SEC chief says worst of fraud is likely past

“Top administration officials indicated the nation is past the worst of the corporate-fraud scandals that blossomed last year, as the White House marked the one-year anniversary of a task force designed to curb corruption,” writes Greg Hitt in today’s Wall Street Journal.

“During the past 12 months, according to a White House briefing paper, task-force prosecutors have obtained more than 250 corporate-fraud convictions or guilty pleas, including those of 25 former chief executives, while sifting through hundreds of cases.”

“The multiagency task force was created by executive order in July 2002 to consolidate the federal government’s prosecution of white-collar crimes after the collapse of Enron Corp. and WorldCom Inc., now MCI, the defining failures in a wave of business scandals that shook the economy and the political establishment.”

“Much work remains. Many top executives at Enron, for example, are still under investigation. But speaking at the White House Tuesday after briefing President Bush, Deputy Attorney General Larry Noble, leader of the task force, said the aggressive pattern of prosecution ‘has gone a long way in helping to restore the confidence of Americans in their financial markets.’ “

“William Donaldson, chairman of the Securities and Exchange Commission, suggested the renewed public confidence at least partially accounts for the recent strength in the stock market. ” ‘There is a confidence, a building confidence out there, that the cop is on the beat,’ Mr. Donaldson said.”

“The corporate-fraud crisis, which began with the failure of Enron in late 2001 and grew into a wave of disclosures of shady accounting and business practices, became a major drag on the U.S. economy. It spurred Congress to enact the Sarbanes-Oxley Act, a sweeping legislative tightening of corporate-governance practices.”

“The SEC chief wouldn’t discount the prospect of future problems. But Mr. Donaldson said federal officials will remain ‘constantly on the lookout,’ and he suggested the deepest point of the corporate crisis is past.”