It's the kind of announcement that should put white-collar
criminals on notice. The Securities and Exchange Commission (SEC) is
now investigating more than 80 companies in the growing stock-
The government has charged officials at two companies for
backdating options - a practice that funneled guaranteed profits to
executives. More indictments are expected.
But far from ratcheting up the fight against financial
wrongdoing, the federal government is actually shifting resources
away from it. The number of white-collar crime prosecutions is down
28 percent from five years ago, according to an analysis of federal
data by the Transactional Records Access Clearinghouse at Syracuse
The reason? The government's focus on homeland security, experts
say. In the same period white-collar crime prosecutions fell, for
instance, immigration prosecutions more than doubled.
"There's been a shift of priorities since Sept. 11 at the
[Federal Bureau of Investigation], in the sense that they've moved
bodies from fraud and white-collar crime units to terrorism units,"
says James Sanders, a partner at McDermott Will & Emery in Los
Angeles and a former federal prosecutor. "At the same time, the
[white-collar crime] cases have gotten bigger and more complex."
During the 1980s and 1990s, many of the white-collar crime cases
involved things like bank fraud, insider trading, and stock
manipulation, many of which were not document-intensive. Trials
could take as little as four or five days, says Mr. Sanders. But
cases like Enron and WorldCom involved complex financial
manipulations at high levels. Prosecutors had millions of documents
to wade through, which in some cases took years to do.
"Those are very, very complex, document-intensive cases," says J.
Boyd Page, senior partner at Page Perry LLC in Atlanta, which was
involved in some civil litigation connected to the WorldCom case.
"The documents that were made available for our review were
something like 1,250 boxes packed one end to the other."
The Enron and WorldCom convictions, as well as the passage of the
Sarbanes-Oxley Act in 2002, which holds CEOs directly accountable
for their public financial statements, may have had a deterrent
effect on some wrongdoers in corporate America, say experts. But
they doubt that the drop in white-collar prosecutions reflects an
equivalent drop in financial wrongdoing.
Instead, they say, the drop is a reflection of changed
priorities. One key factor: The staff available to investigate such
cases has shrunk. …