WHITE COLLAR CRIME
Should the U.S. be doing more to regulate; or are tight government resources better spent toward stimulating this economy?
The biggest questions facing our state—and our planet—need answers.
Hear how Golden Gate University faculty like Dan Ray are combating white collar crime through the classrooms.
Even though felons like Enron's Jeffrey Skilling, Worldcom's Bernie Ebbers, and Tyco's Dennis Kozlowski are in prison, corporate America's criminal class is thriving, untouched, and mindful that very few of their kind get caught.
Some believe white collar crime is to blame for the global financial crisis of 2008. So far during the current economic crisis, not only are most banksters unscathed, but they've been rewarded with trillions of taxpayer dollars, interest-free Federal Reserve money and an open-ended checkbook for as much more as they want.
According to a recent FBI report, "Insider trading has been a continuous threat to the fair and orderly operation of the US financial markets and has robbed the investing public of some degree of trust that markets operate fairly.” The FBI currently has 566 open corporate fraud investigations, including matters directly related to the current financial crisis.
“Due to budget constraints and a high emphasis on anti-terrorism efforts, the Federal Government does not always have the resources to fight white collar crimes,” says Adjunct GGU Professor Dan Ray, director in the Litigation and Forensic Consulting Services Group, Hemming Morse, Inc. “This unfortunately allows some allegations of fraud to go uninvestigated, which in turn empowers others to commit crimes. This is where I believe the limited government resources should go — enforcing the rules.”
It looks like the pressure is indeed on to step up action: Following an announcement that white collar crime prosecution is an organizational priority, the FBI released a public service announcement featuring actor Michael Douglas reprising his role from the 1987 movie, “Wall Street,” asking the public to report insider trading and other securities crime to their local FBI field office. A 2010 undercover video of an insider trading bust drives the message home.
And what about preventative measures? Following the 2008 market collapse, Congress had responded by passing its most aggressive regulation, the Sarbanes Oxley Act (SOX), which gave public companies heightened disclosure requirements and enhanced penalties for securities violations. The year following, over three hundred companies revised their earnings reports. The Act has been credited as restoring investor confidence by forcing more accurate and reliable financial disclosure by companies.
Critics, however, maintain that government regulation has a negative impact on businesses and the US economy. After the enactment of regulation, the rate of US companies deregistering from the American stock exchange tripled with companies heading overseas to avoid additional compliance costs.
Paul Regan (MS 79), CEO, Hemming Morse, and his colleagues pioneered the field of forensic accounting, helping bring to justice such high-profile wrongdoers as Howard Hughes, John DeLorean, Michael Milken and, most recently, the Enron executives and investment banks that bilked shareholders out of billions.
“Though SOX probably will inhibit people from doing what Skilling and Fastow did,” says Regan, “it will not stop that many. The temptations are too great. I think it’s a combination of greed, loyalty to the team and the thinking that ‘we’re just going to stretch this a little bit and it’s really not that bad.’ But once you [lie about earnings] one quarter, then the next quarter you stretch it a little bit more. Well, now you’re part of a crime. It’s a serious problem now. People don’t realize that -- you can quickly find your way into a huge securities crime.”
One thing is certain: the prevalence of white collar crime creates the need for a workforce of trained professionals to solve these cases for the Department of Justice, the SEC, the FBI and in private practice. Thanks to Regan and his colleagues, GGU offers today one of the most innovative forensic accounting programs in the nation. Regan and his firm have helped design the curriculum for GGU’s forensic accounting courses taught by expert adjunct faculty from Hemming Morse and other firms, training students with the unique mix of accounting knowledge and investigative skills to identify and resolve legal issues.
"What you get in the classroom is what you are going to get in the office, says Accounting Student Venk Seelam. "In forensics class, we're given real examples of audit statements to learn how to detect fraud. What I think is the most important thing is passion and I get that from my professor — it has definitely motivated me."
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Craig M. Enos, CPA/ABV/CFF, CFE
MS Tax 11; Professor, Forensic Accounting
Owner, Enos Forensics
Dan Ray, CPA/CFF, CFE
Professor, Forensic Accounting
Director in the Litigation and Forensic Consulting Services Group, Hemming Morse, Inc.
Master of Accountancy 2012