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The Whistleblower

The Whistleblower #31 - Jun 19, 2002

The axis of greed. The insurance industry is conspiring with Congress and the President to rip off the taxpayers in the event of another major terrorist attack. The U.S. Senate, in an 84-14 vote, approved a plan yesterday to hand over taxpayer money to insurance companies if terrorism-related insurance claims exceed $10 billion--a move that the President applauded. If this bill becomes law--and it looks like some version of it will--the insurance companies will rake in huge premiums selling terrorism insurance, but the taxpayers will be responsible for paying up to 90% of the claims up to $100 billion. In other words, the US Senate just passed a $90 billion bailout of the insurance companies. The insurers get the promise of taxpayer subsidies, big property developers and real estate tycoons --the insurers' affected customers--will get subsidized premiums, and taxpayers will get the shaft. The bill now moves to a House-Senate conference, where the abominable Senate version could be made worse; Senators will have to reconcile their bill with the House version, which doesn't even contain the $10 billion threshold. The final kicker: the bill overrides the laws of 22 states, which normally allow Departments of Insurance to scrutinize and adjust the insurance rates charged for these policies. But under this bill, insurers can gouge till their bottom line's content with no public oversight.

Wall Street's beating on the cops. Enron doesn't have a monopoly on unscrupulous business conduct. Neither do Andersen, Kmart, Tyco, Reliant, Merrill Lynch--okay, maybe the contest for most irresponsible company is one area in which there's healthy competition. The anarchy in the corporate suites screams for enforcement, but Wall Street lobbyists have been deployed in force to make sure that the cops stay off of the financial accountability beat. Morgan Stanley's CEO personally lobbied for an amendment to federal legislation that would prevent states from cracking down on perpetrators of securities fraud, according to the New York Times. This push for impunity comes in response to the New York Attorney General's investigation of Merrill Lynch for having recommended its business partners' lame stocks to investors. If Wall Street wins this battle it will have performed an outrageous political jujitsu: turn public outrage and demands for reforms into legislation that will utterly subvert enforcement of corporate ethics laws throughout the country.

Obscurity is the refuge of the inactive. We're willing to bet that few people have heard of the California Board of Accountancy, which regulates public accounting firms in California. This means that few Californians know that the CBA has taken no action to hold Andersen accountable for rubber-stamping Enron's phony books. (Fewer people, still, know that citizens can make suggestions to the Board at http://dca.ca.gov/complainthelp/on-line-complaint.html). The board, which licenses accountants and accounting firms, has the authority to revoke Andersen's license to audit publicly traded companies in California, which FTCR asked the Board to do in March. It was clear enough back then that Andersen could not legitimately perform its task as an auditor. Now that Andersen has been convicted of shredding documents related to Enron-related accounting fraud, it's outrageous that the CBA still allows Andersen to go on like nothing happened. The Board's inaction sends the wrong message to the other companies under its regulatory purview: even if you help a client defraud shareholders and the public and then shred the evidence to thwart investigators, you're still good enough to do business in California.


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