5-2-03
by Elena Steier
Dooz,
If you ever have to have a heated debate against a die hard, pro Bush
conservative, bring up Enron. Bring up this article.
By supporting Bush, conservatives are de facto approving the rampant
corporate criminality which is currently running amok. Conservatives are
beginning to equate "Free Market Forces" with elements which are clearly not
free market forces, but arbitrary decisions made by small minded men with
big wads of cash. This points not to conservatism, but to totalitarianism.
To my mind, a true conservative would champion true free markets. Our
country was built on an excellent set of rules in which companies, free to
compete, could either sink or swim in an atmosphere of competition. In
order to encourage fair play, an even playing field is required. In the
past, this has meant transparency, and the necessity to keep companies above
board and honest.
In order to return the markets to a state of free and open competition would
take a president with a will of steel. In order to stand up to the monied
forces of large corporations who insist on changing the rules, it would take
more than the combined forces of the military. It would take an unyielding
allegiance to the truth and the willingness to strafe American markets as
surely as we bombed Iraqi cities.
Alas, our president has shown that the truth is as malleable as corporate
profits. Note that last night, he once again reiterated Iraq's involvement
with Al Quaeda.
We must be a very gullible people. Fifteen of nineteen 9/11 attackers were
Saudis, but there has been no link established between Saudi Arabia and Al
Quaeda, save for the insignificant fact that its leader is the scion of a
great and wealthy Saudi family.
If our president can't even stand up to the Saudis, how can he stand up to
our own, American corporations, whose executives daily build the engines
which will topple our economy as surely as the machinations of Enron toppled
itself.
I have often had disagreements with cartoonists over the depiction of Bush.
I think he is too often trivialized as a small, insignificant character. To
me, this does not account for the fact that he has so bamboozled our
country, that he has actually convinced a whole cadre of conservatives
that greed and corporate malfeasance are okay, so long as we bomb other
countries in the name of free markets and liberty.
On the other hand, perhaps its just as well that Bush stays small and
insignificant in editorial cartoons. As I said before, we need a president
with guts of steel in order to stand up to corporate greed. Instead, we
have a man who cowtows to lies and has made greed an integral part of our
foreign policy.
Our nation is swinging two ways right now. If we give in to the forces of
corporate malfeasance and totalitarianism, we will lose true free market
forces forever. If we fight against the lies and corporate corruption, we
may yet step away from the brink, and return to an America built on free
market ideals.
Love,
xxxxxxoooooo
Mama
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THE LATEST FROM THE SCANDALS
After Inflating Their Income,
Companies Want IRS Refunds
By REBECCA BLUMENSTEIN, DENNIS K. BERMAN and EVAN PEREZ
Staff Reporters of THE WALL STREET JOURNAL
A parade of big companies is under investigation for inflating their
earnings during the stock-market boom of the 1990s. Now some of them see an
unusual silver lining: They want back the taxes they overpaid along the way.
In the latest wrinkle in the unfolding series of corporate scandals, MCI and
Enron Corp. are in the process of collecting or filing for tax refunds or
credits from the Internal Revenue Service because of tax payments on
billions of dollars they falsely claimed to have earned. Qwest
Communications International Inc., which plans to restate $2.2 billion in
revenue, also is likely to seek a refund. Embattled HealthSouth Corp.,
accused of overstating its earnings by more than $2 billion, said that it
hasn't made a final decision to file for a refund but is considering it.
Fraud or not, the current tax code makes no distinctions. It is a basic
tenet of tax law -- both for individuals and corporations -- that those who
overpay are entitled to a refund.
"It's ironic," said Seth Taub, a former chief of enforcement for the
Securities and Exchange Commission. "But it's the old story, the less money
you make, the less you owe the government."
With the number of corporate scandals and expected financial restatements at
a historic high, no one knows just yet how much the federal government could
have to forfeit on the refunds and credits. Even if such credits are
ultimately lowered as part of settlements, observers believe that the
federal government will probably be out hundreds of millions of dollars.
Investigations into fraud at MCI, which recently changed its name from
WorldCom Inc., have uncovered accounting irregularities that are now
expected to reach $11 billion. The fraud masked two years of losses at the
country's second-largest long-distance company during the height of the
telecommunications and technology boom of the late 1990s.
Already, as MCI prepares to emerge from bankruptcy in September, a person
close to the situation says it has collected tax refunds of nearly $300
million on those now-discredited profits.
TAKING CREDIT
Additionally, these people say that tax implications from MCI's decision to
write off $79.8 billion of its assets is likely to reduce its expected
restatement of earnings to $9 billion from $11 billion. Even with that
reduction, MCI will still claim status as the largest case of accounting
fraud in history.
An MCI spokesman declined to comment. The IRS didn't respond to repeated
requests for comment.
In Birmingham, Ala., HealthSouth said that by inflating its income, it
overpaid more than $300 million in federal taxes.
"Logically, if we overpaid taxes on income we didn't have, we may seek a
refund," said Andy Brimmer, a company spokesman. Mr. Brimmer said pursuing a
refund is secondary to finding out the extent of the accounting
irregularities at the company, which it won't know until at least late June.
Federal prosecutors and the SEC said that the provider of outpatient surgery
and rehabilitation services overstated profits by at least $2.5 billion
since 1997 in an effort to meet Wall Street's profit expectations.
In a plea agreement reached last month with the Justice Department, Ken
Livesay, HealthSouth's former assistant controller, said the company had to
borrow money at times to pay the taxes. Mr. Livesay said that pretax income
was overstated by $635 million in 1998 and $440 million in 1997.
Richard Lipton, a tax attorney for the Chicago-based law firm Baker &
McKenzie, said corporate fraud should have no effect on the ability of
companies to recoup tax overpayments. "It's not the government's money, it's
the shareholders' money," Mr. Lipton said, adding that corporate penalties
for making a false tax return are capped at $500,000.
The overpayments are one more thing for shareholders to be upset about,
since companies were deprived of the use of that cash. "You are really in a
sense shortchanging shareholders," says Henry Hu, a corporate and
securities-law professor at the University of Texas Law School. "It is a
perverse set of circumstances. You are basically making gifts to the
government in order to make yourself not look bad."
Already, one shareholder lawsuit filed last month in U.S. District Court in
Birmingham is asking that any amount HealthSouth is refunded be returned to
shareholders.
Companies -- even in the biggest cases of corporate fraud -- usually
continue paying the proper amount of taxes on their improper numbers so as
not to be found out.
In a recent study of 27 companies charged with fraud, a University of
Chicago accounting professor, Merle Erickson, found that top management
apparently was willing to sacrifice tax payments made in cash in order to
publicly report sham earnings and revenue gains. His study found that, on
average, companies "sacrificed" 11 extra cents in taxes for each dollar of
fraudulent earnings.
As it turns out, companies committing fraud were more afraid of the IRS than
of their own auditors. Also, tax payments in the late 1990s weren't too much
of an impediment to earnings as companies touted the measure known as
Ebitda, or earnings before interest, taxes, depreciation and amortization as
a more accurate gauge of their results and growth potential.
Even Enron, which paid just $63 million in taxes between 1996 and 2001, is
seeking tax credits, say people familiar with the matter. That may be tough
to collect, however, since the IRS has claims of its own, one person
familiar with the company said. Enron spokesman Mark Palmer said that the
company is "in settlement discussions with the IRS."
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