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Tuesday, Jan 31, 2023

Time to Say You’re Sorry

Time to Say You’re Sorry


by Mark Lacter

“No more easy money,” President Bush declared last week as he signed into law a smorgasbord of measures that are supposed to deter bizfolk from engaging in corporate chicanery. It’s the same bill that Bush and his Republican buddies on Capitol Hill opposed just a few weeks earlier and yet, sitting there at the East Room of the White House, he sounded as if he had been a believer all along.

“The era of low standards and false profits is over,” declared the president. “No boardroom in America is above or beyond the law.”

You don’t know whether to laugh or cry. Washington old-timers will point out that the quite pragmatic Bush couldn’t afford to challenge the many misguided features of the Democratic-propelled corporate fraud bill not with the mid-term elections three months off and his own popularity showing some wear.

So he smiled that crooked smile of his and just pretended. Just as he and his advisors had been pretending that the economy was in good shape until the Commerce Department blew their ruse by reporting that last year’s recession was much deeper than first believed and the current recovery is much weaker than first believed.

Candor the dictionary describes it as “sharp honesty or frankness in expressing oneself.” Except you would have a hard time finding it among the cast of characters connected to the various corporate scandals.

On the same day that Bush positioned himself as a defender of the little guy, several executives from Merrill Lynch were claiming on Capitol Hill that their involvement with Enron was above board even though internal documents and emails paint a different picture.

Consider Schuyler Tilney, a Merrill managing partner, who was a close friend of former Enron Chief Financial Officer Andrew Fastow and among a group of 96 Merrill executives who invested $96 million in one of those off-balance sheet partnerships that’s at the core of the energy company’s misdeeds. He also is supposed to have played a role in replacing a Merrill analyst who had the temerity to question Enron’s finances. And did I mention that Mrs. Tilney happened to be a senior Enron executive and a friend of Chairman Kenneth Lay?

When it came time for a Merrill higher-up named G. Kelly Martin to respond to these and other curiosities, all he could say was “at no time did we engage in transactions that we thought were improper.” As for Tilney, he took the Fifth.

How do you defend the indefensible? Even if these guys suddenly recognized the errors of their greedy ways, they wouldn’t want to admit it publicly not at the risk of lawsuits and perhaps even jail time.

And yet, the one element that seems missing from these Washington proceedings whether in Congress, the White House or the SEC is contrition. Which, of course, you don’t get without candor.

As reported this week by Benjamin Mark Cole, Western Asset Management, the big Pasadena bond manager, provided a little dose of candor about its investment in WorldCom. “The firm’s (and other investors’) reliance on audited financials now appears foolish,” concluded a report by Chief Investment Officer Kenneth Leech that was posted on the firm’s web site.

Who knows, maybe Leech was just trying to pass off Western’s responsibility. Still, during a week in which everyone from the President on down was trying to tap dance their way around the mess many of them helped create, somehow those words stood out.

Mark Lacter is editor of the Business Journal.


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