Of all malicious act abhorr'd in Heaven,
The end is injury; and all such end
Either by force or fraud works other's woe.
But fraud , because of man's peculiar evil,
To God is more displeasing; and beneath,
The fraudulent are therefore doom'd to endure
Fraud, that in every conscience leaves a sting ,
May be by man employ'd on one, whose trust
He wins, or on another, who withholds
Seems as the latter way
Broke but the bond of love which Nature makes,
Whence in the second circle have their nest,
Dissimulation, witchcraft, flatteries,
Theft, falsehood, simony, all who seduce
To lust, or set their honesty at pawn,
With such vile scum as these.
The other way
Forgets both Nature's general love, and that
Which thereto added afterward gives birth
To special faith. Whence in the lesser circle,
Point of the universe, dread seat of Dis,
The traitor is eternally consumed. 
If the 1980s were the “ decade of greed “ for the insider trading scandals that embroiledWall Street and ended in the demise of Drexel, Burnham Lambert and theincarceration of Michael Milken, we are presently living through an ” eraof fraud “ for the restatements, suspectresearch analysis, and financial collapse that has engulfed the entire businesscommunity and already resulted in the demise of Arthur Andersen and theconviction of Frank Quattrone.
Despite the immeasurable good that flows from business, andnoble behavior under stressful circumstances that generally characterizes theactivity of its practitioners, this epoch (like that of the '80s) has come tobe associated with those who gained advantage at the expense of others bydeceitful or unfair means. Fromthe elaborate deceptions at Enron andDynegy, to the deliberate misrepresentations at WorldCom and Global Crossing, to the falseclaims at Citigroup and Merrill Lynch, tothe shredding of documents atAndersen and CSFB, to the concealment of information at Merck, Pfizer, and Shell Oil, the public has beenassailed with too much news of truth defeating , truth deforming stratagems from business men and women ofinsufficient character who are caught in tight spots.
What Might Have Been
Consider how differently the landscape would be had thesebusiness leaders and companies faced the truth and acted accordingly, rather than to circumvent it. Imagine, for a moment, that AndyFastow, Enron's CFO had not created a maze of Special Purpose Entities in orderto make Enron look like what it was not: a highly profitable company unburdenedby debt on its balance sheet.Bernie Ebbers and Scott Sullivan at WorldCom capitalized linecosts--lease fees to use other companies' networks--thereby spreadingcosts over longer periods rather than deducting the expense from earnings allat once. The result was higherthan achieved earnings on operations.They also raided reserve accounts in order to boost quarterly earningsat the expense of future periods.The net effect was to make WorldCom look like what it was not: a highlyprofitable telecomm company able to resist the steep downturn that the rest ofthe industry was experiencing.
The WorldCom fraud is especially instructive for the lessons itteaches about the crucial importance of character, how to get and lose it, andthe human costs of failing to live by truth . Betty Vinson was a senior manager inWorldCom's corporate accounting division whose cooperation was needed in orderto execute the fraud. Wheninstructed by her supervisor to make a first questionable transfer of reserves,she balked and protested threatening to resign rather than lose herintegrity. She was assured that itwas a one-time request that would never happen again, and persuaded to comply,though she eventually began to work on her c.v. It was again necessary for her to make false accountingentries the following quarter, and for several quarters thereafter, of an evenmore questionable and complicit nature: she backdated entries and selectedaccounts in order to convert operating expenditures into capital expenses. Her protests grew progressively muteand eventually ceased altogether, and she did nothing about seeking newemployment, as she came to rationalize her situation. She was the family's chief breadwinner. They needed her insurancecoverage. She had a prestigiousjob in her hometown. And, hercompany's CFO, Scott Sullivan was heralded throughout the land as one of thebest and brightest of his profession.Who was she to question and judge him?
By way of contrast, Cynthia Cooper worked as WorldCom's VP ofinternal audit mostly performing operational audits to monitor performance of WorldCom's units, and ensuring properspending controls. When asubordinate's routine investigation stumbled onto $500 million of undocumentedcomputer expenses, she instructed him to “keep going,” even though financial auditing generally fell beyond her purview. Within a month her team “had unearthed$3.8 billion dollars in misallocated expenses and phony accounting entries”  (mostly logged, incidentally, by Betty Vinson and her co-opted subordinates). When she asked questions, Cooper was brushed off first bythe external auditors from Andersen, then by others, and eventually warned offof her investigation by a menacing Scott Sullivan himself. She defied him, worked late into thenight on the investigation to complete her other tasks and avoid arousingsuspicion, and eventually confronted Sullivan at the Board of Directors withthe evidence her team had turned up.The personal costs for her perseverance and courage were high, as shehad as many reasons to wish WorldCom's continued success as Betty Vinson. She simply was not willing to sacrificethe truth in order to maintain an illusion.
I mean neither to castigate a complicit subordinate in lieu ofher more culpable superiors, nor diminish the importance of Vinson's and Cooper'sdifferent responsibilities, positions in the company, and degree ofsubordination to Scott Sullivan.Rather, I mean simply to contrast the behavior of two employees lockedin the maw of beastly circumstances, which called for the urgent exercise ofall the virtues, prudence and courage foremost among them. I imagine that Betty Vinson would bethe first to acknowledge that Cynthia Cooper chose the better part.
As the list of corporate malfeasance grew, the public gotsurly. Despite, for instance, theonerous and costly obligations imposed by the requirement that chief executivesand chief financial officers certify the adequacy of internal controls and thenhave that opinion tested by outside auditors, Section 404 of Sarbanes-Oxley isnevertheless law .  It would have been better all around,including for business, had practitioners exercised more interiorcontrol in pursuit of “truth”(or theclosest, most reasonable approximation attainable given accounting's inherentlimitations). Yet, the seeminglyendless procession of companies having to restate their financials in 2001 and2002--Sunbeam, Waste Management, Enron, Global Crossing, Adelphia,WorldCom, Qwest and more--convinced regulators that interior control wasnot forthcoming from the business community. Many of these companies are now bankrupt; all suffered steepdeclines in market capitalization and shareholder equity. Every public company now shares the burden of what onefriend on Wall Street calls “amateur regulation.”
Consider also the pitiful case of Jamie Olis, a tax VP at theenergy trader, Dynegy, and a defendant with no prior criminal history. He was sentenced in March to 24years in jail for his low-level role in thescheme to make a $300 million loan look like cash flow, and thereby improveDynegy's financial appearance.Defrauded investors lost over $100 million in market capitalization;Olis now sits in jail without possibility of parole.
Finally, consider that home decorating queen, Martha Stewart,also sits in prison, as will the king of the dot-com investment boom, FrankQuattrone. Both were convicted ofobstructing justice: for not only declining to face the truth, but for alsoconspiring to prevent others from discovering it.
As Dante's passage at the head of this essay communicates, andas the long list of convicted business executives have learned the hard way,fraud is not a “victimless crime.” It is a soul-marring, socially devastatingact against truth that harms both those who engage in it--whether caughtor not--and those who rely upon the representations of fiduciaries. Fraud snags the fabric of trust thatweaves through the business world from finance and operations to investors andconsumers. Business is a dignifiedcalling that entails tremendousresponsibilities, not least of which is the obligation to pursue and do truth if for no other reason than to maintain thatdignity.
 Dante, TheDivine Comedy of Dante Alighieri: Hell ,trans. Henry F. Cary, The Harvard Classics , (New York: P. F. Collier & Son, 1969), Canto XI.
 SusanPulliam, “Over the Line: A Staffer Ordered to Commit Fraud Balked, ThenCaved--Pushed by WorldCom Bosses, Accountant Betty Vinson Helped Cook theBooks--A Confession at the Marriot,” The Wall Street Journal , June 23, 2003.
 SusanPulliam and Deborah Solomon, “Uncooking the Books: How Three Unlikely SleuthsDiscovered Fraud at WorldCom--Company's Own Employees Sniffed Out CrypticClues And Followed Hunches--Ms. Cooper Says No to Her Boss,” The WallStreet Journal , October 30, 2002.
 FloydNorris, “Too Much Regulation? Corporate Bosses Sing the Sarbanes-Oxley Blues,” TheNew York Times , January 23, 2004.