The Whistleblower #33
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The Whistleblower

The Whistleblower #33 - Jun 28, 2002

Some Cal. Senators stand up for a principle: protecting corporate scofflaws. The California State Senate passed an important anti-fraud bill, SB 1452, last week, but not before opposing Senators got in a few bizarre statements. The FTCR-sponsored bill would hold executives accountable for covering up accounting fraud, and would also increase protections for whistleblowers. But, apparently, some Senators are willing to betray the public's trust by opposing the bill so that criminal executives don't have to betray one another. Senator Steve Peace (who marshaled electricity deregulation through the legislature in 1996) said the bill's requirements that executives report fraud to law enforcement amount to a "threat to democracy." Peace supplemented his alarmist rhetoric with legislative nonsense: "[It is] some of the bad you endure in order to appreciate the good." Senator Johannessen likened the executive reporting provisions to Nazi policies. Not only is this an outrageous analogy, it ignores an essential feature of non-democratic government: silence in the face of reprehensible behavior. Senator Ross Johnson picked up on the corporate-malfeasance-as-national-greatness theme, incomprehensibly likening the bill to policies in some countries, where criminals' hands are cut off. Fortunately, the majority of Senators made clear that their America is a place where even the rich and powerful should be held accountable to society. The bill will next be considered by the Assembly Judiciary committee on Monday, July 1.

Regulation: 1 gov't agency, Deregulation: 6 and counting. Proponents of deregulation promise that an unregulated marketplace will eliminate the need for clunky bureaucracies. On the contrary, electricity deregulation has loaded down regulators with seemingly endless enforcement duties. The latest investigation by federal regulators: Dynegy, Reliant and Avista were recently issued subpoenas by the Commodity Futures Trading Commission for documents relating to phony "round-trip" trades. The CFTC joins the FERC and the SEC on the list of agencies forced to clean up after egregious market misconduct by the energy companies. And the FERC itself might become the subject of monitoring by the General Accounting Office, owing to the regulatory agency's failure--or unwillingness--to police the energy industry effectively. (And don't forget the CalISO, CalPX and EOB that came with dereg.) Rather than eliminating the need for public oversight, electricity deregulation has simply shifted taxpayer resources away from planning in the public interest, and more and more public funds are being devoted to holding energy companies accountable after they've abused their privileges under deregulation.

Remembering the departed: a continuing series. In issue #26, we began to chronicle the post-Enron exits of executives who steered their companies straight into scandal. The latest departure:

Scott Sullivan, CFO of WorldCom. The telecommunications behemoth announced Tuesday that it lied about $3.8 billion in expenses over the last year and a quarter, deceiving investors who were banking on the company's ersatz profitability. It's too soon to say for sure, but Enron may have to compete with WorldCom to stand as the symbol of the current corporate crime era. WorldCom will in all likelihood file for bankruptcy, resulting in a massive proceeding to rival that of the Houston energy company.



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