by Jack Lee
CEO’s doing whatever it takes to win, you’ve seen the scandals… they’re selling their souls as they lie through their teeth to shareholders. The pathetic part is it’s just not that uncommon anymore. It seems to have begun with the generation of baby boomers and it’s been passed on to successive generation like a cancer gene.
We know why too. It’s all about money. Money is taking precedence over all other things of value today… like ethics, honor and your good name.
Granted, there is extraordinary pressure on today’s CEO’s and CFO’s to perform (after all they have to justify their mega-salaries) and they must be prepared to be creative to meet all expectations, even unrealistic expectations.
Here’s an example that set the stage for one of American’s most consumer costly corporate scandals of all time. CMS Energy was benign non-profit energy company on the east coast and in a smaller way it was much like California’s own PG&E, that is until California lawmakers de-regulated unilaterally. This forced PG&E to divest of some of its own energy producing plants and rely more on the free market that included energy brokers like ENRON and it opened the door of opportunity for energy exploitation. There was now a legal way to earn more money at the expense of California’s inept lawmakers!
The CFO for CMS Energy discovered that it is possible to sell natural gas to a cooperating company who would in turn sell it back at the same price and this round trip trade did two wonderful things! First, it boosted the companys volume as an energy producer and that tricked analysts into thinking they were ramping up production a sure indication of increased profitability for shareholders to follow and it also took that amount of NG off line for a time which had the effect of artificially reducing the supply of NG to other buyers. Obviously when supply of something in demand is reduced there is a far greater chance of higher prices to follow, as PG&E and our dim witted lawmakers were soon to discover to their chagrin.
CMS is not that big, nor was its cooperating company in Texas who helped to complete the scam. But then this was just the tip of the ice berg and this sneaky, but legal tactic of “round trip” trading exposed the ethics of many high ranking people in the energy business. You need only look at the long list of names in lawsuits by the State of California to grasp how wide spread was the cheating. Energy stocks across the board collapsed under the weight of scandal after scandal, even so-called independent auditors were caught up. Several of our nation’s most trusted accounting firms were exposed for dirty dealing. Do you remember the Arthur Anderson Accounting Agency? They were once 3rd largest in the world and among their more famous clients was ENRON.
Speaking of….ENRON’s CEO Ken Lay became infamous for his speech where he told his fellow employees gathered in their massive dining room, “Enron is 100% solvent, buy more stock!” The next week they filed bankruptcy. Ken Lay had dumped his shares long before the end came.
Most recently we read in the headlines about CEO Alan Schwartz. He ran the 100 year old company of Bear Sterns into the ground buying up sub-prime real estate loans. When the axe started to fall he reassured stockholders that Bear Sterns had no liquidity problem and all was well. Like Yogi Berra said, “It was de ja vu all over again.” This bolstered the stock for a few days until the news broke that Bear was broke…a liquidity problem. Of course the stock imploded and billions were lost by shareholders, but many of the top officers were made rich off making bad deals and further they were protected by a government sponsored bail out plan! By the way, the government plans on doing this again for the lenders in Fannie Mae and Freddie Mac who knowing bought up sub-prime mortgages from ill-qualified borrowers who were buying at greatly inflated prices in the belief this Ponzi scheme would go on forever…and then another bubble bursts.
On another front (among many fronts) Giant HCA Inc., formerly known as Columbia/HCA and HCA – The Healthcare Company, got caught bilking taxpayers out of possibly over a billion dollars worth of false claims to Medicare. Their fine was $631 million. Apparently it was worth the risk….they made money.
Indymac was the 9th largest lender and the 2nd largest bank to fail. Over 1 billion was lost to uninsured depositors. But, what makes the fiasco so scary is the FDIC has over 90 banks on a watch list for possible failure and Indymac was not on the list! Like Enron, the big guys lined their pockets and now we the taxpayers are expected to clean up their mess. There will be no accountability for their incompetence and greed. John Bovenzi, FDIC COO should have seen it coming, but he missed it and you caught it…right in your pocket book.
Is it any wonder that Americans are becoming increasingly fearful of investing in public companies and trusting banks? So when GM says they aren’t going to file bankruptcy….yikes, you watch out!
The resentment and anger is building and that may force a wimpy Congress to do their jobs somewhat better, but what about corporate America? What forces them to do better when salary is the overriding measure of success for a CEO? What possible motivation could they have for cleaning up their act when money is everything and lying is just part of the job discription? It begs the question, when will character count again?
You say you wouldnt lie for a million bucks, but would you lie for a hundred million?