Even as regulators continued to reach settlements with companies accused of misleading shareholders, prosecutors were finding it harder to win criminal convictions against the very corporate executives accused of masterminding such fraud.
Citigroup agreed to pay $2 billion to former shareholders of Enron for its role in helping the energy firm mislead them about its true financial condition. The deal is likely to pave the wave for similarly hefty settlements with Enron's other investment bankers, Merrill Lynch and J.P. Morgan Chase.
In Alexandria, two former executives of General Re pleaded guilty to charges that they participated in a scheme to sell insurance products to insurance giant American International Group that they knew AIG wanted to use to manipulate its reported earnings. They are the first in what prosecutors hope will be a string of plea agreements that will lead to charges against top officials at both companies.
And earlier in the week, HealthSouth agreed to pay $100 million to settle allegations by the Securities and Exchange Commission that it misled its investors through fraudulent accounting.
But while the new management of HealthSouth was implicitly acknowledging the company's misdeeds, the old management, in the form of founder and former chief executive Richard M. Scrushy, was quietly celebrating the fact that a jury in his home town of Birmingham had recessed for the weekend without returning any criminal verdicts after 12 days of deliberations.
In New York, a Bank of America securities broker was acquitted of 29 charges that he helped a hedge fund engage in after-hours trading that state prosecutors had alleged was illegal, but the jury concluded was not. Meanwhile, another New York jury continued to deliberate in the retrial of executives L. Dennis Kozlowski and Mark H. Swartz on charges of looting Tyco International.
Juries aren't the only ones beginning to balk at the aggressive prosecution of corporate wrongdoing. In considering the HealthSouth settlement, two Republican members of the SEC dissented, according to Business Week magazine, continuing to argue, as they have in the past, that big fines against companies only hurt the very shareholders who were duped. That minority view is likely to become the majority one next month if Rep. Christopher Cox (R-Calif.) is confirmed to replace the retiring William H. Donaldson as chairman and swing vote on the commission.