A new wave of accounting frauds and white-collar crimes is sweeping corporate America these days, causing anxiety the world over as to which rules of the game are now to determine the direction of the global economy. Hardly a day passes that a new shenanigan is discovered and the US administration vows to investigate the scandal, punish the culprits and to restore the business credibility.

The “Time” magazine in its June 24 issue aptly posed the question: “Is corporate America falling apart?” saying “each day brings sordid details of dirty dealings at the highest levels of what were once the nation’s most respected companies.” Small wonder, the sleaze at Enron, which collapsed in December to become the biggest scandal in American history, and Arthur Andersen, one of the top five ‘infallible’ auditors in the world to be convicted on a felony charge in June, may have been too stinking but has proved to be short-lived. More offending sleaze has been thrown up by Tyco, Adelphia, Xerox and WorldCom. The last one is vying to become history’s biggest fraud perpetrator — a place just won by Enron.

Greed has, no doubt, always been the key factor in creating success stories in the world of business. But it has its limits which, if crossed, leads to criminal acts. In the Third World countries, business and the businessmen have rarely enjoyed a people-friendly image and have often been seen to be the source of most of the miseries that frequently visit the marginalized segments of the population. And it was for no mean reason that the business elite in Pakistan was described as ‘robber barons’ by no less a person than Dr. Mahbubul Haq, a pro-West economist of good repute and no friend of socialist creed, to register his loathing of their greed and lust for profits.

Not so in the West. There, they had visibly been a dominant partner since long in the collective strife for creating a prosperous and civilized society. (That their society turned a blind eye to their acts of ruthless plunder and exploitation of the resources and manpower in the ex-colonies is a different matter.) But it is a different case at the moment. “Respect for business and business credibility”, says Richard Cavanagh, president of the US business research group, the Conference Board, “is at present at the lowest point since 1916.” Horst Koehler, Managing Director, International Monetary Fund told a gathering of the UN Social and Economic Forum on July 1 that collapse of Enron and WorldCom has made it clear more than ever that “there is need to give as much attention to risks and vulnerabilities in the advanced countries as we do to the problems in emerging markets and developing countries”.

It is interesting to note that while the rate of murder, robbery, assault and other violent crimes has fallen in the United States in the past decade, there has been a marked rise in accounting and corporate infractions, fraud in health care, identity theft, illegal corporate espionage and intellectual property piracy.

Some of the most prominent companies found having committed corporate shenanigans are:

‘WorldCom Inc.’: Pure and simple accounting impropriety, and the biggest of its kind ever. The long-distance and data provider, admits its now-fired chief financial officer hid $3.9 billion in expenses to shore up the company’s bottom line. The Securities and Exchange Commission has filed civil charges; Congress and the Justice Department are investigating.

‘Enron Corp.’: The most infamous of the meltdowns, at least until WorldCom, the now-bankrupt energy-trading company created a maze of off-the-books partnerships to hide debts and losses. CEO Kenneth Lay resigned, along with several other top company officers.

‘Arthur Andersen LLP’: The leading accounting firm was found guilty of obstructing justice by shredding documents relating to its audit of Enron Corp. Andersen also audited WorldCom’s books, claiming it did not spot those irregularities because the company never mentioned them. Andersen has all but shut its doors.

‘Xerox Corp’: In the latest announcement, the photocopier giant said that it had improperly reported $6.4 billion in revenue over the past five years and would restate its financial results for that period. The restatement was required under a settlement Xerox reached with the SEC. The SEC said in April that accounting improprieties increased the company’s pretax profits by $1.4 billion from 1997 through 2001.

‘Tyco International Ltd’: Former chief executive L. Dennis Kozlowski has been indicted on charges of tax evasion and evidence tampering in connection with artwork he purchased. Investigators also are looking at the company’s finances and whether Kozlowski used company money to buy the artwork and a New York apartment. The company has sued two other former Tyco officials who received millions from the Bermuda-based manufacturing conglomerate.

‘ImClone Systems Inc’: Former CEO Samuel Waksal was arrested in June on insider-trading charges for allegedly tipping off family members to sell the company’s stock just before an announcement that the Food and Drug Administration was rejecting an application for ImClone’s key drug. Homemaking mogul Martha Stewart, a friend of Waksal’s who dumped her shares ahead of the FDA announcement, is also being investigated.

‘Adelphia Communications Corp’: Investigators are looking at the cable firm, which also has filed for bankruptcy, and $3 billion in questionable loans and transactions involving John Rigas and other members of the founding family. All family members have resigned.

The present phenomenon of corporate corruption in the US, some analysts say, is related to economic cycle and the last time it occurred was during the savings-and-loans crisis a decade ago; it also happened in the 1970s after a wave of scandals; and to a lesser extent during the Great Depression when even the New York Stock Exchange president Richard Whitney went to prison in a three-piece suit in 1938 for market abuses that originated in 1920s.

The current wave, according to Stephen Labaton of ‘The New York Times,’ is different in several respects. Although these fraud cases were on the rise during the boom cycle, their type and nature is different from the early waves. One of the reasons, he thinks, is the changing face of the American population which other analysts find unconvincing because the men and companies committing crimes mostly belong to the old stock. No doubt, an equally important role has been played by factors such as aging, rising prosperity and population’s higher educational level to contribute to these developments. If a better educated person wants to commit a crime, fraud is the best option because the ‘take’ is better and the punishment is generally less.

One finds new varieties of the white-collar crime being developed every day and the amount of money being stolen is incredible. In the first quarter of this year, a record number of accounting and financial reporting cases were registered. The biggest increase in investigations of possible accounting fraud has been in the telecommunications, software and energy areas and that violations appeared to have been motivated by the pressures to meet revenues and earnings targets.

(In Pakistan, three accounting firms recently admitted having committed wrong-doing before the Securities and Exchange Commission and paid a maximum fine of Rs 2,000 for gross negligence.)

It is interesting to note that while the number of federal lawsuits in the United States dropped by more than 21,000 from 1997 to 2000 to 250,907, the number of government and private lawsuits for securities fraud and financial wrong-doings more than doubled — from 1,669 to 3,538. Other type of civil lawsuits has become less common. Then, a new series of financial crimes has arisen with the proliferation of the internet, from identity theft to software privacy and e-mail Ponzi schemes. Because not every fraud is detected, it is impossible to know whether there are actually more instances of fraud or that it is the enforcement level that is rising.

A major development has been the unthinkable disaster that the accounting industry has met. Less than a year ago, Arthur Andersen was a financial behemoth — one of the world’s largest accounting firms with billions of dollars in revenue and thousands of accountants, tax specialists and technology consultants assisting major corporations around the world. But Enron turned out to be Andersen’s Waterloo. Its other accounting disasters included Waste Management Inc., Sunbeam Corp., McKessen, Colonial Reality, Boston Chicken Inc., etc.

The other four accounting firms of the ‘Top Five’ are believed to be no angels any more. To face disaster only recently along with its prestigious client, Xerox, was KMPG. Between 1997 and 2000, Xerox apparently booked $3 billion of phoney revenues, boosting its pre-tax earnings by around $1.5 billion. Xerox thought the accounting function was just another revenue source and profit opportunity. But why its auditors, KPMG, allowed it to happen was not out of ignorance. Like Andersen, more than half of the fees that KPMG was earning from Xerox was from consulting, rather than auditing.

WorldCom is America’s second-biggest long-distance phone company. It employs 80,000 people and serves 20 million customers. But now its survival looks bleak. Its share price recently collapsed from a peak of more than $60 to somewhere below $1, representing a loss of wealth of more than $100 billion — equal to an entire year’s worth of output in Portugal or Israel. Like Enron, WorldCom has been a darling of stock-buyers. Both resorted to cheating. And like Enron, WorldCom employed Arthur Andersen to audit its accounts.

According to The Washington Post, “WorldCom is worse than Enron. The extent of its deceit — profits were overstated by $3.8 billion — appears to be greater, and the manner of the deceit is more troubling.”