Sarbanes-Oxley is Ten Years Old: Happy Birthday! Few Charges! Plenty of Acquittals!

Sarbanes-Oxley (SOX) is now 10 years old.  How’s that false certification thing working out?  The act that was going to stop companies from issuing false financial statements has been a bust.  Richard Scrushy, the former CEO of HealthSouth, one of the first executives to face false certification charges under SOX, was acquitted.  Richard Fuld, former CEO of Lehman and James Cayne, former CEO of Bear Stearns, agreed to pay $275 million to settle civil charges.  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 that 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:  There is something really wrong going on here, but it didn’t violate the law.  The jury was correct.  Crimes are testy things to prove.  From an ethical perspective, however, those who were acquitted or had their charges dismissed occupy the hall of shame.  They missed this very simple ethical standard:  If you were an investor, would you want to know the information that you are withholding?  An unequivocal “Yes!” is the only response.

Walk free, oh ye sophisticated financiers!  Even SOX certification could not ensnare you.  But ultimate accountability 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.  Surely what they will find is the intent to deceive that was so elusive when it comes to the standards of proof under SOX.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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