Tough Prosecutors Changing Corporate Environment

The consequences of bad corporate behavior have never been so severe or so well-publicized.

As yet another high-profile executive is led away in handcuffs on the nightly news, corporate officials are getting the point that fraud doesn’t pay.

Justice Department officials and legal observers say the crackdown by the two-year-old Corporate Fraud Task Force combined with laws that hold the executives themselves liable for malfeasance have had a "significant deterrent effect," according to the Associated Press.

The Justice Department says the task force has prosecuted more than 700 people and obtained guilty pleas or convictions more than 300 times. The task force has 300-plus investigations in the works.

Former Enron chief Kenneth Lay, who eluded prosecution for more than two years, symbolizes the task force’s success. Lay has been indicted on 11 criminal charges.

"Before Enron, it was a rare occurrence when a CEO of any good-sized corporation was prosecuted criminally," said Robert Mintz, a former federal prosecutor who now oversees securities litigation at a New Jersey law firm. "I do think these corporate prosecutions have forever changed the corporate landscape."

The prosecutors have generally started at the middle of the organization, seeking cooperation among the indicted, before focusing on the top executives. The message is that even the most senior levels of the corporation are under the microscope too.

Although top executives are being indicted, the trials have yet to begin, and observers say winning a corporate fraud case is no easy matter. Jurors may have difficulty following the complex accounting maneuvers at the heart of the case.

"You cannot overstate the difficulty of proving these cases," Mintz said. "Linking up the conduct of CEOs with efforts to knowingly defraud investors is not easy to do."

Deputy Attorney General James Comey, who leads the task force, said the task force's overriding goal is "to work like crazy to make sure that those who commit crimes are brought to justice and that people hear about it and learn about that justice, in an effort to restore public confidence."

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