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Thursday, Oct 02, 2003

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Hotlining with the city cops

D. Murali

THIS week, New York will witness high-profile corporate scandal trials such as that of Dennis Kozlowski, Tyco's former chief, as also Frank Quattrone of Credit Suisse First Boston. These would bear out what the US President, Mr George Bush, had wanted about a year ago: A crackdown on corporate crime to root out executive wrongdoing and restore investor confidence in the market.

It is predictable that conviction would be exemplary because, as the Financial Times observes: "Prosecutors need big wins to prove corporate crime does not pay". Kozlowski's alleged sin is that he engaged himself in enterprise corruption, and siphoned off millions through unauthorised compensation and illegal stock trades. Quattrone, on the other hand, "has been accused of obstructing justice by ordering underlings to destroy e-mails at a time when he knew the bank was under investigation by the Securities and Exchange Commission."

In the former case, prosecutors have data such as about Kozlowski's spending $2 million on a Sardinian party for his wife, an event that featured "an ice-sculpted Michelangelo's David, urinating vodka into glasses". Quattrone was responsible for underwriting such Internet icons as, but now he is "the most prominent Wall Street banker to go on trial since Michael Milken, the junk bond king, faced prosecutors a decade ago," writes the FT. With e-mail being at the crux of the case, there have been doubts whether there is enough to establish criminal intent, but the judiciary has to grapple with public sentiment that is against the corporate world.

Another development in New York is on at its Society of CPAs. The NYSSCPA has decided to reveal ethics violations to authorities, and that makes it the first State Society to be empowered on these lines. As per an amendment to its byelaws, the organisation's professional ethics committee (PEC) — something akin to the Indian CA Institute's Disciplinary Committee — will inform regulatory authorities about its investigations "before a final determination is rendered on the alleged ethics violations", reports the AccountingWeb. It is expected that the move would give the ethics process "more bite to better serve the public interest". The new bylaw also requires the PEC to turn over to the regulatory authorities "all statements and other materials" relating to the investigation, if the same are requested by the regulatory authorities.

If the ICAI were to be armed with such a power, it would be easier for it to discipline errant members, some of whom are only too good at spamming all members with mischievous content.

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