New York Times reporter Andrew Ross Sorkin’s suspicions were aroused followed yesterday’s announcement by Attorney General Eric Holder of a massive crackdown on Wall Street fraud and Ponzi schemery. And so he did some digging, and reached a critical revelation:
But after you get past the pandering sound bites, a question comes to mind: is anyone in the corner offices of Wall Street’s biggest firms or corporate America’s biggest companies paying any attention to Mr. Holder’s “strong message”?
Of course not. (I actually called some chief executives after Mr. Holder’s news conference, and not one had heard of Operation Broken Trust.)
Major Wall Street executives haven’t even heard of the most cleverly named government investigation ever? Mr. Sorkin says it’s because the government never takes on big executives at major corporation and instead focuses on minor characters. Sorks talks to an increasingly press-happy David Einhorn:
He said: “The problem with trying to give existing shareholders a free ride on whatever’s going on” – that’s what he argues the government is doing – “is that it takes away the incentive for existing shareholders to be worried when they see management misbehaving. It would be a much stronger, self-reinforcing, positive system if when shareholders saw management misbehaving, they were incentivized to call up management and say, ‘Please stop misbehaving or something bad is going to happen to my investment.’
“Instead, what they do, implicitly, is encourage the further misbehavior.”
Basically, it is in no one’s self-interest to prosecute fraud at the highest levels of Corporate America. Time to go to business school.
mtaylor [at] observer.com | @mbrookstaylor