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OLEAN -- Forgive me if this appears to have been written with one hand. I've been throwing my arm out of its socket patting myself on the back.
One day after my acerbic screed last week urging the restoration of investor confidence in the stock market by arresting some high-profile corporate executives and marching them off in front of television cameras, federal prosecutors did so.
The feds handcuffed John Rigas, 78, head of Adelphia Communications (and his sons Tim and Mike and two other Adelphia execs) and frog-marched them to waiting federal vans.
They were charged with -- among other things -- securities fraud, wire fraud, and banking fraud that supposedly netted the Rigas family over a billion dollars and left investors in the once-admired firm over $60 billion in the hole. The New York Stock Exchange immediately shot up almost 500 points.
The feds probably put the Rigas family in the leadoff spot because they consider the case a lay up. The charges are more clear-cut than with many other corporate corruption cases.
Basically, the Rigas pere et fils are accused of treating a publicly traded company as if it were the same old family cookie jar that brimmed to overflowing during the days when it was a privately run operation: Huge loans to relatives and insiders without reporting them to stockholders, construction of a lush close-to-home golf course without reporting it to stockholders, that sort of thing.
Now let's see if the Justice Department and Securities and Exchange Commission have the guts to go after a more complicated hustle -- like oh, say, the Enron mess.
This is the long, sorry drama in which a CEO so close to the White House that President Bush used to call him "Kenny Boy" watched his minions construct a fabulously complex strata of hidden offshore partnerships in which to hide gargantuan losses and paint them as profits.
Even as Enron was headed for bankruptcy, Ken Lay and his band of merry corporate warriors lavished both political parties with contributions and paid themselves $681 million in salaries and bonuses.
Forgive my cynic's eye, but if John Rigas had spread as much money around Washington as Ken Lay and Enron did, he'd probably be way down on the list of potential indictees.
Enron and its execs, since 1993, according to the Center for Public Integrity in Washington, contributed $550,000 to George W. Bush in his runs for governor of Texas and the White House. That makes the bankrupt firm the president's top career patron. Since 1989, Enron and its employees gave a whopping $5.8 million to members of Congress. The last time I checked, little old Adelphia Communications -- the country's sixth largest cable television outfit -- was limping along with about $120,000 a year in political contributions of all sorts, about 80 percent to Republicans.
The inclusion of another subject in last week's column -- a beef about the way corporations handle their pension funds these days with reduced compassion and generosity -- also turned out to be prescient.
In the year 2000, the Pension Benefit Guaranty Corporation -- the government insurance structure set up to protect retirement benefits for about 44 million private sector American workers -- measured $26 billion in shortfall, or the amount that would be owed participants if a company failed and the pension plan expired.
Sound like a bundle? For 2001, the last period measured, that figure is over four times the previous amount. The money underfunded in private company pension plans, says the PBGC, rocketed to $111 billion last year -- a quadrupling that indicates hard-pressed CEOs in the current chaotic business environment are figuring there are a lot better things to do with a firm's funds than guarantee pension obligations with them.
The pension insurers offer soothing reminders that most corporations still have pensions that are at least 80 percent funded. But here's another eyebrow-raising figure. In 2001, the Pension Benefit Guaranty Corporation assumed responsibility for 104 terminated plans covering 89,000 workers. This year is barely half over, and already the PBGC has taken over pensions with 140,000 participants -- a rate that, if continued, would produce a 300 percent annual increase in the number of private sector workers who now have to rely on the government to protect their retirements.
The one glint of hope: Records show when the PBGC takes over a failing pension plan, the participants eventually receive about 94 percent of the benefits due.
Even if the government steps up its pace of indictment against corporate officers, dear reader, don't expect to see them trudging around in orange jumpsuits for long. You will recall that, in the late 1980s, when similar "Greed Is Good" scandals robbed us suckers of hundreds of millions in rigged investments, the main perpetrators who got jail sentences were soon back on the street.
Ivan Boesky, the arbitrage expert who coined the above definitive phrase, only did a year and a half in the slammer (although he was fined $100 million). Michael Milken served two years. And Charles Keating Jr., who many think should still be in jail for the cruel impoverishment he visited upon trusting retirees, was free after a little over four years.
Contrast this to the hideous felons languishing away their years in Texas jails for possession of a few grams of pot.
These are not the only societal frictions we will see as summer wanes. President Bush has scheduled a big economic forum in Waco -- down the road from his ranch -- for Aug. 13. The topic is: How Do We Get Out of This Mess? The White House will think up a catchier, less accurate name for it, of course.
The big get-together will draw in Americans of just about every stripe -- investors, execs, economists, workers, morality experts, legal advisors, etc. -- but the White House didn't invite the one group clamoring for such a confab -- members of Congress. Look for plenty of howling about that from Democrats and Republicans alike.
On the homeland security front, at the time of this writing, it looked like Bush was going to kick back to Congress the plan for establishing an anti-terrorist structure combining about 22 federal entities and over 150,000 employees. The president said the bill didn't give him enough managerial flexibility. This would leave the country heading into the first anniversary of the Sept. 11 attacks without a formal federal plan for preventing another.
A whole year flown by, and little to show for it, except a continued drum roll of reports about how vulnerable we are. You'll hear a bunch about that, too.
| Niagara Falls Reporter | www.niagarafallsreporter.com | July 30 2002 |