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World is Drowning in Corporate fraud
NEW YORK – The world is drowning in corporate fraud, and the problems are probably greatest in rich countries — those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.
Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs.
There is, however, scant accountability. Two years after the biggest financial crisis in history, fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return.
Corruption pays in American politics as well. The Florida governor, Rick Scott, was CEO of a major health care company known as Columbia/HCA. The company was charged with defrauding the U.S. government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion. The FBI’s investigation forced Scott out of his job. But a decade after the company’s guilty pleas, Scott is back as a “free-market” Republican politician.
When President Obama wanted somebody to help with the bailout of the U.S. auto industry, he turned to a Wall Street “fixer,” Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.
Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country’s oil fields — access worth billions of dollars. When Nigeria’s government charged Halliburton with bribery, the company settled out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney.
Impunity is widespread — indeed, most corporate crimes go unnoticed. The few that are noticed typically end with a slap on the wrist, with the company — meaning its shareholders — picking up a modest fine. The real culprits at the top rarely need to worry. Even when firms pay mega-fines, their CEOs remain. The shareholders are so dispersed and powerless that they exercise little control over the management.
Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on.
Second, companies are the major funders of political campaigns in places like the U.S. Politicians often look the other way when corporate behavior crosses the line. Even if governments try to enforce the law, companies have armies of lawyers to run circles around them.
Reining in corporate crime will be an enormous struggle. Fortunately, the rapid and pervasive flow of information nowadays could act as a kind of deterrent or disinfectant. Corruption thrives in the dark, yet more information than ever comes to light via email and blogs, as well as Facebook, Twitter, and other social networks.
We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses.
Moreover, we will need to light the dark corners of international finance, especially tax havens like the Cayman Islands and secretive Swiss banks. Tax evasion, kickbacks, illegal payments, bribes, and other illegal transactions flow through these accounts. The wealth, power, and illegality enabled by this hidden system are now so vast as to threaten the global economy’s legitimacy, especially at a time of unprecedented income inequality and large budget deficits, owing to governments’ inability politically — and sometimes even operationally — to impose taxes on the wealthy.
So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the U.S. nor any other “advanced” country should be pointing the finger at poor countries, for it is often the most powerful global companies that have created the problem.
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26 Comments so far
Show AllThe fish starts to rot from the head.
How can we take this guy seriously? The hypocrisy of Sachs is boundless. Twenty years ago this dickhead practically instituted corprate oligarchy in the former USSR... the same trends we're seeing here now in the West. Thank you neo-liberal savior! Tell us what sins we must avoid...
He must need a few bucks to buy his "Economics is a Science, dummy" bumpersticker. I wonder if he's realized some of the harm he did in the past and is trying to move forward...without ever saying, "Hey, I'm a dick. I'm sorry." Not a bad article in the scheme of things really, but its all been said a thousand times before. Moving on, now.
More likely he's just trying to make money from both sides of the issue.
When the politicians emancipate themselves from their corporate donors. NOT! The reason politicians enter politics is for the graft and corruption they reap from their corporate donors.
Is this the same Jeffrey Sachs that was the famous Chicago School of Economics hit man described in excruciating detail in Naomi Klein's "The Shock Doctrine"? The one who went all over the world causing untold economic chaos with his "shock therapy" prescription of slashing government social spending, opening the doors wide to global corporate investment, and totally deregulating business? That caused massive displacement of workers and unemployment? That devalued money to the point people were starving in the streets? That encouraged dictators to round up dissidents and kill or torture them? THAT Jeffrey Sachs?
So he's feeling some compunction now? I doubt the guy had a shred of actual integrity in his body, ever. Too little, too late.
Didn't know any of that about Sachs. Huh. Familiar with him through editorials he used to do in Scientific American. Thought that his suggestions seemed as much protective of neoliberalism as they were identifying the sources of rot in the system.
Sachs doesn't connect the dot that when the US collectively dared the world to stop it from illegally invading Iraq, well a whole lot of excrement has rolled down hill since then.
Jeffery, the biggest corporate crime in the world today is "asset-stripping" --- which is why Mitt Romney would be an ideal president/emperor for this GD global corporate/financial/militarist Empire which has captured our former country by hiding behind it's bought and owned TWO-Party modernized Nazi "Vichy" sham of faux-democratic government and media.
After all, Romney is the only professional and practicing "asset-stripping" private equity pirate running for the office of CIC (con-artist in chief) of the biggest asset-stripping Empire to ever walk the face of this dying earth.
As a degreed economist, Jeffrey, you certainly know that the preferred and guileful technique today for asset-stripping, both abroad and at home, is to use the faux-profits from negative externality cost dumping schemes (like the laughably mis-named $17T "financial crisis", which was really the global $40T "financial fraud") to buy-up real assets with phony debt under the threat of war.
What the looters (as economics Nobel laureate, George Akerlof, called the Empire's government economic policy) did within the US with CDOs (and are now setting the trap to do again with ETFs) the Empire's really good asset-stripping pros (like Romney) can do even more efficiently with US government demands and brute force by placing what look like "humanitarian sanctions" on countries like Libya, stripping the assets of the sovereign bank accounts and then enforcing contracts with the Empire's weapons makers, like Boeing and GE, to supposedly save the people of the foreign oil territories by killing them with phony kindness.
What a great playground for a real professional asset-stripper like Romney --- where the efficiency of the grift is even better than that of a slaughter-house where only the horns and hooves of the dead animal are left behind!
This is economic efficiency at its penultimate, eh Jeff?
Alan MacDonald
Sanford, Maine
Liberty & democracy over violent empire -- People's Party USA 2012
Global People's Anti-Empire Action -- 2011/NOW!
Dead on as always Alan.
Yes, it's the same Jeffrey Sachs that Klein writes about in "Shock Doctrine," the Keynesian turned Milton Friedman acolyte who went around the world in the 1980s as Dr. Shock himself, imposing his austerity programs, keeping prices high and driving millions into poverty, from Bolivia to Russia. All he says here is true enough, and most of us have known all this for years, so maybe he's trying to make amends. Or maybe he just wants less blatantly obvious corporate crime and a return to "lawful free market" practices, where corporate CEOs get rich the traditional way, by being more discreet and delicate about their piracy.
Ephraim,
I think you hit the nail on the head with: "Or maybe he just wants less blatantly obvious corporate crime and a return to "lawful free market" practices, where corporate CEOs get rich the traditional way, by being more discreet and delicate about their piracy."
I don't like to bash the messenger when the message is correct, but that doesn't mean we shouldn't have some healthy skepticism, and notice how he's conveniently left out any proposed solutions. Also notice how more and more of these people who got rich causing all these problems are now telling us what's wrong and that we need to fix things.
Perhaps I've gotten too cynical but I feel as if these people only want to reign in the worst of the excesses for two reasons. To protect their wealth from a total economic collapse and to prevent a middle eastern style uprising here in the U.S.
I've gotten to the point that absolutely nothing will ever get better as long as we continue to listen to, elect, or put in positions of power people who are wealthy. We can quibble about how much wealth is too much, but I no longer feel that anyone who has millions of dollars can truly be part of the solution. These people certainly don't live in the same world we do; gated communities, cars that cost as much as a house, private schools, exclusive private country clubs, etc.
To tell you how cynical I've gotten, when the news came across that Bin Laden was killed my first reaction was to say something along the lines of "I wonder what major scandal's coming up that they want to distract us from. First the week long Royal love fest and now this?
KrazyKatz suggests a likely reason why Dr. Jeff Shock now appears on cd as a Corporate basher lite. Without offering any solutions to Corporate pillaging, the author is perhaps just spinning a tale for his own personal image enhancement.
Dr. Shock says, "When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses." OK, that is key. But, why doesn't he just describe the unabashed feeding trough of Corporate lobbying and how it is done in the light of day as an integral part of daily biz inside the Beltway. Instead, the author implies that such corruption is somehow 'hidden,' or is somehow limited to "abuses."
No. The corruption is complete, and the bad guys won. They already own every aspect of government and msm. The author refers to "Corporate donations" but stops well short of mentioning the only solution, the only way of stopping these "donations" - a Constitutional Amendment beginning with "A Corporation is not a Person . . ."
This is a very suspicious article.
I'm in total agreement with both you and KrazyKatz. Most of the corruption in Washington is perfectly legal, since the criminals in question are the very same ones who passed the legislation making their labyrinthine subterfuge and chicanery just part of doing Business as Usual. It's a closed system, with no substantial independent oversight anywhere. The masterminds of all the ripoffs, sheer theft and highway robbery these bastards practice are the same bunch who pass the laws making it all "legal." That's what lobbyists are for.
This is nothing but capitalism unmasked, but I'm sure Dr. Shock Sachs is only interested in sprucing up its tarnished image. The whole thing is a little like Henry Kissinger criticizing Obama's failed Afghanistan policy, pretending to be a peacenik.
Or maybe Sachs is just like Clinton and Obama and wants to destroy our side from within.
Honestly, folks, how many Trojan Horses do we need?
I'm a fan and regular listener of Harry Shearer's weekly hour-long radio show, "Le Show".
This past Sunday, Shearer departed from his usual hilarious and thoughtful potpourri and spent the entire hour interviewing Professor William K. Black, Professor of Economics and Law at the University of Missouri-- a well-known and well-regarded former high-level regulator and expert on banking and financial fraud.
I certainly recommend the interview, which is available this week at Shearer's web site* where Le Show programs are archived and available for download. It centered on institutionalized fraud in US financial markets.
Unfortunately, listening to Black makes it hard to take seriously the usual well-meaning, ingenuous recommendations for reform set forth in this article and many like it that appear on CD and elsewhere.
In general, articles on this level either presume a level of individual and institutional good-faith that is utterly refuted by expert accounts like Black's, or offer glib suggestions, e.g. that it's feasible to discover or cultivate "a new kind of politician leading a new kind of political campaign" or manage to "light the dark corners of international finance".
Black doesn't set out to be "negative", "pessimistic", or "nihilistic"; he's not a "doomer", to use the fatuous put-down that has gained currency in recent months, and is usually applied to those with a propensity for speaking and writing unpleasant and unvarnished truths.
But just listening to Black's straightforward, knowledgeable, and persuasive recounting of the ascendancy of "liar's loans" and other fraudulent instruments and practices that precipitated the Amerikan mortgage and finance crises brings to mind an acronymic dilemma made popular by the dreaded 9/11 "Truthers": LIHEAP or MIHEAP?
That is "Let It Happen On Purpose" or "Made It Happen On Purpose"?
The implicit "they" being both the financial institutions and government.
Unless one is hung up on dimwitted, simplistic beliefs attributing the crisis to foolhardy or greedy, materialistic consumers knowingly biting off more than they could chew and living above their means, it's clear that the chain-reaction of financial crises would not have happened if banksters and financiers hadn't colluded to incorporate pernicious and toxic fraudulent practices into everyday banking and mortgage lending.
And this could not have been accomplished if the political elite had not worked hand-in-glove with the banksters to pass laws that enabled the fraud to escalate and simultaneously muzzled regulators and agencies that exist to check and slow down, if not entirely derail, runaway gravy trains.
After all this was fairly underway and the crises and scandals broke, candidate Bonnie Prince Obama proved to be "part of the problem" when he enthusiastically supported the first in a serious of bankster bailouts, and began creating a maladministration that amounted to a branch office for Goldman Sachs.
I recall watching a "Democracy Now" discussion at that time featuring Robert Johnson, former chief economist of the Senate Banking Committee, and Bruce Marks, the founder and CEO of NACA, the Neighborhood Assistance Corporation of America.
The gist of it was that, broadly speaking, the "fix" would be implemented in one of two ways: either the politicians would choose a "top-down" approach bailing out the banksters and financial institutions, or they could implement a "bottom-up" approach that would be tough on the banksters and directly provide relief to the ordinary citizens victimized by the predatory banking and loan schemes.
In theory, of course, it's possible to do both. But in practice, it was clear that the emphasis was going to principally break one way or the other.
Obviously, the "bottom-up" approach never had a chance. And listening to Black confirmed that the overwhelming bipartisan political support for the banksters has become business as usual.
Sorry, but throwing the public a few bones like giving Elizabeth Warren a token position of responsibility and passing a few marginal, cosmetic reforms isn't going to change this deeper malignant status quo.
There is simply no evidence that the political leadership in Washington has the will or slightest intention of belatedly taking the "bottom-up" approach at the banksters' expense that they decisively rejected when enabling the crises and bankster-friendly bailouts in the first place.
Black's discussion was limited to domestic (US) fraud, but it's representative of Western financial markets in general. Perhaps the new kinds of politicians and the illuminators of dark corners of international finance Sachs advocates will emerge in some other country, and tame the raging Amerikan predatory capitalist beast from without.
* http://www.harryshearer.com/news/le_show/
Great post, OS, and thanks for that tip about Harry Shearer. What a great interview. Black should be attorney general; maybe then we'd see some justice, since we sure as hell never will under Obama and his puppet Holder. The level and depth of the fraud Black exposes is staggering beyond belief. Except that I totally believe it. This cover-up by Obama alone is enough to convice anyone conscious that he is literally Bush all over again. Compared to those "savvy" banksters, I'm sure Obama feels outclassed in the big carnival of fraud this system has become. I expect they've been giving him some important tips on how to get away with absolutely anything.
The interview with William K. Black is now online at:
http://harryshearer.com/news/le_show/player/?id=816
Harry Shearer o Le Show o MAY 01 2011
Eek!
That should be LIHOP or MIHOP, of course, not LIHEAP and MIHEAP!
LIHEAP is the acronym for Pennsylvania's Low-Income Home Energy Assistance Program, ingrained into my head from decades working at a state agency.
"Corporate corruption is out of control for two main reasons. First, big companies are now multinational, while governments remain national. Big companies are so financially powerful that governments are afraid to take them on."
Multinationals might be regulated by global, direct, decentralized, technology assisted grassroots democracy at the village, town, city, state and global level. As the world grows smaller, will it be ruled by autocrats or by all the people?
"We will also need a new kind of politician leading a new kind of political campaign, one based on free online media rather than paid media. When politicians can emancipate themselves from corporate donations, they will regain the ability to control corporate abuses."
Aren't politicians the problem? How can they emancipate themselves from corporate "donations" when their election depends on these bribes? Why do we continue to depend on representative government that represents the highest bidder when we have the technology to govern ourselves direct democratically?
The rule of law is moribund, and this will very shortly be the new normal. If we elect one more President after Obama without prosecuting the Bush administration for war crimes and the banksters for stealing trillions of dollars in funds, equity and title, then we will not get it back. Here is a well written petition for election reform so that we can regain a Congress and President responsive to the people more than the corporations: www.petitiononline.com/PoliTru3/petition.html. Please sign and share.
AG Holder is just following the same practices as those before him..
http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=asU.b_fCjHTE
Wachovia's Drug Habit - Bloomberg.com
"...The 1970 Bank Secrecy Act requires banks to report all cash transactions above $10,000 to regulators and to tell the government about other suspected money-laundering activity. Big banks employ hundreds of investigators and spend millions of dollars on software programs to scour accounts.
No big U.S. bank -- Wells Fargo included -- has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again..."
There is probably a little known political science law that a corrupt system cannot be corrected by voting.
Great thread! A lot of keen thinkers are out. Thanks to all.
...and pray, Jeremy, please tell us how Wikileaks fits into "the rapid and pervasive flow of information nowadays [that] could act as a kind of deterrent or disinfectant"...
---------
(( I expected at least endorsement of Wikileaks' good work, if not, then determined support - but you didn't even mention them. Why? ))
Demonizing others for whatever reason, is evils bidding, there is good & evil in all societies which commit atrocities in the name of both...
The*People shall depose any and all oppression, either government or corporate, that confronts their will and authority to secure the natural rights of freedom, justice and unity... C.H.A.O.S.
Measure the actions of CEO's of modern day Corporations against these values of fair play at: http://www.machiventamelchizedek.org/Urantia-Book/Revelation-Wealth%20and%20Nobility.htm