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Corporate America battered by charges of white-collar crime
NEW YORK -- Just when it seemed the credibility of corporate America couldn't sink any lower, another top business executive faces white-collar crime charges.
The arrest of former ImClone Systems chief executive Samuel Waksal on charges of using inside information to tip off relatives to sell company stock came just a week after Tyco International's chief executive was charged with evading sales taxes on expensive works of art.
Experts say the moves show prosecutors are becoming bolder about taking corporate leaders to task for crimes the public didn't care much about until recently.
In the past, prosecutors avoided going after white-collar offenses because the public was more concerned with violent crime, said John Coffee, a Columbia University law professor who specializes in securities fraud.
That mind-set changed after Enron collapsed and accounting firm Arthur Andersen LLP was accused of shredding incriminating documents about the energy trading company, according to Coffee.
"There is a sense in America now that white-collar crime is a more serious problem," he said. "It suggests a very serious sea change on the part of the voter, and I think that affects prosecutorial priorities."
The high-profile prosecutions are "designed to serve as a warning and to reinvigorate public confidence," said Charles Elson, director of the University of Delaware's Center for Corporate Governance. "There will always be human beings who break the law, but enforcing the law tends make certain people less aggressive."
A loss of trust
Because of the scandals, investors are staying away from the stock market because they don't know whether they should trust corporations anymore, said Paul Lapides, director of the corporate governance center at Kennesaw State University in Georgia.
"Money's coming out of the market in a big way," he said. "People are buying real estate and art because they've lost so much trust."
Enron's collapse into bankruptcy late last year set off the wave of corporate scandals.
In a spectacular implosion that drew comparisons to Enron, telecommunications giant Global Crossing filed for bankruptcy protection in January, and the company and its top executives were besieged by charges of deceptive accounting. Founder and chairman Gary Winnick managed to cash out, selling $734 million in stock before the company hit bottom.
As for Tyco, the company has been dogged by questions about the way it accounted for the string of corporate acquisitions that turned it into a huge industrial conglomerate in the 1990s. Tyco's stock has plummeted.
The situation turned even worse when Tyco's chief executive, Dennis Kozlowski, resigned June 3 -- a day before being charged with evading more than $1 million in New York sales taxes on paintings.
Lapides said defendants in white-collar crime cases can usually afford the best lawyers and rarely face serious jail time.
"We have developed a privileged class that is beyond anything anyone could have imagined since the Roaring '20s," he said.