Sarbanes-Oxley is a failed financial reform law. Sarbanes-Oxley was passed after the Enron fraud, to prevent executives from lying about earnings. Sarbanes-Oxley failed to prevent financial fraud at Lehman Brothers. Similarly, the recent financial "reform" law will not prevent the banksters from stealing.
Lehman Brothers used the "
Repo 105" accounting trick to hide shaky assets off their balance sheet. Loans were disguised as sales. Lehman Brothers did $50B of Repo 105 fraud. Lehman Brothers raised approximately $50B in capital while lying about their earnings.
If there's no Sarbanes-Oxley prosecution for Lehman Brothers, then State thugs might as well repeal the law. Sarbanes-Oxley compliance costs are $3M+ per year, for both small and large public corporations. Sarbanes-Oxley is a huge regressive tax on small public corporations.
Lehman Brothers' CEO Dick Fuld was not prosecuted for accounting fraud.
Sholom Rubashkin was convicted for accounting fraud, which wasn't the original reason State thugs raided his business and seized his records. There are two justice systems in this country. There's one for insiders and one for non-insiders. It is hypocritical for State thugs to prosecute non-insiders but not insiders.
A pro-State troll says "Enron's fraud is completely different from Lehman Brothers' fraud." Enron used off balance sheet partnerships to hide losses. Lehman Brothers used the "Repo 105" trick to hide losses. There's no similarity at all.
Sarbanes-Oxley compliance costs $3M+ per year. The compliance cost is nearly the same for small corporations and for large corporations. If a corporation has $5B+ in revenue, then $3M is negligible. If a small public corporation has $100M in revenue, then $3M is a huge cost.
The CEO of a large corporation likes Sarbanes-Oxley. It's a tax on smaller competitors. Many small corporations have been "taken private" to avoid the Sarbanes-Oxley compliance cost. Some small corporations were bought out by larger corporations, due to Sarbanes-Oxley.
Sarbanes-Oxley particularly hurts the software startup market. Before Sarbanes-Oxley, a startup could "go public" with a valuation of $1B. This enables the VCs and founders to cash out their investment. Now, small startups must sell to a larger corporation or stay private.
Knowing that small startups can't go public, large corporations offer lower buyout prices. Sarbanes-Oxley had a huge chilling effect on software startups. Now, a startup needs to be almost as successful as Google to be a public corporation. Facebook is not a public corporation, partially due to Sarbanes-Oxley.
Sarbanes-Oxley is a failed reform law. The "financial reform" law is no different. The State explicitly encourages and rewards fraud by insiders. There are many ways that the State encourages accounting fraud.
- Negative real interest rates encourage executives to load up on as much debt as they can. Then a bankruptcy or bailout occurs during the next recession.
- Limited liability incorporation provides a free put option for executives to declare bankruptcy and cheat creditors.
- "Too big to fail" means that there's no risk when lending money to a "too big to fail" organization.
- There's the Principal-Agent problem. A CEO is gambling with other people's money. Therefore, he takes unreasonable risks to maximize short-term profits.
- Government regulations and government violence shield insiders from competition. With a fake free market, there's no penalty for inefficiency and waste and fraud.
Sarbanes-Oxley and the financial "reform" law are evil fnords. These laws provide the illusion of accountability, while insiders may continue to loot and pillage. The biggest State evils are the Federal Reserve and income tax. They are politically untouchable. Too many insiders profit from the corrupt way things are now. They will never allow real reform. Instead, fake reform is sold to the public as real reform.
If there isn't a Sarbanes-Oxley conviction for Lehman Brothers, then that law may as well be repealed. That law is a huge tax hike, due to excessive compliance costs. Small corporations and startups are hurt the most by Sarbanes-Oxley. That's exactly the way insiders like it.
