Replacing
Pinstripes with Prison Jumpsuits
By
Phil Mattera, Dirt Diggers Digest
We’ve just been treated to the rare sight of a corporate executive pleading guilty to criminal charges stemming from actions that harmed the public. This outcome was particularly satisfying given that the case was one that symbolized much of what is wrong with U.S. business and regulatory practices.
The
culprit is Gary Southern, who was at the center of an incident last year in
West Virginia whose details, I wrote at
the time, sounded a parody: the company responsible for a toxic chemical leak
into the Elk River that contaminated the water supply of hundreds of thousands
of people and sickened many turned out to be named Freedom Industries and had
been cofounded by a two-time convicted felon.
That felon was Carl Lemley Kennedy II, who was apparently no longer active in the company by the time the spill occurred. The man who had taken over was Southern, who is now a felon as well thanks to his plea on charges of violating the federal Clean Water Act.
Five other Freedom executives had earlier admitted guilt and
negligence in connection with an accident that U.S. Attorney Booth Goodwin
(photo) called “completely preventable.” Southern faces up to three years in
prison.
Goodwin
had rejected calls to focus on restitution to the community and insisted on
seeking prison time for Southern et al. “Executives are used to writing
checks,” he said. “It sends a
stronger message if they have to trade their three-piece suits for a prison
jumpsuit.”
A
similar get-tough-on-business-crime attitude was recently displayed by
Manhattan District Attorney Cyrus Vance, who brought manslaughter charges against two
construction managers (and the companies they worked for) in connection with
the death of a worker earlier this year in an accident that occurred after the
managers had, Vance alleged, ignored repeated warnings from inspectors about
unsafe conditions on the site.
Let’s
hope Goodwin’s message also gets through to prosecutors bringing cases against
companies with a much bigger footprint than that of Freedom Industries and the
New York construction firms. For a long time, large corporations and their top
executives seemed to be immune from criminal prosecutions, no matter how
serious the offense.
The
Justice Department has started to give in to the pressure and get some big
companies to plead guilty to criminal offenses, as occurred in May in a case involving allegations against
Citicorp, JPMorgan Chase and other large banks in connection with the
manipulation of foreign exchange markets.
Now
it’s time for prosecutors to take the next step and bring individual criminal
charges against Fortune 500 top executives involved in serious misconduct.
There’s
no guarantee that a criminal conviction will completely reform a wayward
businessperson. The Wall Street
Journal has a piece about an accounting executive who,
after being convicted of embezzlement and banned for life from the accounting
profession, altered his name slightly (changing Stephen to Steven and adopting
a different middle name) and went on providing accounting services with bogus
credentials. The SEC eventually caught on and is going after him in court.
Yet
we need to see whether individual prosecutions of top executives works. One way
or another, we’ve got a find a way to bring an end to the corporate crime wave.