A Fortune piece this week shows how editorial tastes can differ, to say the least.
When it chooses to explore the extent to which the credit crisis will produce criminal prosecutions, the business magazine looks for reasons why it shouldn’t, rather reasons than why it should.
That’s why there’s strawberry and vanilla, I suppose.
One can see, of course, obstacles to criminal prosecutions of bankers, bond salespeople, mortgage brokers, and senior financial executives.
But given what Fortune itself describes as a $9 trillion wipeout of investor capital, including a $1 trillion raid on the U.S. Treasury, my first thought would be to imagine that a wealth destruction and transfer of such magnitude might indeed have been amplified by criminal conduct along the way. If I had 4,800 words to explore the question, that’s what I’d look for.
But, again, that’s just me.
In fact The Audit’s Ryan Chittum, in a post yesterday, commended the piece for exploring the subject at all.
I say the piece went out of its way not to see potential criminality in a situation that most non-business reporters would find rich with it. In this sense, the Fortune cover story may be unintentionally revealing about a business-press culture that identifies too closely with the people and institutions it covers.
The piece, headlined “Wall Street: It’s payback time,” explores the prospects for executives’ “heads” winding up “on pikes,” as the result of the crisis.
The subhead and other parts of the story resort to hyperbole, implying that anyone who suspects criminal activity, especially fraud, might have amplified the crash might not be entirely rational.
An angry mob of investors and taxpayers is assembling, and they want to see some executives’ heads on pikes. The question for the courts will be, Who was just foolish with our money - and who was lying, cheating, and stealing?
And from the story:
So there’s an angry mob with pitchforks assembling, and they want to see some heads on pikes.
Actually, is there? Even allowing for colorful language, no evidence is presented to support this point. If you ask me, the public has been fairly stoic, even resigned to this calamity.
And here’s some more:
While former Enron CEO Jeff Skilling could at least try to have his case transferred out of Enron-devastated Houston, the credit-crisis targets will have no such card to play. This time the corporate shenanigans have wrecked the globe. “This is the ugliest enforcement environment I’ve ever seen in my professional career,” says one criminal- defense lawyer, who also asks for anonymity.
Again, is it?
And while we’re at it, since when do we give people, even lawyers, anonymity for making general, banal statements like this? Here’s an even worse example, with my emphasis:
It’s no defense for an executive who bends the truth to say that he did so only to prevent a run-on-the-bank-type situation, says one criminal-defense lawyer. (The lawyer requests anonymity because in this climate, he notes, such an on-the-record statement might lose him some business opportunities.)
Are there so few defense lawyers around?
In any case, Fortune cautions us to tamp down expectations, and, as a respected voice on business matters, helps to lower public pressure on prosecutors.
People have a right to be angry, but anger is not the best frame of mind in which to mete out due process. Here, the process that is due requires distinguishing foolish mistakes from lies and fraud - a line that can get surprisingly fine. To the chagrin of John Q. Public, there will be serious defenses in most of these cases.
The main flaw of this piece, in my view, is that it frames the question so narrowly—did top executives lie to investors about the financial condition of their companies?—so as to exclude, or dismiss arbitrarily, entire categories of potential crimes, rich veins of wrongdoing, lying, cheating, forging, etc., which we’ll get to, that could easily result in criminal prosecution—and probably should.
The narrow frame is set here (with my emphasis):
To be clear, we’re not talking here about sensational, not conceivably legal, out-and-out Ponzi schemes, like the $50 billion one that former Nasdaq chairman Bernard L. Madoff has been arrested for, or brazen forgery and criminal impersonation, like the $100 million spree that glitzy New York litigator Marc S . Dreier has been accused of. Crimes like those typically have only one of two defenses: (a) “It wasn’t me,” or (b) “Okay, it was me, but I was sleepwalking on Ambien at the time.” The probes being discussed here concern statements that ultimately proved incorrect, but which reasonable, straight-faced people can, and vigorously do, contend were honest when made.