Liberalism vs Conservatism

“As the 2008 campaign gets under way, it is critical for Americans — and especially for conservatives — to understand what this campaign is — and is not – about,” writes Jeffrey Lord in the American Spectator.

In October 1964, “the polls were dismal. And they were accurate. Just over 38% of the American people were getting ready to vote for the first modern conservative to be nominated for president, Arizona’s Senator Barry Goldwater. Nonetheless, a fledgling conservative, actor Ronald Reagan, boldly committed to do a television commercial supporting Goldwater. The commercial was a version of a speech he had begun delivering around the country as he toured General Electric plants in his role as GE spokesman. The name of the talk was “A Time for Choosing,” and it aired the evening of October 27th, forty-three years ago this month. Eventually, the speech made Reagan president.”

“To say that Barry Goldwater and the conservative cause got 38% of the vote is another way of saying that Lyndon B. Johnson got 61% of the vote for the liberal cause. He campaigned explicitly on expanding the New Deal, the vast extension of government that was the brainchild of his political hero and role model, Franklin D. Roosevelt. LBJ crisscrossed America that fall of 1964 promising Americans a “Great Society” in which the government would declare war on poverty, spend billions on health care and education and housing and more, more, more. All of this combined with a promise not to send American boys to fight in Asia.”

This campaign is not about Hillary Clinton, the only candidate in the race for whom a prosecutor once drew up a draft indictment; nor is it about Rudy, Fred, Mitt, John, John and Obama. What the 2008 campaign is really about is the next phase in what has become an almost century old argument on the role of government in American life. “And conservatism, from the moment Ronald Reagan’s image faded from the television screen that crisp October night, has been winning the argument. Contrary to appearances in 1964, it won then and it continues to win today. Why?”

Lord says the 2008 election will be no different than any other election in how the Mainstream Media tries to portray it. The media will present it to the American public as contest of personalities, and on the surface, it will be. There will be much talk about the first woman president, the glamorous John Edwards, the first African-American president, and the wives and spouses of all – just as they always have.

“But all of this fluff masks the very central fact that the idea of more government running things in American life has been tried — and found to be an abysmal failure,” says Lord. Roosevelt and Johnson won the day in their election victories, but America lost. Their liberal ideas were tried, and in the short run, Americans liked what they saw. But as in everything else, reality inevitably stepped into view and illuminated what happens when government runs things in the fashion of FDR, LBJ, and Hillary Clinton. Slowly, with that 38% of the American people in 1964 getting it first, the country began to understand what actually happens when liberalism “wins.”

Lord gives a very short list of the government programs inspired by liberalism that animated Roosevelt’s New Deal and Johnson’s Great Society – and their status today.

  • Social Security — Reagan horrified liberals on the night he gave that televised speech for Goldwater by pointing out that Social Security, as run by the government, was “$298 billion in the hole.” The 2007 Social Security Trustees Report says the program, is, to use Reagan’s term, now “in the hole” in net present value terms for $6.8 trillion dollars more in benefits than it will receive in taxes. Projection? Massive annual deficits will begin running in just ten years.
  • Medicare — The 2007 report from the Trustees of this program states that there is a “Medicare funding warning,” attached to this LBJ signature program and that “fund assets are projected to be exhausted” in a mere twelve years. Fraud is so extensive in the program that Health and Human Services Secretary Michael Leavitt recently asked Congress for $1.3 billion just to try and keep pace with the amount of corruption in the program.
  • Medicaid — Estimates of fraud and waste in this program, according to the Heritage Foundation, run between $15-$25 billion annually.
  • Education — The Detroit public school system, as pungently noted by Newt Gingrich, is a prime example of the problems that result from the bureaucratic mind-set so favored by liberalism. Run solely by liberals using every last tool of the liberal philosophical playbook, the Detroit system, as reported by the Gates Foundation, manages to graduate only one-fourth of its freshmen on time, with Education Week magazine saying the system manages to graduate 22% of its students. Some version of this problem has crippled big city school systems around the country, all of them using the liberal big-government, big-bureaucracy model. Here in my own state of Pennsylvania the Philadelphia school system was in such dire straits in 2001 (a deficit of $200 million) it prompted a takeover by the state.
  • Housing — In 1949, as part of Truman’s Fair Deal, the federal government launched urban renewal as a policy of the federal government. It proved to be a disaster, dislocating tens of thousands of small businesses and destroying neighborhoods. Public housing projects became nothing more than human dumping grounds crawling with, as one report had it, “drug-dealing predators.” Notorious projects like Pruitt-Igoe in St. Louis, the Robert Taylor Homes in Chicago, the New Brunswick Homes and the Christopher Columbus Homes in New Jersey, and the Ellen Wilson project in the District of Columbia were so bad they finally had to be destroyed. As a young aide to then-HUD Secretary Jack Kemp, I toured the Wilson project, stunned at what my colleagues and I saw. It was, not to put too fine a point on it, outrageous. And just to show the problem was philosophical and not simply of American origin, then-British Prime Minister Margaret Thatcher faced the same problem with “council flats” — and persuaded Parliament to finally sell them.

There are of course many other examples of liberalism’s failure; a very prominent one being the city of New Orleans. With all the finger pointing by the mainstream media at “Big Government” failure (read George Bush), the obvious never occurred to them: “what in God’s name were all those poor people doing there living as they did before Katrina even got up steam? They were there, and had been so for decades, mired in a cesspool of bad education, crime and housing — because, drum roll, the liberal philosophy was running the show from start to finish.”

This is the heart of the debate to come in 2008, Lord says. Liberals know it and conservatives know it.

Hillary Clinton abandoned her “Goldwater Girl” roots for the liberalism of Lyndon Johnson and re-made herself into a spokeswoman for a philosophy that hit its high water mark in 1964 with Goldwater’s “defeat” – and has been declining ever since. Hillary’s answer, as well as every other Democrat answer, to every major issue is the same as it was when LBJ took office and has been for the five decades since; tax more and let the government do it.

Clinton’s answer to the energy crisis? Take the profits from private sector oil companies and give them to the government. Clinton’s answer on health care? Take the one section of the health care economy that works and re-make it in the image of Medicare and Medicaid. No word on how much she believes her program should set aside for the inevitable epidemic of fraud and corruption that will accompany her health care program. Clinton on the capital gains tax? Raise it. What does Clinton want to do with personal income tax? Raise it.  

On November 3, 1964, Barry Goldwater was buried at the polls while Johnson and his ideas of liberalism reigned supreme. The New York Times applauded the victory, the three major television networks, ABC, CBS, and NBC cheered the win and the Congress was embarrassingly lopsided in Johnson’s favor. The liberal elite dismissed Goldwater and Reagan as bit-players in an ushered in with liberal enlightenment with the liberal elite in charge.

And they got it wrong. Very, very wrong.

Instead of withering away as the liberal elites assumed they would, Goldwater and Reagan went on to lead a stunningly successful movement of ideas. Not only did they produce election victories, they led the massive assault on what seemed to be the unquestioned wisdom of the ages. They unshackled the American economy by reducing taxes opening trade barriers. Together with British Prime Minister Margaret Thatcher and Pope John Paul II, they brought about the destruction of Soviet communism and ended the Cold War.

The 2008 election stakes are clear. Democrats and liberals are not fighting for Hillary Clinton or Barack Obama, or even John Edwards. They are in a fight for their lives. They are in a fight for a way of life that has become indefensible. Beginning with their contempt and disparagement of the military, they have become the epitome of pacifism abroad and failure at home.

Whatever happens in 2008, conservatism is here to stay, will continue to grow, and liberalism will keep unraveling.

“A government big enough to give you everything you want is a government big enough to take from you everything you have.”   Gerald Ford

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3 Responses to Liberalism vs Conservatism

  1. Pingback: Modeling » Liberalism vs Conservatism

  2. Frank Stricker says:

    Why not do some research instead of lying? E.g, Social Security will not run out of money until 2040 or so, and even then it could be paying most of what it has promised. OF course this depends on whether the feds repay what they owe the SS fund. Bush does not want to do that. He financed some of his huge tax cuts to the rich by using the SS surplus and he and other bad people hint they won’t pay the money back.
    Also, if we had better employment markets, we would have even more inthe SS fund.

  3. Jay Drai says:


    It is not enough that consumers are paying higher cost for energy – Gas, Electric, Tel., Etc.
    Due to the market volatility and the increase demand for energy worldwide and the manipulation of market conditions by various corporation.
    Deregulation, which was designed to save the consumer on the cost of energy. Many new companies have started selling gas and electric in the past 20 years, as a result of this deregulation. We now have numerous deregulated third party suppliers of Gas and Electric that are gouging the consumers – billing prices higher than the regulated utility companies, inflating the bill, billing for product never delivered, billing phantom tax on the product, reneging on fixed price contract – when market prices go beyond the fixed contract. In short any way they can cheat, deceive and defraud the consumer is fair game.
    Among the companies that practice such tactics is MULTIUT CORP or Multiut LLC of Skokie, Illinois the owner of the company Nachshon Draiman is well connected, one of the previous owners of Multiut was a federal judge and therefore has gotten away with numerous over billing and deceptive practices, there are numerous lawsuits for fraud pending against Multiut Corp and its owner Nachshon Draiman among them a Class Action Suit and Dynegy Mkg & Trade v. Multiut Corp, Nachshon Draiman et al 1:02-cv-07446 The Federal Court has imposed numerous contempt orders against Multiut and its owner and its owner Nachshon Draiman is involved in numerous other fraud in the Nursing Home business (defrauding the state Nursing License with false documents to obtain a Nursing Home License) and a hotel project where he committed a fraud of $45 million dollars and numerous other fraud and deception too numerous to mention. (Especially since Multiut and its owner Nachshon Draiman is represented by Jack Abramoff Law Firm – which has clout).
    Energy Billing Fraud Charges vs Multiut owned by Nachshon Draiman!
    Multiut Admitted to holding money belonging to customers.

    In a Class Action proceeding initiated in November 2001 – The case after numerous delays by Multiut, is now proceeding.
    Gore vs Multiut – IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS Case No. 01 CH 19688 (See:

    Another Company is Santana Energy out of Texas. Some utility companies were forced to refund the consumers hundreds of million of dollars due to manipulation of pricing and billing – many of those shenanigans stem from the Enron debacle some precede it and continue on to date.
    Many of these suppliers of Gas and Electric who are promoting saving are actually charging higher prices than the local utility company which defeats the intent of deregulation – Multiut’s billing shows 20% to 30% higher cost and billing for gas that was never delivered. Not to mention Multiut’s billing for non existent City of Chicago Tax on Natural gas and inflated billing for lighting retrofit to various Nursing Homes which inflates the Medicaid billing to the government.
    Corporate CEO and other higher ups in the corporate world have been convicted of fraud and sentenced/fined (WorldCom, Enron, Adelphia, Etc.). But it seems that some companies can continue to defraud the public without being hindered by the authorities.
    Other frauds by Gas Electric suppliers are: Centerpoint Energy Inc.,
    Pending lawsuits are: AG files fraud suit against Sempra affiliate alleging Enron-like games.
    The American people want corporate fraud and criminal activities by corporate executives to be stopped now, and they expect government to act aggressively to accomplish that goal. Clearly, the federal and state governments have a shared responsibility to make this happen. It’s also essential for the criminal and civil courts to be kept open and available to deal with this most serious problem, which that has become like a cancer in our country. I suppose that all of this sort of thing has been going on for years, but the public just didn’t know about it. I have always suspected that the “tort reform” movement was devised by smart folks in the very beginning to protect corporate wrongdoers. I am now firmly convinced – more than ever – that I was on target at the time in my suspicions.
    This article is presented by Citizen for Honest and Fair Billing


    CHICAGO — Three former executives of Nicor Energy L.L.C. and an outside lawyer for the Lisle, Ill.-based company were indicted today for allegedly engaging in a corporate fraud scheme to obtain $400,000 in bonuses and other benefits for themselves by inflating revenues – at times by as much as $6 million – and understating expenses to make the company appear more profitable than it actually was in 2001. The defendants allegedly fraudulently deprived Nicor Energy – a retail energy marketing company established in 1997 as a 50/50 joint venture by Nicor Inc. and Dynegy Inc. – of their honest services and caused a loss to investors in publicly-traded Nicor, Inc. and Dynegy. On July 18, 2002, Nicor Inc. issued a press release announcing that its financial results for the second quarter and first half of 2002 were negatively affected by several factors, including irregularities in accounting at Nicor Energy, and the following day, the stock price of Nicor Inc. fell approximately 40 percent. Nicor Energy is currently in the process of final liquidation.

    The five-count indictment returned by a federal grand jury charges Kevin Stoffer, formerly Nicor Energy’s President and Chief Executive Officer; Andrew Johnson, former Director of Financial Services; John Fringer, former Vice President of Major Markets and Power Services; and outside counsel Michael Munson, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois
    Judge Concludes Energy Company Drove Up Prices
    by Richard A. Oppel Jr. and Lowell Bergman, September 24, 2002 (New York Times)
    QUOTE: In the ruling, Curtis L. Wagner Jr., the chief administrative law judge at the Federal Energy Regulatory Commission, essentially validates the suspicions of California officials that El Paso, the nation’s largest natural gas company, withheld natural gas from the state, thus driving up the cost of electricity…
    ABSTRACT: In a judge’s ruling, a company who provides gas and energy supplies was found to have aided in raising the price of gas and electricity in California during previous energy crisis’s. The El Paso Corporation allegedly withheld natural gas, and in doing so, raised both gas and electricity prices. The ruling is still up for further review and many lawsuits are pending, but the El Paso Corporation contends that operations were normal and that an appeal will follow if the current decision is upheld.
    — C. Heimbuch-Skaley

    Chicago – Attorney General Lisa Madigan and Mayor Richard M. Daley today announced that Peoples Energy has agreed to more than $196 million in consumer credits and benefits as part of a settlement that will provide much-needed relief to current Peoples Gas and North Shore Gas customers, establish a more than $25 million program of conservation and weatherization assistance for low- and moderate-income households and reconnect customers who have been disconnected from their heating services due to an inability to pay the high gas prices.
    Chicago — Attorney General Lisa Madigan, City of Chicago Mayor Richard M. Daley and Citizens Utility Board (CUB) Executive Director David Kolata today announced that as a result of their settlement agreement with Peoples Energy more than one million current customers of Peoples Gas and North Shore Gas will see refund credits on their next gas bills.
    To compensate for over billing consumers between 2000 and 2004, Peoples Energy has agreed to provide a refund credit to each of the 1,014,071 current customers of Peoples Gas and North Shore Gas. The credits – totaling $100 million – will be included on the first bill received by customers after April 24.
    “These refund credits cannot change the conduct of Peoples Energy, but they will help consumers who suffered as a result,” Madigan said. “This is an appropriate response to Peoples’ conduct.”
    “We are pleased that consumers are finally receiving the refunds that they deserve,” said City of Chicago Corporation Counsel Mara Georges. “Consumers should not have to pay for bad planning and business decisions by Peoples Gas.”
    WEDNESDAY, JUNE 13, 2007
    Justice Department Investigating NY Energy Markets
    New York’s wholesale energy market is being investigated for possible antitrust violations, according to a recent news report. A Newsday story indicates that a subject of the investigation may be possible withholding of capacity from the market, to drive prices up. This revelation has raised further questions regarding the proposed merger of National Grid and Keyspan, which controls significant amounts of generation capacity in the New York City markets.
    Reliance Energy fraud on consumers

    REL power bills have shocked Mumbai citizens, who will now have to pay double the amount they had been paying. A citizen pins down — point-by-point — the discrepancies in this billing and warns of the “REL fraud” perpetrated on the consumer.
    Oilman on trial in New York was involved in Austin’s 1970s energy crisis
    Monday, September 10, 2007
    Former president of Coastal States Gas charged with wire fraud and conspiracy
    Lawyers for Austin and San Antonio also learned that Lo-Vaca was selling gas to utilities serving the Dallas-Fort Worth area at the same time it was curtailing in Austin and San Antonio. In 1974 and 1975, Austin and other customers sued Lo-Vaca for $1.6 billion in rate overcharges.
    EnCana Corp. et al.
    A class action lawsuit has been filed against EnCana Corp., its marketing company, and sixteen other companies and corporations on behalf of Fairhaven Power Co. and all other business entities in the state of California that purchased natural gas between Jan. 1, 2000, and Dec. 31, 2001. The suit alleges a massive scheme to control the flow and prices of natural gas that was sold within California, which is a violation of U.S. antitrust laws. The suit further charges the companies with false reporting of natural gas prices, of conducting “wash trades” designed to boost trading volumes and conspiring to avoid competing with each other in the pricing and sale of natural gas in California.
    Centerpoint Energy Inc. et. al.
    A class action lawsuit has been filed against Centerpoint Energy Inc. and other natural gas suppliers on behalf of millions of residential customers in Arkansas, Texas, Louisiana, Oklahoma, Mississippi and Minnesota. The suit alleges fraud, unjust enrichment and claims that a conspiracy between the companies has led to the artificially inflated natural gas prices.

    If you feel you qualify for damages or remedies that might be awarded in this class action please click the link below to submit your complaint.

    BP & Reliant – Guilty of Price Fixing

    In yet another settlement over the California Energy Crisis, BP & Reliant admit guilt and settle with the State of California.

    Source: TheTip, 2003-07-21

    Candidate: Enron

    Naturally, the settlement does nothing to compensate the hundreds of thousands of people whose jobs and lives were ruined by the FERC-Caused California Recession.

    BP Energy agreed to contribute $3 million to fund low-income home energy assistance programs in California and Arizona to settle a case in which federal energy regulators said that they found apparent evidence of power price manipulation.

    In March, staff members of the Federal Energy Regulatory Commission issued a report on the 2000-01 energy crisis in the West. It said it found evidence indicating Reliant Resources and BP Energy, both based in Houston, appeared to have engaged in coordinated efforts to manipulate power prices at a trading hub in Arizona.

    Both companies were ordered to demonstrate why their authority to sell power on unregulated wholesale markets shouldn’t be revoked.

    BP Energy doesn’t lose that ability under the settlement. But for six months, BP Energy’s electricity sales in the West will be subject to review by the FERC with the possibility of refunds.
    Mid America Energy Inc.,
    The Securities and Exchange Commission said today that it had filed a civil complaint against Gary M. Milby and his company, Mid-America Energy Inc., asserting that they bilked several hundred investors of more than $19 million in what the commission described as “a fraudulent oil-and-gas investment scheme.”
    SEC charges four more former Nortel execs
    Allegations the men manipulated reserves to change Nortel earnings
    The Associated Press
    Updated: 6:36 a.m. PT Sept 13, 2007
    TORONTO – The U.S. Securities and Exchange Commission has charged four more former Nortel Networks Corp. executives with accounting fraud, alleging they manipulated reserves to change Nortel’s earnings statements on the orders of more senior officers of the Canadian networking equipment maker.
    Sept. 21, 2007
    ENERGY Edison Is Hit Hard For Fraud On Survey
    Category: Lexis Nexis – AC, CG News & Updates, Acc News & Updates, A/F News & Updates, ET News & Updates, PG News & Updates, Main AC RSS Feed, AC – Whats New
    BY: LOS ANGELES TIMES – Oct. 2, 2007
    There is “overwhelming” evidence that senior managers at Southern California Edison knew about a seven-year fraud at the Rosemead utility to collect millions of dollars in customer-funded incentives, according to a judge’s decision released Monday by the California Public Utilities Commission.
    The opinion, written by Administrative Law Judge Robert Barnett, makes official the $200-million cost to Edison that he outlined Thursday in an unusual oral preview of his conclusions. The decision required Edison to lose $160 million in performance bonuses and to pay a $40-million fine — among the largest ever assessed by the commission.
    Waste Management Pays For Executives’ Fraud
    Washington (Aug. 30, 2005) – Looking to avoid the publicity of a trial, the country’s largest trash hauler will pay $26.8 million to cover most of the costs of a settlement between former executives and the Securities and Exchange Commission.
    The settlement by Waste Management Inc. was approved in U.S. District Court in Chicago. Originally filed in 2002, the SEC suit had accused Waste Management’s founder and former chair, Dean Buntrock, and three other former executives of failing to report expenses, postponing costs and filing false financial statements, in order to meet earnings targets between 1992 and 1997.
    A new chief executive of the company ordered a review of the company’s accounting practices in late 1997, eventually uncovering the problems and leading to a restatement of $1.7 billion in earnings. At the time, the restatement was the largest in the country’s history.
    In 2001, Waste Management agreed to pay $457 million to settle a class-action lawsuit alleging securities-law violations, and received about $20 million in a related settlement with now-defunct auditor Arthur Andersen LLP. At the time of that settlement, Buntrock reportedly agreed to pay a $2.3 million fine, and Andersen later paid another $7 million to settle with the SEC.
    Conviction upheld in Cendant case
    A federal appeals court upheld the conviction of former Cendant Corp. Chairman Walter Forbes on Monday for leading an accounting fraud.
    The 2nd U.S. Circuit Court of Appeals in New York upheld Forbes’ conviction on conspiracy to commit securities fraud and two counts of making false statements. Forbes was sentenced to 12 years and seven months in prison and ordered to pay more than $3 billion in restitution. Forbes, 64, reported to prison Aug. 7. 2007.

    ARRESTED: Adelphia CEO. U.S. Justice Department officials marched the head of Adelphia Communications and two of his sons out of their luxury apartment in handcuffs. The trio was charged with turning the bankrupt cable company into “the family’s personal piggy bank,” hiding $2.3 billion in debt and using up to $1 billion for personal expenses. (Robert Gearty and Helen Kennedy, “Cable Mogul Busted,” [New York] Daily News, July 25, 2002)
    ARRESTED: WorldCom Executives. “Applause broke out on lower Manhattan’s Federal plaza when former WorldCom executives Scott Sullivan and David F. Meyers were ushered, arms handcuffed behind them, through the morning crowd.” (James Toedtman and Tom Brune, “WorldCom Exec’s Walk Of Shame,” Newsday, August 2, 2002)
    ARRESTED: ImClone CEO. The Justice Department arrested Samuel Waksal on charges of tipping off relatives to sell company stock a day before the Food and Drug Administration rejected ImClone’s application for a new cancer drug. The Securities and Exchange Commission alleged that the family “dumped more than $10 million in stock in a 48-hour period.” (Devlin Barrett, “Former CEO Of ImClone Systems Arrested On Insider-Trading Charges,” The Associated Press, June 13, 2002)
    ARRESTED AND INDICTED: Former Tyco Executive. Tyco CEO Dennis Kozlowski resigned, and was arrested and indicted for sales tax evasion. (“Tyco Falls As S&P, Moody’s Confirm Co. Credit Still Under Review,” AFX-Asia, September 18, 2002; Devlin Barrett, “Former CEO Of ImClone Systems Arrested On Insider-Trading Charges,” The Associated Press, June 13, 2002)
    SOON TO BE INDICTED: Former Enron CFO. “Federal prosecutors are expected to announce an indictment of former Enron chief financial officer Andrew Fastow as soon as next week . . . . [T]he government has recently secured a sealed grand jury indictment with fraud charges and other allegations against Fastow and subordinates who enriched themselves through Enron’s partnership deals.” (Greg Farrell and Edward Iwata, “Indictment Of Former Enron CFO Fastow Expected Soon,” USA Today, September 25, 2002)
    INDICTED: Two WorldCom Executives. The Justice Department charged Scott D. Sullivan, the former chief financial officer, and Buford Yates Jr., the former director of accounting, with “falsely and fraudulently” reducing expenses to inflate earnings by $5 billion. They also made false statements to the Securities and Exchange Commission. Earlier this year, WorldCom acknowledged that it had falsely booked $7.7 billion in expenses. (Carrie Johnson and Jonathan Krim, “Ex-Finance Chief, Colleague Indicted,” The Washington Post, August 29, 2002)
    INDICTED: Five Adelphia Executives. Adelphia Communications Corp. Founder John J. Rigas, two of his sons, and two former executives were indicted on charges of conspiracy, securities fraud and wire fraud. The Justice Department is seeking to have the men forfeit $2.5 billion they received from the “large-scale accounting fraud and corporate looting.” (Devlin Barrett, “Adelphia Founder, Four Others Indicted On Securities Fraud,” The Washington Post, September 23, 2002)
    CONVICTED: Arthur Andersen. Marking the first time a major accounting firm has ever been convicted of a felony, a jury found Arthur Andersen LLP guilty of destroying documents related to the collapse of Enron. The company faces up to $500,000 in fines. (Carrie Johnson and Peter Behr, “Andersen Guilty Of Obstruction,” The Washington Post, June 16, 2002)
    PLED GUILTY: Former Enron Executive. Former Enron managing director Michael Kopper pled guilty to participating in a conspiracy against the company and its shareholders. Kopper agreed to forfeit $12 million. (Deputy Attorney General Larry Thompson, Press Conference, August 21, 2002)
    Prosecutors and agency attorneys who are part of the Task Force have brought charges for accounting fraud, securities fraud, insider trading, market manipulation, wire fraud, obstruction of justice, false statements, money laundering, Foreign Corrupt Practices Act violations, stock option backdating and conspiracy, among others.
    The following cases highlight just a sample of the exhaustive prosecutorial efforts of the U.S. Attorneys’ Offices and the Criminal and Tax Divisions of the Department of Justice and investigators of the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the Internal Revenue Service-Criminal Investigation:

    The following cases highlight just a sample of the exhaustive prosecutorial efforts of the U.S. Attorneys’ Offices and the Criminal and Tax Divisions of the Department of Justice and investigators of the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the Internal Revenue Service-Criminal Investigation:
    — Enron: Criminal charges were brought against 36 defendants, including 27 former Enron Corporation executives. Eighteen of those charged pleaded guilty or were found guilty after trial, including Enron’s former chief executive officer, who was sentenced to 292 months in prison. The guilty verdicts against the former chairman/CEO in two cases were dismissed by abatement following his death. The Task Force seized over $100 million in ill-gotten gains and the Department of Justice worked jointly with the Securities and Exchange Commission to obtain orders directing the recovery of more than $450 million for the victims of the Enron frauds.
    — Enterasys: Eight former officers of Enterasys Network Systems, Inc., including the chairman and the chief financial officer, have pleaded guilty or have been found guilty at trial of charges stemming from a scheme to artificially inflate revenue to increase, or maintain, the price of Enterasys stock. The fraud caused Enterasys to overstate its revenue by over $11 million in the quarter ending Sept. 1, 2001. The fraud and its public disclosure resulted in a loss to shareholders of about $1.3 billion. As a result, Enterasys Chief Financial Officer Robert J. Gagalis was sentenced to 11 and a half years in prison. Bruce D. Kay, formerly Enterasys’s Senior Vice President of Finance, was sentenced to nine and a half years in prison. Robert G. Barber, a former Enterasys business development executive, was sentenced to eight years in prison and fined $25,000. Hor Chong (David) Boey, former finance executive in Enterasys’s Asia Pacific division, was sentenced to three years in prison.
    — Qwest: The former CEO of Qwest Communications International, Inc., was convicted on insider-trading charges stemming from his sale of more than $100 million in Qwest stock while in possession of material, non-public information regarding Qwest’s financial health. A former CFO pleaded guilty to insider trading. The CEO will be sentenced on July 27, 2007.
    — AEP: AEP Energy Services, Inc. (AEPES), a wholly owned subsidiary of American Electric Power, Inc. (AEP), one of the nation’s largest electric utilities, entered into a deferred prosecution agreement in which it admitted that its traders manipulated the natural gas market by knowingly submitting false trading reports to market indices. AEPES agreed to pay a $30 million criminal penalty. In separate actions, the Commodity Futures Trading Commission filed a civil injunction against AEP and AEPES. The companies also agreed to pay $21 million to the Federal Energy Regulatory Commission.
    — PNC: PNC ICLC Corporation, a subsidiary of the PNC Financial Services Group, Inc., the seventh largest bank holding company in the nation, was charged with conspiracy to violate securities laws by fraudulently transferring $762 million in mostly troubled loans and venture capital investments from PNC ICLC to off-balance-sheet entities. PNC entered into a deferred prosecution agreement and PNC ICLC agreed to pay a total of $115 million in restitution and penalties.
    — Cendant: The former chairman and vice-chairman of Cendant Corp. were sentenced to 12 and a half years and 10 years respectively on conspiracy and securities fraud convictions arising out of a complex decade-long accounting fraud scheme. The fraud and its public disclosure caused a market capitalization loss of $14 billion in one day, the largest market capitalization loss ever at that time. Both defendants were ordered to pay $3.2 billion in restitution, which is believed to be the largest restitution order ever imposed.
    — Mercury Finance: Senior executives of Mercury Finance Company, a subprime lending company, were convicted on charges stemming from an accounting fraud scheme designed to inflate the company’s revenues and to understate its delinquencies and charge-offs. The market capitalization of the company decreased by nearly $2 billion in one day after the fraud was made public. The former CEO, treasurer and accounting manager each pleaded guilty and were sentenced to 10 years, 20 months, and 12 months, respectively. The former CFO admitted his role and cooperated, but died before being charged.
    — Hollinger: Four former executives of Hollinger International, Inc., a newspaper holding company, including its CEO, chief operating officer, CFO, executive vice president and corporate counsel were recently found guilty of charges arising from a scheme to defraud the company and others primarily by misappropriating funds from non-compete agreements as part of the sale of newspaper publishing groups. The COO pleaded guilty and cooperated.
    — Homestore: Eleven executives and employees of, Inc., an Internet company, were convicted for their roles in a complex revenue inflation scheme. Homestore fraudulently paid itself millions of dollars in bogus “round trip deals” to meet quarterly revenue expectations. The defendants were convicted of conspiracy, insider trading, wire fraud, and other securities violations. The former CEO was found guilty, sentenced to 15 years in prison, and ordered to pay $13 million in fines and restitution.
    — Adelphia: Following a four-month trial, the former CEO and CFO of Adelphia Communications Corp. were convicted of fraud charges arising from their participation in a complex financial-statement fraud and embezzlement scheme that defrauded Adelphia’s shareholders and creditors of billions of dollars. The former CEO and CFO were sentenced to 15 and 20 years in prison, respectively. Forfeitures netted over $715 million for distribution to victims.
    — WorldCom: The former WorldCom CEO was convicted on charges of conspiracy, securities fraud, and making false statements in SEC filings, and was sentenced to 25 years’ incarceration.
    — Refco: The former CEO of Refco, a commodities brokerage firm, its former CFO, and a former 50 percent Refco owner were indicted for their roles in a scheme to hide massive losses sustained by the company in the late 1990s. Public investor losses exceed $2 billion. The trial is scheduled for October 2007.
    — Impath: The former president and COO of Impath, Inc., a biotechnology company, was convicted for his role in an accounting fraud that caused a decline in the company’s market capitalization in excess of $260 million. He was sentenced to 42 months in prison and repayment of $50 million in restitution and $1.2 million in forfeiture.
    — Monster: The former general counsel of recruitment services giant MonsterWorldwide, Inc. pleaded guilty in connection with a scheme to fraudulently backdate millions of dollars’ worth of employee stock option grants by creating the appearance that the options had been granted on dates when Monster’s stock price had been at a periodic low point.
    — Imclone: The former CEO of Martha Stewart Living Omnimedia was convicted of conspiracy, obstruction of justice and false statement charges and sentenced to five months in prison and five months of home confinement. The charges arose from the former CEO’s efforts to obstruct federal investigations into her trading in the securities of ImClone Systems, Inc. The former Inclone CEO pleaded guilty to insider trading and was sentenced to seven years in prison.
    — Bayou: Three principals of Bayou Hedge Funds pleaded guilty to fraud and conspiracy charges based on their substantial and prolonged misrepresentation of the value of the assets of the funds, to which investors had entrusted over $450 million. Forfeitures netted $106 million for distribution to victims.
    — Prudential Securities: Three suspects at the Boston office of Prudential pleaded guilty, and under a deferred prosecution agreement, Prudential agreed to pay a total of $600 million in penalties and restitution in connection with a “market timing” scheme. Using in-and-out deposits and withdrawals of mutual funds, Prudential increased investors’ gains by following the rise and fall of foreign markets, which are several hours ahead of U.S. markets.
    — Network Associates: The former CFO of Network Associates, Inc. was convicted by a jury on securities fraud and related charges stemming from a revenue recognition scheme in which Network Associates’ revenue was overstated by more than $470 million.
    — DVI: The CFO of DVI, a medical office finance company, was sentenced to 30 months in prison for defrauding DVI’s finance companies and banks of $50 million through the use of false corporate books and the double pledging of assets.
    — Beacon Rock: In the first U.S. prosecution of a market timing scheme, hedge fund Beacon Rock Capital and its broker pleaded guilty to defrauding mutual funds and their shareholders of $2.4 million. The defendants used multiple account names and numbers, structured trades to avoid detection, and lied to mutual funds about the activity in order to market time trades.
    — Comverse: The former CFO of Comverse Technology, Inc., pleaded guilty to fraud charges arising from the backdating of option grants and granting of option grants to fictitious employees at Comverse from 1998 to 2006. The former general counsel also was convicted of participating in the backdating scheme. The former CEO was arrested in Namibia in September 2006. The U.S. seeks his extradition.
    — Dynegy: Three former executives of energy firm Dynegy were convicted of charges stemming from an accounting scheme in which they misrepresented the proceeds of $300 million in loans as revenue from operations rather than debt.
    — El Paso: Four traders of energy firm El Paso Corporation and six traders of its Merchant Energy subsidiary were convicted on charges relating to false reporting of natural gas trading information.
    Cooperating and Sharing Information across Agencies
    For decades, the United States has been widely viewed as having the best approach to corporate governance in the world. But the scandals of the past year – Enron, Worldcom, Global Crossing, Tyco, Imclone and others – have shaken public confidence in the integrity of U.S. financial markets. These events have to led to renewed attention to the system of governance and a consideration of whether particular improvements are needed in order to restore public confidence in U.S. markets. The public forum aims to address what has caused the current crisis and what steps may be needed in the future to prevent these problems from re-emerging or newer ones from erupting, while not harming the strength of U.S. markets.

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