Enron and Other Corruption Scandals Were Preventable

Spitzer Slams Opponents of Corporate Reforms

Weeks after Americans voted against corruption, some Republicans still call for less corporate accountability and lower ethical standards.

Here are excerpts from a Financial Times article distributed by Transparency International.

Eliot Spitzer, New York’s governor-elect, has hit out at efforts by figures in the Bush administration and business to roll back corporate accountability reforms imposed in the wake of financial scandals such as Enron.

In an interview with the Financial Times, the outgoing state attorney-general, who won fame for tackling corruption in the financial services industry, said diluting such reforms would be “counterproductive” and would fail to tackle the reasons that US businesses are falling behind.

“The argument that we are failing in competitiveness because of regulations is incomplete,” Mr Spitzer said. “We’re failing in competitiveness because of failed business models and the lack of smart investment in technology. General Motors is not failing because of regulations but because it hasn’t produced good products.

“It’s failing because it hasn’t controlled costs and those costs are from private contracts that GM entered into.”

Bush Administration Calls for More Corruption, Less Ethics

Last week, Hank Paulson, US Treasury secretary, gave a closely watched speech calling for a fundamental re-examination of the way the US regulates its capital markets to ensure they remain globally competitive.

Mr Spitzer did not rule out all regulatory reform. “Are there some elements of the regulatory framework that may need tinkering? Of course. Do compliance costs get unwieldy? Sure.”

But he pronounced himself suspicious of the push to revamp the Sarbanes-Oxley corporate accountability rules. “Look at the pushbackjust a few years ago, many of those same individuals were acting in ways that fundamentally misled the market and investors,” he said.

Mr Spitzer said critics who warned that aggressive enforcement hurts competitiveness were ignoring recent history. “The sectors that bore the brunt of my cases are performing extremely well,” he said. “They are more competitive because they [now] understand the importance of ethics.”

People Prefer Ethical Businesses

Many of the top investment banks and the insurance companies that settled with Mr Spitzer over allegations of biased stock research, accounting fraud and bid-rigging are having extremely profitable years.

But some of his former targets, most notably Marsh & McLennan, have struggled to find new business models after he required them to change the way they did business.

After a landslide victory in the gubernatorial campaign, Mr Spitzer promised he would fight to maintain New York’s status as a world financial capital and help the New York Stock Exchange compete for new listings.

But he made clear that he would not support a regulatory race to the bottom that would gut protections for investors and consumers. “The lesson of competitiveness is critical but let’s not forget the lessons of integrity,” he said.

Also see:

www.progress.org/wordpress/corrupt-government-giveaways-will-continue-admits-congressman/

www.progress.org/wordpress/lowering-standards-lower-and-lower-and-lower/

www.progress.org/wordpress/corruption-and-torture/