I have studied accounting ethics for some time, and I find interesting but sad the revelations about corporate fraud during the past couple of years. A number of writers assert with more hope than fact that these humiliations reflect the work of a few bad apples. I have argued for some time that these setbacks likely involve an orchard of bad apple trees because our economic system, our justice system, and our system of corporate governance provide a plethora of incentives to cheat and lie with few mechanisms to catch and punish malefactors. Now it appears that I might have to amend the story and say that accounting merely reflects the poor ethics practiced throughout the American society.

 

Martha Stewart, emblem of how to decorate a home, owned almost 4,000 shares of ImClone, and she sold them just before the Food and Drug Administration temporarily rejected the cancer drug Erbitux. The SEC is pursuing a civil case of insider trading against her, while federal prosecutors have charged her with securities fraud and obstruction of justice. At this point in time I think the insider trading charges and the charges of securities fraud will prove hard to demonstrate. The case of obstruction of justice, on the other hand, may prove her undoing, for she seems to have lied to prosecutors on a number of occasions. Ironically, she saved herself less than $50,000 by her trades and has since paid out many times that amount in legal fees and has sullied her reputation. Given her immense wealth, what did Martha Stewart think she would gain by lying to prosecutors?
 
As an aside, we continue to ask the SEC and federal prosecutors why Ken Lay and Jeff Skilling are running around free. Martha's shenanigans hurt only herself; Ken's and Jeff's lies have destroyed the fortunes of many and have caused the evaporation of many retirement accounts. Media representatives for our government agencies claim that they are still investigating Ken and Jeff and that Enron is a terribly complex case. While I concede that point, I think one and a half years is long enough to bring indictments against these thieves. I don't mind the Justice Department going after Martha, since it appears that she did obstruct justice, but I remain angry with them for their inability or lack of will power to take on Ken Lay and Jeff Skilling. Those guys deserve to be behind bars for the rest of their lives for what they did.

 

In a recent game the slugging hero of the Chicago Cubs Sammy Sosa splintered his baseball bat. The umpires discovered cork inside the bat and screamed foul, and now he awaits suspension for several games. Worse, he has lost some fans who will think him undeserving of accolades bestowed on him in the past. Sammy is one of the game's best hitters, because an average professional player cannot hit as many homeruns as he hit regardless of the bat employed. Yet we still wonder how many homers Sammy would have hit with legal bats. And we marvel why Sammy did it.
 
The New York Times recently revealed that several dozen stories written by Jason Blair contained fictional components or were otherwise tainted. The paper has now relieved the managers Harold Raines and Gerald Boyd of their duties. What is distressing about this set of exposures is that the newspaper has had a reputation for being the paper "of record" -- that the news reports are completely factual. We always knew that the paper represented liberal views but hoped they at least published the facts. Alas, that is not the case. Perhaps the owner can put together a team of reporters and manage them in such a way that we can again trust their reports. Until then, readers will have a jaundiced eye concerning the veracity of its front page stories.
  
Hillary Clinton has released her new book, which supposedly tells her side of the story in an attempt to remove Monica-gate from the political landscape before she launches her presidential campaign. Early reviews, however, doubt the veracity of parts of her account. Given the lies of the past few years, I find those censures believable. Of course, we expect politicians to lie -- it's in their genes.
  
As I consider these narratives I wonder about the American dream of achieving success even if you have to lie, cheat, steal, or kill. I now not only doubt that accounting scandals of the last few years involve only a few rotten apples, I am beginning to suspect that ethical lapses pervade all of the quilt we call America. What fabric cleaner will it take to change our views about success?