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Corporate Fraud

Americans have become thoroughly disgusted by the gross fraud committed by the likes of Enron, WorldCom, Arthur Andersen, Martha Stewart, and their ilk. These groups are the poster children of Wall Street fraud, but are really only representative of a much larger problem that involves almost all Wall Street brokerage firms, congresspeople, and large corporations in America. Years of pervasive fraud, whether subtle or obvious, has undermined the world’s confidence in the US stock market, causing untold billions of dollars in loss for common families and pensionholders. Some loss has directly resulted from fraud, but most loss is merely because the fraudulent cases have caused a general lack of trust in the marketplace, creating additional sellers and fewer incentivized buyers of corporate stock (causing massive financial loss for the sellers).

Virtually all brokerages and market listed companies have passively or actively allowed fraudulent analyst reports and recommendations to boost their stock prices, or those of their clients, even though they falsely claimed that the analysts were independent. Apparently it was a well-known insiders game that ultimately caused enormous loss for all consumers who weren’t in on the secret. Anyone who was actively engaged in this deceit should be prosecuted; and everyone that passively was aware of it, but did not blow the whistle, should be fired. (Therefore a huge portion of the high-level employees of Wall Street firms should be jailed or fired. If we do this now, we are likely to delay or reduce future Wall Street scandals and consumer frauds.)

There are also numerous ways that large corporations can and have “cooked their books”. They may set up fraudulent subsidiaries to trade with, and therefore create phony profits or tax dodges. They can find ways to treat future expected revenues as current revenue streams. They can pretend current expenses are future expenses, and on and on. All of these tricks artificially manipulate the stock prices to the benefit of insiders who sell off their stock when (only they know) it is artificially high. This of course leaves common consumers holding stock that is generally worth much less than what they paid – or at least much less than they were led to believe, by the fraudulent financial reports of large corporations, and the low-life analysts that delivered false ratings and commentary to the market.

Another very disturbing part of this story is the relationship between the US Congress and the large cheating US corporations. If US laws were tighter in the first place, or if there was any decent oversight of the securities industry, this corporate fraud would have been vastly less painful to voting US taxpayers. The reason Congress was able to ignore the fraud, and the lax laws that fueled it, is because they are virtually all indirectly being paid off through donations to their campaigns and political parties, or by various other money-based influences that only multi-billion dollar corporations are able to leverage. These are all essentially legal bribes. Congress hasn’t passed the necessary campaign finance laws to prevent themselves from accepting (currently legal) bribery. This permanently taints their objectivity in matters pertaining to the regulation of mega-corporations.

Our advice: throw the bums out of Congress. We urge US citizens to only support candidates that are working towards massive Wall Street and Congressional reform. And clearly we do not want to re-elect anyone with strong ties to the corporate world, unless they have demonstrated their ability to be independent and fight corruption. Send Congress the message that we wont stand for any more of their passive collusion with, or lax oversight of, Wall Street.

The good news, if there is any, is that in July 2002 President Bush signed the “Corporate Fraud Accountability Act of 2002”. This set of edits to existing US laws calls for:

-Heads of corporations to personally certify the accuracy of their company’s financial reporting.

-Stiffer penalties and jail time for many types of corporate fraud.

-Penalties for those who interfere with “whistleblowers” on corporate fraud.

-Penalties for shredding of relevant documents.

-Additional powers for the Securities and Exchange Commission.

We think this act is a positive step but is somewhat meaningless without very firm enforcement. The enforcement of these laws has not happened yet as far as we can tell. To date, very few of even the most egregious violators of our trust have been sent to jail.

Dear Congress and Judiciary:

Please prosecute the scum that stole the money of hard working Americans and retirees - and reform yourselves while you are at it.

With Love,



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