2006 Budget: Coddling Corporate Criminals

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Wed, 16 Feb 2005 11:17:09 -0800 (PST)

2006 Budget: Coddling Corporate Criminals

 

 

 

 

2006 Budget: Coddling Corporate Criminals

 

The Bush administration's 2006 budget proposal includes deep cuts in

social services and community development programs, while increasing

military spending and preserving his first-term tax cut for

corporations and the nation's wealthiest.

 

In just a few years, the U.S. budget has dropped from a surplus to a

dramatic deficit.

 

The budget includes several anti-regulatory initiatives, as well as

deep cuts in the enforcement budgets of certain regulatory agencies

including the EPA.

 

How Bush's budget goes soft on corporate crime The FBI predicts that

" major corporate crime will impact the U.S. economy over the next five

years. " The FBI is currently investigating over 189 major corporate

frauds, 18 of which have losses over $1 billion. The FBI asserts that

" aggressive investigation and prosecution of major corporate fraud

will be a key factor in restoring long-term confidence in our business

leaders. "

 

Yet the Bush administration's 2006 Budget allocates just a fraction of

the $1.6 billion budgeted for U.S. Attorneys. (In its request, the

Department of Justice fails to break this figure down any further.

Since there is no division of the Department of Justice or FBI whose

exclusive mandate is to deter corporate crime, it is difficult to

assess how much is specifically spent on detering and prosecuting

corporate crime. For example, no specific effort is made to track

corporate crime. It is also clear from the Department of Justice's

budget request press release that corporate crime and fraud are not a

priority, since they aren't even mentioned.

 

As Prof. John Coffee of the University of Columbia Law School points

out: " The consensus of criminologists is that likelihood of

apprehension is far more important than the severity of punishment ...

From a policy perspective, this means that the passage of tough

mandatory sentences that impose exemplary sentences on white collar

offenders will do less to achieve deterrence than investment in

enforcement and detection. "

 

Another example of how the Bush administration's 2006 budget

undermines efforts to crack down on corporate crime (and restore

investor confidence in financial markets) is a proposal to cut the

SEC's enforcement budget by $ 8 million .

 

Although the SEC's budget has increased significantly in recent years,

that increase came nearly a decade of neglect, when SEC budgets failed

to keep up with an exponential growth in markets and regulatory

responsibilities. The drastic shortfall in SEC's funding was widely

recognized by Congress and the GAO to be a major factor in the

epidemic of corporate fraud witnessed in recent years.

 

In 2001, for example, commission staff managed to review just 16

percent of corporate annual financial reports submitted each year (it

failed to review Enron's report after 1997). GAO concluded that the

failure to increase the SEC's resources resulted in high staff

turnover, resulting in regulatory delays that " hampered market

innovation. " Thus, the Bush administration's proposed enforcement cuts

could damage the economy by undermining investor confidence in U.S.

financial markets.

 

But don't take our word for it. Take the word of Bush's own FBI: " The

erosion of public confidence in the management of public companie

will, if left unchecked, have a negative impact on the stock markets

and capital raising, which will in turn have a negative impact

throughout the U.S. economy. "

 

http://www.corporatepolicy.org/topics/budget.htm