by Joe Shea
American Reporter Editor-in-Chief
July 10, 2002
An AR Special Report
The American Reporter has obtained the original copy of a letter from American investors to President George W. Bush, informing the President of steps they are taking in response to his "tough" speech yesterday about corporate scandals that have decimated the stock market and cost Americans almost a trillion dollars. Here is the full text: Dear Mr. President:
On behalf of the American people, thank you for your forceful rhetoric of July 9, 2002, on the Wall Street scandals that have bankrupted several major companies and cost investors nearly a trillion dollars in diminished stock values. Our Board of Directors met this afternoon, Thursday, July 10, 2002, and voted on the content of your message, giving appropriate weight to your intent, your personal probity, and most importantly, your proposed solutions.
We want you to know that we heartily agree with the measures you proposed, including recovery of salaries paid to CEOs who engage in such fraud, doubling prison terms for convictions; criminalizing document destruction, setting strict limits on the number of insiders who can sit on a board like ours, and requiring that CEOs certify their SEC filings as truthful. Hiring 100 more SEC investigators will be of some help. These are all salutary innovations, especially by a Republican president.
We also liked the idea of treating employees exactly the same as bosses in stock option "blackout" periods, and the new SEC rules against stock analysts who tout holdings owned by them or their firms you announced . You were right to demand better teaching about such issues in the business schools, too, and to ask all corporate officers and directors to take a harder look at the companies they are entrusted with by stockholders, and that loans to them by the companies they serve be forbidden. Independence is indeed the key, as you stressed, to corporate reporting that is accurate and fair.
However, we failed to discern in your remarks a concern for the structural and regulatory deficiencies that precipitated the scandals. These root causes, we believe, include the current "self-policing" regime that has failed to correct accounting practices that are profoundly implicated in all of the scandals, have driven down stock values and reduced giant corporations like Enron, Tyco and Adelphia to heaps of smoking cardboard.
Your speech and your proposals provided no indication that any of these practices will change, but only that the CEOs who sign off on them may be prosecuted. It is not inconceivable, of course, that middle managers protecting their jobs and perks could create false records that are unwittingly adopted by the accountants and signed off on by the CEO, who then goes to jail for the crimes of others.
But why should accountants, who have no greater claim to honesty than CEOs not also go to jail when they are responsible for fraud? And why did you exempt them from the chain of responsibility that so clearly includes them? Your "10-point Accountability Plan for American Business" was precisely the kind of rhetorical claptrap that Americans have come to completely distrust when their lives and money are at stake. Like the "Patient's Bill of Rights" and any number of other such devices, their significance is unlikely to outlast the speech in which they are announced.
Moreover, the fact that you did not propose anything that is going to send Arthur Andersen and Merrill Lynch and Xerox and Tyco and Enron executives to jail anytime soon did not inspire the confidence of your investors. Many of us believe that your sale of stock in an energy firm shortly before its price collapsed, and then your failure to ensure that the SEC had notice of your sale in a timely way, were part of a corrupt relationship with the firm's other owners and directors.
Corporate governance, as they say, is not rocket science. Income and expenses are profit are pretty easy to distinguish from one another. People whio saddle a corporation with debt in order to maximize their salaries or steal from it ought to go to jail, along with the accountants who help them. Your speech aimed at such clarity but missed the mark.
Accordingly, at a meeting yesterday and today of all the investors in America, a vote was held on the ultimate outcome of your speech. It was determined that everyone was present and voted both days, and the vote was duly recorded. Had the outcome improved on the first day or reversed on the second day, the results might have been different. Such was not the case.
By a vote of 1,353,859,590 shares on Tuesday, you lost 178.81 points. By a vote of 2,073,607,980 today, you lost 282.59 points, for a grand total loss of 461.40 points. On the NYSE today, votes against your speech totaled 1,778,060,730, while those in favor voted 284,760,150.*
Therefore, it is my sad duty to inform you that your services are no longer considered of value by those whom you have often characterized as the financial backbone of our nation. If you wish to contest the matter, a hearing has been scheduled for November, 2004, prior to which you may make any argument you wish on the merits of your service. All your pension benefits will be triggered at that point should our shareholders reaffirm the votes of yesterday and today. We wish you the greatest good luck in the future in whatever employment you may pursue. It has been a pleasure doing business with you.
Investors of America, Inc.