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Commentary | JOHN BALZAR

White Collars, Black Hats

April 03, 2002|JOHN BALZAR

From 1992 to 2001, the Securities and Exchange Commission referred 609 Wall Street crimes to federal prosecutors. Of that total, 87 people went to prison, fewer than 10 each year on average.

In a federal prison population of 156,238, only 1,021 inmates now fit even a broad definition of white-collar criminals. And more than half of them are doing easy time at low-security "Club Fed" institutions.

Since 1985, the percentage of white-collar criminals in our federal prison population has dropped almost fivefold.

We have Fortune magazine to thank for providing these dismaying statistics. And for the sentiment they evoke: The cover of the March 18 issue of the magazine came to a blunt conclusion: "It's time to stop coddling white-collar crooks. Send them to jail."

I like to think of myself as a law-and-order man. But friends, there is something way wrong in the land. Our double standard for white-collar crime is itself a crime. As Oliver Wendell Holmes Jr. said, sometimes we need an "education in the obvious."

Consider this: In the year 2000, all the bank robberies and armored-car holdups in the nation added up to $78 million, far less than the individual gross of any number of shady wheeler-dealers in business. How many billions of dollars of investments vanished in recent months behind complex webs of white-collar manipulation?

Where is the outrage?

Compare the stink in Washington today with just a few short years ago when President Clinton was made to admit lying about a dalliance. That misdeed absorbed most of the energy of our government and politics for a couple of years. Principles and values and the example of leadership were at stake, we were told. But aren't they at least as much now, too? And in ways that touch us all?

Our differing attitudes about street crime and suite crime are strange, to say the least. Law enforcement authorities are now arguing for the right to sentence a petty thief to 50 years in California prison for shoplifting $153 worth of videos. Yet President Bush's response to Enron is to propose that corporate executives give back their bonuses if they are caught swindling investors with cooked books.

Rather than ripping into this scandal, Wall Street and official Washington are unconscionably mounting an all-out "don't-worry, be-happy" defense of the status quo. Oh yes, we'll fiddle here and there with 401(k) blackouts and accounting self-regulation. But really, we should trust the market to do the heavy work of reestablishing legitimacy to business.

"We have to be careful . . . not to look to a significant expansion of regulation as the solution to current problems," Federal Reserve Chairman Alan Greenspan said in a speech last week.

"I frankly don't see a need for lots of new law," Treasury Secretary Paul O'Neill told a group of investors.

"We need to keep in mind the competitive position of our nation and its businesses," Eastman Kodak Co.'s CEO Daniel Carp warned in an appearance before business leaders.

Let me put it in political terms: For the life of me, I cannot understand why liberals aren't reaching for the high ground here. For every multimillionaire donor, aren't there 5,000 people wondering what happened to their retirement investments or their jobs? Democrats seem to have lost the ability to even fathom a scandal, let along capitalize on it. Perhaps they invested in secret partnerships like those at Enron, where insiders turned $5,800 into $1 million in two months.

And conservatives, where is their famed intolerance? White-collar crime mocks the oldest of American values, honest work. You'd think Republicans would be up in arms against such permissiveness.

In the last dozen years, American business has enjoyed ever more freedom from regulation. Business ethics have correspondingly sunk to a modern low.

The system's supposed watchdogs, the brokers and credit raters and accountants, have become corrupted by divided loyalties. Each month seems to bring fresh evidence that a rapacious few are absconding with an ever-greater share of our prosperity--and not by giving us better service or more desirable products, but by high-flying and too often reckless gamesmanship. Who has faith that what a corporation reports is faithful to the truth?

There oughtta be a law. And that law ought to be enforced. We need to get these people off the streets and put them in prison with the shoplifters.

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