Prepared Remarks of Attorney General John Ashcroft
Corporate Fraud/Responsibility Conference Enforcing the Law, Restoring Trust, Defending Freedom September 27, 2002
(Note: The Attorney General Often Deviates From Prepared Remarks)
For over two hundred years, the Attorney General and the Department of Justice have enforced the laws that separate freedom from tyranny, order from anarchy, and the welfare of the people from narrow self-interest. And in this time, America's experiment in liberty and equal justice has been overwhelmingly successful.
A nation built of emigrants has been bound together in respect for the rule of law, trusting that the law will be enforced fairly and consistently. And the unity borne of this trust has made the United States the most powerful and the most free - the most productive and most generous nation in the history of humanity.
But today, just as Americans are coming together in mutual trust to stand up to international terrorism, our trust in a critical sector of our society - our business leaders - has been shaken. The past months have revealed a series of allegations of deception, fraud and malfeasance among a few individuals in whom we have placed our trust, and who have in turn assumed a fiduciary obligation to us. These are allegations of criminal conduct spanning years and, as their numbers have mounted, they have eroded confidence in the integrity of U.S. markets. Some investors both at home and overseas have done what was previously unthinkable: questioned the security, stability, and honesty of American markets.
The malignancy of corporate corruption threatens more than the future of a few companies - it destroys workers' incomes, decimates families' savings and casts a shadow on the health, integrity and good name of American business itself. The success of the free market depends on a marketplace of integrity - a marketplace that operates on information of integrity. Reliable, truthful information is the unseen force that drives the economy.
But when information is falsified, the invisible hand that guides our financial markets is replaced by a greased palm. The goal of law enforcement, then, is clear: information cannot be corrupted. Trust must not be abused. Confidence must be sustained. America's marketplace of integrity must never be contaminated by a culture of greed.
Under the leadership of our Corporate Fraud Task Force, created earlier this summer by President Bush and headed by Deputy Attorney General Larry Thompson, the Department of Justice is taking a tough, new, cooperative approach to the real time enforcement of our corporate fraud statutes. The result is a lengthening list of both individuals and corporations that have become the targets of Department of Justice investigations and prosecutions:
- MARCH 2002: The Department indicted Arthur Andersen LLP, the auditor of Enron, for obstruction of justice.
- APRIL: Andersen's Global Managing Partner pleaded guilty to obstruction of justice.
- JUNE: Andersen was convicted of obstruction of justice by a federal jury.
- AUGUST: Former Enron executive Michael Kopper pleaded guilty to conspiracy against Enron and its shareholders.
- AUGUST: Two WorldCom executives were indicted on seven counts of securities fraud, conspiracy to commit securities fraud, and filing false statements with the SEC.
- JUNE: A former trader for Allfirst Bank was indicted on seven counts of bank fraud and falsification of records.
- JUNE: Former ImClone CEO Samuel Waksal was charged with insider trading. ImClone Systems, Inc. is under investigation for allegations of insider trading.
- JUNE: Top officials of Rite Aid Corporation charged. Four of the five officers indicted; fifth pled guilty to an illegal accounting scheme.
- JULY: Top executives of Adelphia Communications charged with securities fraud, wire fraud and bank fraud.
- JUST THIS WEEK: Three former executives of Homestore.com, the nation's largest internet-based provider of residential real estate listings, pled guilty to securities fraud.
The vast majority of American business leaders are responsible, honest men and women. But left unchallenged, corporate cultures that foster criminal behavior have an impact felt far beyond the corporation itself. Investors lose savings. Employees lose jobs. Families lose providers. And American markets lose integrity in the eyes of our citizens and the world.
In the face of such damage, prosecutors, investigators and regulators do not have the luxury of time. We simply cannot afford to wait to challenge corporate corruption until jobs are lost, retirement funds are depleted and confidence is destroyed.
The Department of Justice is working in extraordinary cooperation with the Securities and Exchange Commission to bring about real time enforcement of the nation's corporate fraud statutes. That means that investigations and prosecutions are carefully executed but quickly paced in order to end criminal activity before jobs, investments and assets are squandered.
We must work together. We must work swiftly. We must pursue allegations of corporate fraud regardless of the size or the prominence of the company under scrutiny. And in response, those corporations under investigation have a fateful decision to make.
Companies such as Homestore.com, whose leadership is choosing to cooperate with law enforcement in order to contain the damage to employees and investors, are to be commended. The nature and extent of a company's cooperation is always a significant factor in deciding what charges will be brought.
In contrast, companies such as Arthur Andersen that chose to impede and obstruct the investigation of corporate corruption deny themselves the benefit of cooperation, sometimes inviting their own demise. The Department of Justice has long recognized the principle that an employee's criminal conduct does not mean that the employing company should automatically be charged with a crime.
But those corporations that choose to prolong the damage to the public by refusing to cooperate with investigators should be forewarned: if you obstruct, if you impede -- you leave your company vulnerable to public indictment, prosecution, and conviction.
We appreciate the gravity of charging a corporation with a crime; we understand the grave possibility that the corporation may not survive. But where corporate corruption extends to a corporate cover-up, we will not hesitate to seek a corporate conviction. The Department of Justice will use all of the tools within the law - including the indictment and prosecution of corporations themselves - in order to protect American workers and investors and restore trust in American markets.
In the end, of course, the integrity of American business cannot be upheld by government alone. It is up to American business leaders to set high ethical standards, to heed President Bush's call to "usher in a new era of integrity."
The genius of America is that our free markets are combined with free people to create a universe of choice. We are blessed to be able to choose how to invest our money, and in whom to vest our political power. And free markets, like free people, require information of integrity in order to function.
Just as we rely on a free press to make informed political choices, so do we rely on truthful information to make informed economic choices. But when balance sheets are falsified and financial transactions are fraudulent, information becomes lies, lies deny choice, and our liberty is a casualty.
We cannot - we will not - surrender freedom for all to the tyranny of greed for the few. Just over a year ago, Americans were called to defend our freedom from assault from abroad. Today we are called to preserve our freedom from corruption from within.
You are the answerers of this call; you are the defenders of this freedom. I am grateful to you all for your leadership, and I thank you for your sacrifice and your steadfast commitment to returning integrity to American markets through justice for American workers, investors and retirees.
America is a nation that values personal responsibility, equality before the law, and above all, liberty. With each act of leadership, you reaffirm these values. And with each act of justice, you send the unmistakable message that no board room is beyond the law, no executive is above the law, and no American is beneath the opportunity to pursue a better, more prosperous life.
Thank you for your work. Thank you for your sacrifice. God bless you and God bless the United States of America.