Sarbanes-Oxley (SOX) is now 10 years old.Â How’s that false certification thing working out?Â The act that was going to stop companies from issuing false financial statements has been a bust.Â Richard Scrushy, the former CEO of HealthSouth, one of the first executives to face false certification charges under SOX, was acquitted.Â Richard Fuld, former CEO of Lehman and James Cayne, former CEO of Bear Stearns, agreed to pay $275 million to settle civil charges.Â Nothing criminal going on there. Angelo Mozilo, the CEO whiz behind Countrywide’s loser portfolio of mortgages, had his SOX certification charges dismissed because the judge ruled thatÂ false certification requires proof of securities fraud. And last week, a jury acquitted a Citi mid-level executive of fraud charges for selling securities to customers who did not know Citi picked the loser mortgages in the portfolio and then bet against the funds they were selling to their ill-informed customers.
The Barometer echoes what the jury in the Citi case said:Â There is something really wrong going on here, but it didn’t violate the law.Â The jury was correct.Â Crimes are testy things to prove.Â From an ethical perspective, however, those who were acquitted or had their charges dismissed occupy the hall of shame.Â They missed this very simple ethical standard:Â If you were an investor, would you want to know the information that you are withholding?Â An unequivocal “Yes!” is the only response.
Walk free, oh ye sophisticated financiers!Â Even SOXÂ certification could not ensnare you.Â Â But ultimate accountabilityÂ under a higher law awaits. From what the Barometer understands, the judge and jury at that level know what’s in the heart and mind.Â Surely what they will find is the intent to deceive thatÂ was so elusive when it comes to the standards of proof under SOX.