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Corporate Crooks: How Rogue Executives Ripped Off Americans... and Congress Helped Them Do It!
How did the most trusted financial system in the world become the breeding ground for the massive corruption uncovered in the Enron and Worldcom scandals? The simple answer is greed. Greed so blinded CEO's, auditors, and even members of Congress that they allowed a gang of rogue executives to rig the game and cheat investors out of $200 billion, wiping out the life savings of many unsuspecting Americans.In Corporate Crooks, veteran USA Today investigative journalist Greg Farrell explains how this breakdown happened. The book shows how incentive compensation for CEOs, combined with the decline of the American auditing industry, led to a series of spectacular accounting frauds, not just at Enron and WorldCom, but at other companies as well.Farrell details how a series of seemingly minor Congressional actions-from a law penalizing corporations for paying salaries in excess of $1 million to a Senate vote to scuttle a rule calling for the expensing of stock options-created the conditions that led to the accounting abuses that eventually brought gigantic corporations down.Written in a straightforward, explanatory style, Corporate Crooks allows the average investor to understand the root causes of the biggest accounting frauds of the past five years. But understanding how these frauds took place isn't enough. Farrell also arms readers with the knowledge they'll need to judge whether the next fantastic, fast-growing company of the new economy is a genuine business success or another Enron waiting to implode.
225 pages, Hardcover
First published September 1, 2006
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August 3, 2024
AN INDICTMENT OF ENRON, WORLDCOM, AND OTHER CORPORATE "ROBBERS"
Greg Farrell is an investigative reporter for the "Money" section of USA Today. He wrote in the Introduction to this 2006 book, "These corporate meltdowns shook investor confidence in Wall Street and scared Americans out of putting their money into stocks... This book is an attempt to explain what happened, to explore the root causes of these frauds. It is written... to provide an overview of how the public got ripped off in these and other cases. Its goal is to give the average investor a greater understanding of how a bunch of greedy people... defrauded the public on a scale not seen since the savings and loan crisis a generation ago." (Pg. 21)
He observes, "managers whose compensation depends on their company's stock price at the end of each quarter have enormous incentives to make sure they report positive earnings each quarter, whether or not those earnings are real." (Pg. 28) He adds, "Close to 90% of Enron's reported profits resulted from bogus financial machinations---banks loans that had been disguised to look like sales revenues, and tax credits that exploited loopholes." (Pg. 42) He notes that Enron "entered into transactions with respected financial institutions that should have revealed the weak state of the company's business operations. But those institutions... refused to see the truth about Enron." (Pg. 54)
He recounts, "on Monday, Dec. 3 [2001], Enron's top managers pulled aside 5,000 staffers, and told them... that because of the bankruptcy, they would have to be let go, with a payment of $4,000 just three weeks before Christmas. What the senior Enron executives didn't tell those staffers was that they---the managers---had decided to divvy up $55 million in retention bonus money among themselves." (Pg. 60-61)
About former Enron exec Jeffrey Skilling, "After his indictment... he and his wife spent the night drinking with people they met at their hotel bar... Skilling became intoxicated and turned on his new-found friends, accusing them of being undercover FBI agents... Skilling tried to rip the license plate from the car of the people he thought were federal agents. He also grabbed at the blouse of the woman who owned the car, in the hope of finding a recording device he was convinced she was carrying. When the police responded to a call concerning the incident, they observed Skilling... talking to an imagined satellite camera he believed to be tracking his every move." (Pg. 62)
He states, "after Enron's collapse, public officials demanded to know what the SEC had been doing to prevent financial catastrophes. What the public learned wasn't pretty: ... the SEC had been transformed from a lean but efficient police force patrolling the securities industry into the Keystone Kops." (Pg. 174) He adds that President Bush's creation in 2002 of a Corporate Fraud Task Force "spurred prosecutors across the country to become more active in making criminal cases out of transgressions that only a few years ago were treated as civil cases." (Pg. 187)
The financial collapse of 2008-2009 has only made Farrell's fascinating book seem all the more prescient.
Greg Farrell is an investigative reporter for the "Money" section of USA Today. He wrote in the Introduction to this 2006 book, "These corporate meltdowns shook investor confidence in Wall Street and scared Americans out of putting their money into stocks... This book is an attempt to explain what happened, to explore the root causes of these frauds. It is written... to provide an overview of how the public got ripped off in these and other cases. Its goal is to give the average investor a greater understanding of how a bunch of greedy people... defrauded the public on a scale not seen since the savings and loan crisis a generation ago." (Pg. 21)
He observes, "managers whose compensation depends on their company's stock price at the end of each quarter have enormous incentives to make sure they report positive earnings each quarter, whether or not those earnings are real." (Pg. 28) He adds, "Close to 90% of Enron's reported profits resulted from bogus financial machinations---banks loans that had been disguised to look like sales revenues, and tax credits that exploited loopholes." (Pg. 42) He notes that Enron "entered into transactions with respected financial institutions that should have revealed the weak state of the company's business operations. But those institutions... refused to see the truth about Enron." (Pg. 54)
He recounts, "on Monday, Dec. 3 [2001], Enron's top managers pulled aside 5,000 staffers, and told them... that because of the bankruptcy, they would have to be let go, with a payment of $4,000 just three weeks before Christmas. What the senior Enron executives didn't tell those staffers was that they---the managers---had decided to divvy up $55 million in retention bonus money among themselves." (Pg. 60-61)
About former Enron exec Jeffrey Skilling, "After his indictment... he and his wife spent the night drinking with people they met at their hotel bar... Skilling became intoxicated and turned on his new-found friends, accusing them of being undercover FBI agents... Skilling tried to rip the license plate from the car of the people he thought were federal agents. He also grabbed at the blouse of the woman who owned the car, in the hope of finding a recording device he was convinced she was carrying. When the police responded to a call concerning the incident, they observed Skilling... talking to an imagined satellite camera he believed to be tracking his every move." (Pg. 62)
He states, "after Enron's collapse, public officials demanded to know what the SEC had been doing to prevent financial catastrophes. What the public learned wasn't pretty: ... the SEC had been transformed from a lean but efficient police force patrolling the securities industry into the Keystone Kops." (Pg. 174) He adds that President Bush's creation in 2002 of a Corporate Fraud Task Force "spurred prosecutors across the country to become more active in making criminal cases out of transgressions that only a few years ago were treated as civil cases." (Pg. 187)
The financial collapse of 2008-2009 has only made Farrell's fascinating book seem all the more prescient.
October 31, 2016
Sensationalism over substance. Thankfully its a short book. There are better books out there detailing how and why these crimes occurred.
Displaying 1 - 2 of 2 reviews