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Editorial: Make corporate crooks give up their profit

Friday, July 12, 2002

If there were a surefire way to prevent crime, we could all get up every morning with the secure and happy knowledge that we wouldn't be murdered or raped or have our life savings destroyed by corrupt corporate schemers.

But this is the real world. Nearly every politician is demanding stiffer penalties for corporate fraud in the wake of so many revelations of misdeeds and false reporting in recent months by some industry giants.

The nation, struggling with a sluggish economy, has been hit hard by underhanded business practices. The confidence of investors clearly has been affected. The Dow Jones Industrial Average has been taking a nosedive in recent weeks.

President Bush this week called for stiffer penalties for those who doctor the books of corporate America.

The U.S. Senate, which already was well on its way to writing new legislation in response to the recent waves of corporate fraud, acted with speed and unanimity Wednesday in approving new penalties. Most of the sanctions proposed by the president were incorporated into that piece of legislation.

One suggestion the president made deserves far more attention than it is getting: forcing corporate crooks to give up any financial gains they receive as a result of illegal and improper accounting practices.

Americans have watched as one company official after another has lost his job because of lousy accounting -- but managed to keep millions of dollars pocketed before the shenanigans became public knowledge. WorldCom is suing its former chief financial officer to get back $10 million in bonuses he received last year. Ironically, the bonuses were for good financial performance.

For most of us, it seems only prudent and fair that those who benefit the most from underhanded corporate schemes should know they will have to give up their ill-gained profit if they are caught.

While tough regulations and penalties are needed, the fact remains that corporate crime will always be with us. This places a heavy burden on potential investors who want to know they can trust the people who run the companies they choose to back.

The Senate-approved changes include a provision to give stockholders more time to file lawsuits in cases of corporate fraud.

At the same time, there are major opportunities for the many well-run, fiscally honest companies who take pains to make sure their accounting is proper and their reporting is accurate. These companies will, over the course of time, be the ones that attract investors on the strength of well-earned confidence.


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