White Collar Witch Hunt

By Moore, Stephen | The American Spectator, September 2005 | Go to article overview
Save to active project

White Collar Witch Hunt

Moore, Stephen, The American Spectator

Why do Republicans so easily accept Neobolshevism as a cost of doing business? BY STEPHEN MOORE

It's BECOME ALMOST ACCEPTED WISDOM that the Sarbanes-Dxley law, passed in the wake of the corporate iccounting scandals of the late 1990s, is one of the nest economically imbecilic new regulations ever macted in Washington. CEOs of major U.S. corporaions now routinely point to these new onerous iccounting standards and the attendant reams of paperwork, legal bills, and auditing costs-which can easily stretch into the tens of millions of dollars per firm-as one of the major new public policy impediments to growth and profitability. Sarbanes-Oxley, proclaimed one CEO, who for obvious reasons insists on anonymity, "is a politically well-crafted wealth destruction machine."

What is not well known is the real chilling effect of this law, and other white collar crime laws like it, which carry social and economic costs that go well beyond the quantifiable monetary price tag of compliance. Sarbanes-Oxley also imposes hefty criminal penalties, including 10-to-20-year jail terms, for management and directors associated with, for example, signing false financial statements. In a recent interview, one CEO showed me a stack of financial statements nearly four inches thick and noted that he could go to jail if there were any arithmetic errors contained therein. The criminalization of falsely signed financial documents is meant to deter accounting fraud; instead, its impact is to deter top-quality talent from serving on boards and in management positions. As Hick Sharp, the chairman of Carmax, notes, "Managers and directors now ask the logical question: Is this job really worth risking going to prison over if I inadvertently sign a misleading quarterly earnings report? Is that a gamble really worth taking?"

The entire Sarbanes-Oxley fiasco-which passed on a 98-2 vote in the Senate and almost unanimously in the House-is symptomatic of a new cancer that has invaded our criminal justice system. This cancer could be more hazardous to our financial health than even the excesses of the tort system and the trial lawyer bounty which extracts tens of billions of dollars a year in dead weight loss from our economy.

The more dangerous problem is that our legal system is being transformed from one that provides protection for our personal and economic freedoms, to one that in the name of fighting white collar crime is increasingly at the service of the state in the pursuit of exacting tribute from our economic system. SarbanesOxley and other such laws criminalizing economic behavior have become a toll on the free market system. Rather than protect the interests of shareholders, they reduce corporate profitability and thus shrink shareholder wealth.

As a corollary, I might add that the certainty and reliability of the system so essential to our freedom is compromised as the rules of the road evolve from case to case and we move toward a system of ad hoc justice that changes from prosecution to prosecution. New York's Eliot Spitzer, at least a dozen other anti-growth states attorneys general, and a bevy of prosecutors around the nation have become America's new regulators on the beat and their stick reaches to whole swathes of the U.S. economy. They have come to realize that the power to indict is the power to destroy.

Contributing to this atmosphere of a prosecutorial witch-hunt against CEOs and the successful firms they run is the erosion of any clear requirement of criminal intent on the part of the wrongdoers. Even inadvertent errors under Sarbanes-Oxley and other white collar crime laws can lead to massive fines and jail terms. It should not be surprising that the anticapitalist left has enthusiastically embraced this fearsome weapon of using the criminal law for the endgame purpose of striking down the productive class in America that they so envy and despise. But what of supposed free-market Republicans in Washington and in the states?

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

White Collar Witch Hunt


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?