It’s become a pattern of the recent financial meltdown, dating back to Bear Stearns’ downfall in March: The CEO of a troubled bank goes on CNBC and says, “Everything’s fine. Don’t worry. We’re doing great.” Then, days later, their firm collapses.
It happened to Bear Stearns CEO Alan Schwartz, former Lehman CFO Erin Callan and, most recently Wachovia CEO Robert Steel.
Are these reassuring statements grounds for charging these execs with fraud? Andrew Ross Sorkin suggests investors might think so.
NY Times: It is a conundrum that C.E.O.’s of troubled companies seem always to face. In an effort to bolster public confidence in their businesses, they give interviews and try to put on a happy face — right before their companies go off a cliff…
Of course, after the fact, we point fingers. Were they lying? In hindsight, it always seems that way no matter how they rationalize away their comments…
[B]y all accounts, Mr. Steel is a pretty smart guy. He had to know that going on television the same day that Lehman Brothers went bankrupt, Bank of America bought Merrill Lynch and A.I.G. was on the brink of collapse was just asking for trouble. And it’s hard to imagine he didn’t appreciate the precarious state of his own company given the carnage around him. He knew how fast a bank’s fate can turn. Worse, he and all the other happy-talk executives put themselves in legal jeopardy.
It is hard to imagine that taxpayers would spend $700 billion (or any amount) to bail out Wall Street and the economy without some big-name executive going to jail. For better or worse, it is the way our society works. Michael Milken can tell you all about it.
More likely than not, when we start seeing pictures of C.E.O. perp walks, the crime won’t be theft or some other kind of financial chicanery, it will be some kind of fraud — probably lying to the investing public.
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