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News & Politics

Flim-Flamming CEOs Walk Free

There's a word for people who take money from others under false pretenses. The word is: criminal.
But this word does not apply to corporate CEOs, even if they are guilty of the kind of flimflam that would send common hucksters to prison. Instead of bilking people in Ponzi schemes, some CEOs fleece investors by claiming to have achieved enormous profits in the previous year, when the company actually made much less or even suffered a loss. These executives cook the books to make the corporation's performance (and theirs) look far better than it is, thus artificially jacking up the company's stock price and duping investors into putting more money into the scam. The executives, who get rewarded based on meeting profit goals, walk away with millions.

Take William Wise, honcho of El Paso Corporation. In 2001, this energy giant reported a $93 million profit--and Wise cashed in with a $3.4 million bonus plus $6 million in other incentive pay, on top of his $1.3 million regular salary. Two years later--oopsie-doopsie--El Paso admitted that instead of making a $93 million profit that year, it actually had lost $447 million.

This got Wise booted from his job, but what about that $10 million or so he looted from stockholders by falsely claiming to have made a profit? Not only has he avoided any prosecution, but he has not paid back a dime of his ill-gotten gain--nor has the corporation even asked for repayment.

Wise is not alone in profiting, rather than being prosecuted, from this kind of high-class hucksterism. Time Warner, Bristol-Myers Squibb, Xerox, and Qwest are among the corporations that paid fat bonuses in the past couple of years to CEOs based on false claims of profits. They let the CEOs walk, they say, because they don't want more bad publicity, or because they fear it'll be too costly to sue the CEOs for repayment.

Who says crime doesn't pay? It can pay very nicely ... if the crime is in the suites.




Jim Hightower is the best-selling author of Let's Stop Beating Around the Bush, from Viking Press. For more information, visit jimhightower.com.
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