With the past month featuring an SEC investigation of former Capital One CFO David Willey, charges against two more Enron executives, and whispers that Bernie Ebbers probably knew about accounting fraud at WorldCom, it's clear that we haven't reached the end of the latest round of financial scandals. But so far, relatively few executives have gone to jail for white-collar crimes and, except for Arthur Andersen, not many companies have felt the full weight of a Department of Justice investigation.
That may be about to change. It seems the DoJ is moving beyond rhetoric in its efforts to bring criminal, as opposed to civil, charges against companies and executives suspected of committing financial fraud. As staff writer Alix Nyberg reports this month (see "Fraud Squad,") the Corporate Fraud Task Force is helping local U.S. Attorneys, the FBI, and the SEC to more aggressively pursue corporate cases.
For companies under investigation, cooperating with the DoJ seems to be the only option, since not cooperating automatically reduces one's ability to negotiate with prosecutors. For most individuals, even cooperation may not bring much relief; at best, they face ruinous legal fees and loss of reputation.
Even within the legal profession, there is some murmuring that we now have an aggressive solution for a problem that, thanks to the depressed economy, no longer exists. But the real litmus test of the DoJ's efforts will be the outcome of the Andy Fastow case. If the former Enron CFO, who is pleading not guilty, does not go to jail, it's going to be hard for U.S. Attorneys to argue that middle managers who perhaps worked on one $33.6 million deal for Qwest should be incarcerated.