SamSaid!

JUST NOT RIGHT

     When I get together with my kids and their spouses, we talk about important matters  –  international events, wars, national politics, investing, taxes, real estate prices, natural disasters, crummy TV and even the weather and sports. When I offer my views, they even listen, sometimes. It isn't exactly lecturing  –  maybe  closer to a bit of pontificating. They all understand.

     Of late the conversation is dominated by the horrific events in the stock market where a handful of extremely powerful business leaders have systematically looted their companies and destroyed the lives of thousands of investors and employes. Such words as fraud,  corruption, greed, abuse of power, misrepresentation,etc., aren't good enough. It is theft  –  just plain theft –  of corporate funds and the savings and investments of people who placed their faith in an honest system.

     Now, my kids are not bomb-throwing left wingers. Two are self employed, one is employed  in corporate America and the other is in the Public sector. They save their money and invest carefully. They are conservative and believe in the free enterprise system. Actually, one still claims to be a liberal but I think he is wavering. All of them  see nothing wrong with the profit motive and the desire to sell goods and services for a fair profit. But when it comes to the looting and fraud by the leaders of Enron, Global Crossing, Adelphia, Tyco, Worldcom, etc., they say “That just isn't right”. To see these guys hang onto hundreds of millions of dollars and buy/build ungodly mansions while the Companies are in Chapter 11 bankruptcy just isn't right. I agree. It isn't.

     And these young adults are smart enough to see the handwriting on the wall. Sure, these big guys  will be investigated and we will see the whole gamut of escape  techniques  –  deny, deny, deny  –  delay, delay, delay, take the 5th as often as needed, supress information and evidence, delay some more, change lawyers a couple of times,and then as a last resort plea bargain and walk away free with a huge bundle of cash. And looking over their shoulders saying, “I did nothing wrong”, and “I didn't know”.

     Maybe the new Federal legistlation will fix the problem, but I am skeptical. Political contributions are likely to be the deciding factor. What is the old saying?, “Anything worth doing is worth doing for money”.

     Our “civilized ” society banned vigilante justice a long time ago. But I am re-thinking that one. Somehow, our “civilized” justice system just isn't up to the task of getting an appropriate remedy for the injustices at hand. I have not been personally affected by the misdeeds of these arrogant and ultimately corrupt men, but if I were, I don't think that “doing nothing” would rank very high on my list of options.

ROCKS AND GREENHOUSES

     Jonathan Karl is a reporter for CNN. Can't say that I have read much of what he writes, but he authored a good column in the WSJ the other day, “Cooking the books is an old recipe for Uncle Sam”.

     There is a veritable frenzy in Washington to severly punish the Corporate giants who are guilty of fraud, theft. embezzlement, shoddy accounting, misrepresentation, and destroying the lives of many shareholders and investors. Our Congressmen and Senators are highly indignant and vow vengeance on Corporate America for all of these misdeeds. And in an election year they are riding the wave of anti-business sentiment. Mr Karl points out that our duly elected leaders in Congress are hardly strangers to creative, imaginative accounting when it suits their purpose. And the public never knows the difference. He offers several examples. I'll only cite a few.

     1.  Last year Congress spent $15 Billion to bail out the railroad workers retirement fund, but not a cent showed up on the books. Using a trick called “directed scoring”, they simply voted to keep it off the books. By comparison, WorldCom's $3.8 Billion overstatement of profits looks like chickenfeed.

     2.  A census is taken every 10 years. Last year, Congress changed the designation of “census” to “emergency” and detoured $4.5 Billion out of the operating budget into an emergency bill. Just change the label  –  but of course that's not shady accounting —right?

     3.  Consider the Medicare and Social Security Trust Funds. Congress sets up these funds and then borrows heavily from them with no re-payment. The liabilities run into the trillions. But you will never find the trillion dollar liabilities on the books. The GAO Director says, “How can the federal Government pretend that a trillion dollar liability doesn't exist. Easy  –  just use off-the-books accounting. Sound familiar Enron??

     4.  Looking at the Executive branch, for the past 5 years, the GAO has refused to certify that Federal agencies are following generally accepted accounting principles. Due to slipshod accounting, GAO was unable to provide assurance that the financial statements were fairly presented. Doesn't that make you feel good??

     5.  As far back as 1985, Budget Director David Stockman said, “We have increasingly resorted to squaring the circle with accounting gimmicks, evasions, half-truths and downright dishonesty in our budget numbers”. Doesn't look like much has changed inside the beltway in 15-17 years.

     To our Congressional leaders we say, “You are right to act in behalf of thousands of shareholders and investors who have been victimized by flim-flam accounting”.

     But how about the millions of just plain citizens, Senators??  By what accounting standards do you judge the accused??   Whose greenhouse should be under the rock assault??  

THE SPLENDID SPLINTER

     Last week, Ted Williams died. To many it may have been a non-event or at least a semi-event. To me it was a major event.

     I was raised around baseball. My Dad was a good player and in his later years managed the Town Team. I was a batboy at 6 and learned basic math by keeping the box scores, and calculating batting averages and earned run averages. Skill-wise, I was a lot longer on desire than I was on talent but still had a few memorable occasions as a player.

     Best of all, I had the oportunity to watch the great ones play  –  Ted Williams, Joe DiMaggio, Stan Musial, Dizzy Dean, Bob Feller, Jackie Robinson  –  to name a few  –  and was fortunate enough to attend All-star games and the World Series. In recent years my interest in baseball has waned due to the Player's Union, agents, strikes, free agency, big bucks and player behavior. Last week, I didn't even see a pitch in the all-star game. Not interested.

      Williams was really something special. It was worth the price of admission just to watch him hit 4 times. His running fued with the Press in Boston was more a matter of irresponsible journalists than an individualistic super talent. He was his own man and set many good examples for others to follow. It's OK to be outspoken when speaking from a position of authority  –  and he was all of that.

     It is not appropriate to grant him fame for all of his being. Let's just say that he was the very best at a special skill  –  hitting a baseball. I hated to see him go. He will always be my selection of the best in a great era of sport  –  baseball, football, track, golf, tennis, skiing, skating, boxing, etc. Now I will have a lot of time to see who I would put in second place. So long to the Splendid Splinter!

LIARS AND JUSTICE

     The last few weeks have been very troubling for me. I feel betrayed.

     I am a very strong supporter of  –  and believer in  –our American Economic System, whether it is called capitalism, free enterprise, economic freedom, or whatever. It is undoubtedly the best eco-socio system in the history of mankind. It provides more opportunity and benefits to individuals than any other system, and in my view there is nothing else in second place. As far as I can see, all socialism does is provide employment for left wing academicians who have never met a payroll and are content to contaminate universities by hogging up on the benefits of free enterprise as parasites while bad mouthing the system that allows them to do it.

     Maybe I am hopelessly biased because I am one of the millions who have benefited from our economic system. From a modest backgroud I was able to fashion a rewarding career in industry, put 4 kids through college, and retire with dignity. Along the way, I had the privilege to work with, and for, many outstanding, high quality, high integrity people. Were there some scoundrels?  Sure, there always are. But overwhelmingly, it was the quality people who moved ahead as leaders.  As it turned out, the Company for which I worked for 33 years has disappeared from the corporate scene  –  but not because of theft or fraud. It failed because of the ego, greed and avarice of 2-3 men. And there is no way we can legislate our way around that.

     But the ongoing revelations of big time corporate theft, greed and fraud are disheartening indeed. And it starts and ends at the top. Whether Enron, Adelphia, Global Crossing, Tyco, Worldcom, or Arthur Andersen, it is just a handful of very powerful men (and maybe an occasional woman) who knew exactly what they were doing. This business of finger-pointing, “don't know”, “can't recall” or taking the fifth is so much hogwash. They knew exactly what they were doing  –  every step of the way. They just got caught. All of corporate American surveys the bottom line numbers and relates them to the stock price. Every day!

     True enough, a million dollars isn't what it used to be. But it still is a big chunk of change. Most Americans simply can't relate to the enormity of a net worth of $50 million, much less hundreds of millions or billions. How many toys can you accumulate? Why do people of immense wealth have to evade taxes, cheat and steal? But even beyond in the quest for super wealth, these guys just didn't sink the ship, they took the crew down with it. It was all so simple  –  just manipulate the numbers and tell no one. And now they sit in a hearing  taking the fifth.

     Why shouldn't Americans be leery of the stock market when funny numbers are so prevalent? Now Congress is on the attack for stronger laws to punish the trangressors. All we can hope is that they don't throw out the baby  with the bath water. As an aside, considering the spending proclivities of Congress and some of the creative accounting now being used (see Social Security) inside the Beltway, Congress and its leaders may not be in the best position to be outraged at financial deception. To many of them, a mirror might be helpful. No matter what, we cannot pass laws to guarantee honesty, integrity and trust. It is difficult indeed to put those qualities in place, and very easy to lose them. But without them, our system surely will fail.

     The current top level thieves have done a great disservice to this country. We no longer have vigilante justice, and maybe that is unfortunate. I personally think we should commandeer all of their assets, lock them up, and throw away the keys.

     Come to think of it those seeking harsh extreme penalties for the corporate transgressors are indulging in just another form of greed  –  greedy for revenge. Certainly, the corporate leaders now facing justice can't quarrel with greed, can they?