merits. As a nation we must embrace the debate and discussion of ideas about the various issues concerning us.Over the last several weeks, my input about white collar crime has been published in the blogs below.I thank these blogs for covering my side of the issue on white collar crime, SarbanesOxley, internal controls, the accounting profession, and more. Their readers have agreed and disagreed with me. I respect them all and hope that my input on the issues that we discussed may contribute to helping prevent white collar crime, strengthening the integrity of financial information, and help strengthen ou…

Memo to Warren Buffett from an Ex-Felon on White Collar Crime

Memo to Warren Buffett from an Ex-felon:

I commend your memo to your managers urging them to be ethical and compliant with the law.

Recently, Alan Greenspan a man like you of high moral character whom I am sure you respect as I do said the only thing good about Sarbanes Oxley is that CEO’s and CFO’s should sign certifying documents and rest of it should be swept away.

However, white collar crime and criminality cannot simply be attacked or prevented with well intentioned memos and directives, codes of ethics, and having CEO’s and CFO’s sign certifying documents.

Criminals (like I was) do not respect memos directing them not to commit crime, codes of ethics, and certainly have no problem signing false certifications in furtherance of their crimes.Simply said, we cannot attack white collar crime with paper.

However, an en ex-felon I can say that criminals fear barriers such as a strong internal control structure, well educated, skilled, and trained external public accountants who are truly i…

Who Should Internal Auditors Report To? How This Very Important Function can be More Effective.

An article published in CFO.com on October 13, 2006 by Sarah Johnson entitled "Should Internal Audit Report to the CFO?" reports that Moody’s Investor Service issued a “best practices for audit committees’ oversight of internal auditors” which recommends that such internal auditors not report to the company’s CFO but instead the CEO and the independent audit committee of the Board of Directors.

Currently the practice is to have the internal auditors report both to the Chief Financial Officer and the Audit Committee of the Board of Directors. Explaining their recommendations according the CFO.com article:

"It creates a potential conflict if the internal auditors report directly to the CFO," says Dave Roberts, president of the Institute of Internal Auditors and a member of the city of Orlando's audit committee. I respectfully disagree with Moody’s recommendations in that they do not solve the overall problem of potential conflicts of interest.

I wrote a response …

The Battle for the Soul of American Capitalism

I can see the day in the not too distant future when Sarbanes Oxley “reform” passes the Congress for approval and is ready to be signed by the President in office at that time. On that day many will crowd around the cameras as the new legislation is ready to be signed into law. They will herald it as a step forward for our great capitalist economic system. They will say that the new reforms will free companies from unnecessary regulatory burdens and increase capital formation. They will claim that investors will be protected.

Imagine then that Sam E. Antar is there too with them at the signing of this new "reform."

Imagine me who has said the following:

“I was the worst of the worst, the scum of the scum” (1)

And who openly admits as a criminal that:
“I broke and corrupted the sacred trust that was put upon me by the shareholders, the employees and the vendors and the public. I corrupted the main pillar of the free market system—the integrity of our financial statements—by commit…

Warning to Business: We require better education for accountants and auditors, more independent audits, and better barriers to white-collar crime

I recently told five audiences in Bowling Green, Ohio and Toledo, Ohio that white collar crime can be just as brutal as violent crime.

White collar crime inflicts a collective harm on society that does not affect only the companies that were defrauded. It affects the integrity of our financial markets, raises the cost of capital and debt, causes unemployment, and is a cancer on capitalism.

Michael Chertoff who prosecuted the Crazy Eddie criminal case called Eddie Antar the "Darth Vader of Capitalism." White collar criminals are economic predators and are the scum of our free market capitalist economic system.

An article entitled, “In BGSU talk, 'Crazy Eddie' figure backs better audits” written by Homer Brickey in the Toledo Blade published on October 5, 2006 said in part:

This week Antar is telling four Toledo-area audiences the business world needs better education for accountants and auditors, more independent audits, and better barriers to white-collar crime. The four…