Time for Democrats to take stand against run of corporate crime

July 26, 2005|By Jamie Court

IN A BETTER WORLD, today's Senate confirmation hearings on the nomination of Rep. Christopher Cox (R-California) to lead the Securities and Exchange Commission would be the Democratic Party's finest hour. The hearings offer a perfect opportunity to decry Wall Street's looting of Main Street and to put the GOP on trial for creating the conditions under which corporate criminals flourished.

Instead, Democrats have been eerily silent on Mr. Cox, a right-wing Republican who wrote a 1995 law making it harder for investors to take corporate swindlers to court. Mr. Cox's Private Securities Litigation Reform Act, which became law over President Clinton's veto, has been blamed for allowing some of the nation's worst financial scandals - including those at Enron and WorldCom - to proceed unchecked. The law let corporate executives off the hook for exactly the kind of utterly misleading statements Enron Chief Executive Kenneth Lay made to keep his company's stock price artificially high.

Mr. Cox - whom President Bush has tapped as the best possible choice to be Wall Street's top cop - is the poster child for how laissez-faire, country-club Republicanism took trillions out of the pockets of Americans. If the Democratic Party can't find it within itself to stand against putting Americans' life savings in Mr. Cox's hands, the party doesn't stand for anything.

Consider his record: As a congressman, Mr. Cox voted repeatedly in the interests of Wall Street investment houses to undermine conflict-of-interest standards protecting investors and pension plans. He has voted against post-Enron proposals that would require executives to certify financial statements, strip bonuses from CEOs who falsify statements, and stop stock analysts from holding shares in the companies they cover (although he did ultimately vote for the Sarbanes-Oxley corporate reform bill when it became a fait accompli).

None of this is particularly surprising given that Mr. Cox's campaigns have collected more than a quarter of a million dollars from the securities and investment industry he soon may be regulating. WorldCom was the 10th biggest contributor to the congressman in 2002, the year that auditors revealed the company's fraud. WorldCom Chief Executive Bernard Ebbers was recently found guilty of deceiving investors in an $11 billion accounting fraud.

Mr. Cox's approach to corporate crime predates his time in Congress. As a private securities attorney in the mid-1980s, he worked for William Cooper and his company, First Pension Corp. Mr. Cooper was accused of running a Ponzi scheme, convicted of fraud and imprisoned. After Mr. Cooper was caught, Mr. Cox, then a congressman, claimed he had not known his client was a fraud. Nonetheless, Mr. Cox was sued by investors for what they said was his role in misleading regulators on his client's behalf. His law firm settled the case.

Documents from the lawsuit show that Mr. Cox, acting as Mr. Cooper's securities lawyer, represented the plan - which ultimately went bust - as "low risk," and sought to minimize state oversight of it. Mr. Cox failed to disclose to regulators that Mr. Cooper's real estate license had been suspended in another alleged fraud and that First Pension was under investigation by the SEC. Whether this violates the rules of professional conduct governing attorneys is an open question the Senate should explore. But America shouldn't choose as its chief investment cop a lawyer who tests the very limits of those rules.

Mr. Cooper and First Pension Corp. took investors for up to $130 million. Doesn't Mr. Cox need to answer for his role as Mr. Cooper's attorney and for his statements later that he did not know about the executive's crimes? Shouldn't we demand full disclosure before entrusting Mr. Cox with policing the stock market in which Americans have invested their savings?

It is time for a public explanation of how a lap dog for investment houses can be the nation's investor watchdog.

Jamie Court is the author of "Corporateering: How Corporate Power Steals Your Personal Freedom and What You Can Do About It" (Tarcher/Penguin, 2004). This article first appeared in the Los Angeles Times, a Tribune Publishing newspaper.

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