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Motivated to Prosecute

Corporate Fraud Task Force Pursues Mission Aggressively

By Carrie Johnson
Washington Post Staff Writer
Wednesday, October 20, 2004; Page E01

It was July 2002 in Washington, and the heat was on the president to respond to a devastating series of corporate scandals that had cost investors billions of dollars.

Houston energy trader Enron Corp. had collapsed seven months earlier amid revelations of shady business partnerships, thrusting former chief executive Kenneth L. Lay and his long history of political donations to the Bush family into the harsh spotlight.

Former WorldCom chief executive Bernard J. Ebbers was escorted in handcuffs when he turned himself in earlier this year. The Corporate Fraud Task Force was created a month after his company announced its bankruptcy in 2002. (Daniel Acker -- Bloomberg News)

Cracking Down on Corporate Crime More than two years after the creation of the Corporate Fraud Task Force, federal prosecutors and securities regulators have helped charge and convict a number of high-profile executives.
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Quattrone to Remain Free During Appeal (The Washington Post, Oct 20, 2004)
Enron's Lay to Have Two Trials (The Washington Post, Oct 20, 2004)
Ex-WorldCom CEO's Defense Wins Delay (The Washington Post, Oct 20, 2004)

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Now corporate corruption was making headlines again with revelations that a multibillion-dollar accounting fraud had struck telecommunications giant WorldCom Inc. Prominent Democrats seized the news to argue that the president and vice president, both former energy industry executives, were too cozy with corporate America. Lawmakers from both parties maneuvered to be the first to investigate claims of accounting fraud and call for corporate leaders' scalps.

Within two weeks of the announcement that WorldCom had filed the largest bankruptcy case in U.S. history, President Bush signed an executive order creating a government-wide task force to root out business crime. Bush told reporters a few months later that the multi-agency task force "is sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed, and you will be punished. No boardroom in America is above or beyond the law."

Today, more than two years after the task force's creation, federal prosecutors and securities regulators have helped convict a number of high-profile chief executives, including the former leaders of drugstore chain Rite Aid Corp. and cable television provider Adelphia Communications Corp. Government lawyers have indicted many more -- including Enron's Lay, WorldCom's Bernard J. Ebbers, and HealthSouth Corp.'s Richard M. Scrushy -- all of whom pleaded not guilty and are awaiting trial.

There have been some losses and charges that prosecutors are overreaching in an effort to bring high-profile cases, but federal prosecutors involved in the task force have convicted more than 500 corporate wrongdoers as of last month, according to a task force report. That is out of 900 suspects criminally charged, with many of those trials still pending.

"I think the proudest legacy is . . . we have sent a message of deterrence that has found its way into every corner of corporate America," said Deputy Attorney General Jim Comey in an interview. "I believe we have changed behavior."

Lawyers on both ends of the spectrum said the political overtones of Enron, whose executives and political action committee contributed millions of dollars to the Bush campaign and whose former vice chairman Thomas E. White became Army secretary, helped set in motion an aggressive federal effort to prosecute corporate criminals.

"Had Lay not had the kind of connection to the Bush administration that he did, I don't think you'd have seen this level of activity out of the Justice Department," said Michele A. Roberts, a longtime Washington defense lawyer. "It began with the need to distance the White House from Enron, and it stoked a fire that was ready to burn."

Despite a few mentions by Democratic presidential nominee John F. Kerry of Enron and Vice President Cheney's former company, Halliburton Co., in this month's debates, nonpartisan analysts said the Bush administration mostly has neutralized the corporate fraud issue by acting quickly.

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