Monday, June 13, 2005
Have anti-fraud laws done a good job?
Three years after Congress responded to a wave of corporate fraud with a comprehensive new set of laws to prevent it, the so-called Sarbanes-Oxley Act is getting mixed reviews from companies, lawyers and shareholders.
While most agree the law has helped restore investor confidence in corporate accounting, companies have complained that the benefits of the new regulations are not worth the cost of complying with them. And one key provision — holding top executives personally accountable — has so far failed to win a conviction in the first high-profile criminal case under the new law.
That “certification” provision — requiring corporate CEOs to personally sign off on accounting statements — was supposed to make it tougher for top executives to claim they didn’t know that underlings were cooking the books.
But after four weeks of deliberations, the jury in the fraud trial of HealthSouth Corp. founder and ex-CEO Richard Scrushy remains deadlocked. Scrushy — the first chief executive accused of violating the Sarbanes-Oxley law — is accused of orchestrating a $2.7 billion earnings overstatement at the rehabilitation and medical services chain over seven years beginning in 1996. He is also accused of conspiracy, fraud, false reporting and money laundering.
posted by Brian Moran @ 8:49 AM