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Mon, Sep 04, 2006 - Page 10 News List

Corporate crime in the US shows no sign of abating

WIDESPREAD Business fraud has become so endemic that harsher penalties are needed to defeat it, say securities lawyers and investors

AFP , WASHINGTON

What do AT&T, Boeing, Com-verse Technology, Prudential Financial, Medtronic, Schering-Plough and Tenet Healthcare have in common?

In recent months, they have all been charged with fraudulent conduct by the US Justice Department's Corporate Fraud Task Force, or with serious misconduct by government prosecutors.

Among other charges, the companies were accused of deceptive stock trading, improper billing, falsification of drug prices, kickbacks to doctors and the creation of a "secret stock options slush fund."

The total cost of their misconduct in fines and effective penalties to shareholders? A cool US$2.6 billion.

Enron aftermath

Almost five years after the Enron scandal first came to light, corporate crime involving major US companies appears to show no sign of abating, despite a government crackdown on corporate malfeasance.

Set up after Enron's collapse, the Corporate Fraud Task Force has taken the lead in prosecuting bad executive behavior.

Critics concede it has notched up major victories, notably the convictions of Enron's two former top executives, but some securities lawyers and investor advocates say corporate fraud has become so endemic that harsher penalties are needed to defeat it.

Jacob Zamansky, a New York lawyer whose firm, Zamansky and Associates, has filed securities lawsuits against big Wall Street brokerages, says more top executives need to be held accountable to deter corporate fraud.

"If the Justice Department is serious about showing enforcement, go after some top guys on Wall Street, in Corporate America," he said.

Slack prosecution

Zamansky believes the government did an "excellent job" in prosecuting the Enron case and other cases until last year but says that prosecutions have slackened overall this year.

A senior Justice Department official, who requested anonymity, argued, however, that the task force has been clamping down aggressively and that the flurry of recent cases was somewhat of an aberration.

"From July 2002 to March 2006, we've had more than 1,000 guilty pleas; more than 160 of those have been chief executive officers and [company] presidents," the official said.

Key members of the task force, which also groups Securities and Exchange Commission and FBI officials, met just last month to swap notes and plot strategy.

"We certainly seek to recover [money] vigorously and to the maximum extent we can consistent with the facts," the official said, adding that there are no plans to disband the task force.

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