Corporate Crooks: How Rogue Executives Ripped Off Americans... and Congress Helped Them Do It! - Hardcover

Farrell, Greg

Hardcover

ISBN 10: 1591024552 ISBN 13: 9781591024552

Verlag: Prometheus Books, 2006

Inhaltsangabe

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.

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Über die Autorin bzw. den Autor

Greg Farrell (Pelham, NY) is an award-winning reporter who writes about Wall Street for The Financial Times. Prior to joining the FT, he was an investigative reporter for USA Today, where he specialized in white-collar crime, legal affairs, and the regulation of corporate behavior. He is a past winner of the American Business Press’s Jesse Neal Award for investigative reporting and a recipient of the Knight-Bagehot Fellowship for business journalism.

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CORPORATE CROOKS

How Rogue Executives Ripped Off Americans ... and Congress Helped Them Do It!By GREG FARRELL

Prometheus Books

Copyright © 2006 Greg Farrell
All right reserved.
ISBN: 978-1-59102-455-2

Contents

Foreword by Joseph T. Wells......................................13Introduction.....................................................17Chapter One - Executive Compensation.............................23From salaries to stock options...................................27Executive compensation goes Hollywood............................28Easing of restrictions...........................................30Unaccountable....................................................32CEO pay versus the average wage..................................35Postscript to Waksal's crime.....................................37Chapter Two - Enron..............................................39Edifice of mirrors...............................................41From gas pipelines to the "gas bank".............................42Enron's business.................................................43The $80,000 lemonade stand.......................................46Fastow's secret partnerships.....................................48Bank prostitution................................................52Bogus businesses.................................................54Clipped hedges...................................................57Sherron Watkins' letter..........................................58Enron's implosion................................................60Criminal investigations..........................................61Aiding and abetting..............................................62Chapter Three - The Auditors.....................................65The bad old days.................................................66The true believers...............................................68From profession to business......................................69Loosening the legal shackles.....................................72Auditors serving two masters.....................................75Consultants versus auditors......................................79The management of Waste Management's earning.....................81The black hole at Enron..........................................82The shredding of Arthur Andersen.................................84The verdict......................................................86Pyrrhic victory..................................................88Chapter Four - WorldCom..........................................91Motels and Ma Bell...............................................95The masterstroke: MCI............................................97Master and commander of the board................................98Ebbers' money troubles...........................................100Cutting corners..................................................102Capitalization of line costs.....................................104The fraud unravels...............................................106Trial and conviction.............................................109Chapter Five - Tyco..............................................113A difficult trial................................................114The board's duties...............................................117A criminal birthday party?.......................................118A brilliant career...............................................123Beginning of the end.............................................127The finale.......................................................130Retrial..........................................................132Chapter Six - HealthSouth........................................133An Alabama success story.........................................135Living in a dream world..........................................138Cooking the books................................................141Security and paranoia............................................145Televangelist....................................................148Aquittal.........................................................149Chapter Seven - Stock Analysts...................................153Conflicts of interest............................................157The end of an era................................................158Jack Grubman's revolution........................................162Judgment day.....................................................164Chapter Eight - The Securities Cops..............................169The Keystone Kops................................................173No respect.......................................................174The starving of the SEC..........................................179Stagnation.......................................................182Cops without bullets.............................................184Congress acts....................................................187Competition......................................................189Epilogue.........................................................191Lessons learned..................................................195Notes............................................................201Special Thanks...................................................215Index............................................................217

Chapter One

Executive Compensation

The day after Christmas, 2001, Harlan Waksal called his brother Sam with some bad news about their company, ImClone, and its cancer-fighting drug, Erbitux. After months of review, the U.S. Food & Drug Administration was going to deny their company's request for approval to market the new drug to the public. The brothers had spent the last few years of their lives working doggedly to develop and promote the drug, which promised relief to millions of Americans suffering from cancer. But when Sam Waksal heard about the FDA decision, the last thing on his mind was the suffering of cancer patients. All he could think about was his own bank account and how the negative FDA decision could wipe him out.

Waksal, the mercurial son of Holocaust survivors, had climbed his way to the top of New York society by combining the scientific promise of his medical company's products with his love of the glamorous life. He dropped huge sums of money on lavish parties and befriended stars such as Mick Jagger, but there was substance beneath the style: some medical experts believed ImClone's new drug could be an effective tool in the fight against cancer.

But the negative FDA decision threatened to shatter Sam Waksal's life. Most of his wealth was tied up in shares of his publicly traded company, ImClone. Once the FDA announcement was made public, which would probably happen within days, the price of ImClone's stock would plummet and with it, Waksal's net worth. Worse, Waksal had used his stock holdings in ImClone as collateral for a series of loans which allowed him to live like a prince among the jet-setters who divided their time between Manhattan, the exclusive Hamptons and a series of exotic vacation spots around the globe. The FDA decision would pull the plug on Waksal's princely lifestyle.

Faced with a financial collapse, Waksal reacted instinctively, breaking the law that serves as the foundation of the nation's capital markets. He tried to sell a big stake of his ImClone stock immediately, before news of the FDA decision was disseminated to the public, and ImClone's shareholders.

Following the crash of the stock market in 1929, Congress passed the landmark securities laws of 1933 and 1934. The...

Details zur Ausgabe

• Verlag: Prometheus Books
• Erscheinungsdatum: 2006
• Sprache: Englisch
• ISBN 10: 1591024552
• ISBN 13: 9781591024552
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 225
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar