What’s cookin’ in New York?

All over the US, the news about Terri Schiavo had everyone riveted, but even now that she had died, the family is still embroiled in a legal battle. It seems that the saga of litigation will outlive even her death. On the other side of town, people are flocking to watch the Broadway musical hit Wicked. And people are willing to pay as much as $250 to scalpers for a ticket. Meanwhile, the crusader for good corporate governance – NY Attorney General Eliot Spitzer – is out spitting fire all over the concrete canyons of Wall Street as he goes after both white collar and blue collar crooks. In the past few years, the accounting scandals of big firms like Enron, Worldcom, AIG, and Arthur Andersen, among others, have kept us riveted to every unfolding CEO/CFO shenanigans. As a result, the Securities and Exchange Commission (SEC) has cracked down hard on white collar crime and this affected the way corporate Americans do business at home and abroad. With all these investigations, many US corporations feel like they are walking on thin ice.

"It’s only sporting that at least one government official be inclined to quibble with gluttonous telecom CEOs, rapacious pharmaceutical companies, and certain Midwestern utilities that are only too happy to let their smog and acid rain drift eastward to the Empire State," it was written of Spitzer three years ago. He took up the issue of conflict of interest among stock analysts who double as salesmen for their firms’ investment divisions. Spitzer is to Wall Street’s injudicious present what former federal prosecutor Rudolph Giuliani was to its injudicious past.

Enron lied about its profits and stands accused of a range of shady dealings, including concealing debts so they didn’t show up in the company’s accounts. Andrew Fastow - its former chief financial officer and alleged author of the deceptive accounting practices - was sacked as the scandal unfolded. As the depth of the deception unfolded, investors and creditors retreated, forcing the firm into Chapter 11 bankruptcy in 2001. It was the largest bankruptcy in American history. The Arthur Andersen accounting firm obstructed justice by engaging in a "wholesale destruction" of tons of Enron-related documents, a federal indictment charged in 2002. Financial executives at WorldCom exercised various methods of hiding expenses for a period of more than two years between 2000 and 2002. They delayed reporting some expenses and misrepresented others to give investors the appearance of growth during secretly hard times. Martha Stewart was convicted November last year for lying to investigators about her sale of ImClone Systems shares in December 2001. Just recently, billionaire investor Warren Buffett has been implicated in the $500-million deal involving the American International Group (AIG) and Buffett’s General Reinsurance Corp. This controversial deal helped AIG inflate its finances with the help of General Reinsurance, a rival company. As a result of its collusion with Buffett’s firm, AIG lost its top AAA credit rating from Standard and Poor’s. This could only spell more trouble for the embattled company as its stock prices continued to plummet. In addition, a cut in the embattled AIG’s top ratings would virtually make its businesses more expensive to operate.

Three years ago, the US government responded with tough regulations from the Sarbanes-Oxley law. "But now one provision that requires more oversight by auditors has triggered a backlash. Companies have discovered that the cost of complying is 30 times as expensive as originally predicted. The total tab: $35 billion," reported Newsweek. Next month, the US SEC will conduct a hearing to rethink the law. In fact, even our own principal firm – The Interpublic Group (IPG) – is going through a rigorous and stringent process like other US conglomerates. IPG, which is a public firm, is going through the eye of the needle because of what is going on. Unfortunately, this is affecting its operations in Asia where business is conducted quite differently from most parts of the world. Ultimately, this will affect America’s competitiveness in the world of conglomerates. The US has lurched so far to the right that even the corporate world has been brought under the heels of a police state-like monitoring and regulation. The Philippines may need a good dose of good governance vigilance and regulation, too, especially with some banks having major shareholders like the GSIS and the SSS. These should be looked into very carefully – especially the goings-on in the boardrooms – because the families who own these banks are technically no longer the majority stockholders. And yet, they have the run of the show. Careful investigation should be conducted by the Monetary Board because already there are rumors that some of these banks are in deep shit – big time! Clearly, the interests of the stockholders must be protected.

In September last year, America’s largest insurance firms were served with subpoenas from Spitzer asking an explosive question: Had they engaged in bid rigging? A week later, several of the insurers, AIG included, told Spitzer they had paid kickbacks for having business steered to them and had submitted sham bids to mislead customers. Their panicked responses revealed evidence of a broad scheme of collusion and price-fixing within the $1.1-Trillion insurance industry. "It’s the same kind of cartel-like behavior carried out by organized crime. It’s like the Mafia’s ‘Cement Club’," explained Spitzer. Everyone knows former AIG Chair Maurice "Big Time Hank" Greenberg because of Philam Life. For many decades, he was THE god of some of the Makati businessmen because of his perceived power and influence in New York and in Washington, D.C. With Greenberg out of the loop, there are many wondering why Malacañang is keeping him as an international adviser when he is reportedly being accused of "cooking" the books of AIG. New York is a vicious town. When you’re out of the loop, you’re out. Certainly, we have enough cooks or crooks in the Philippines and if we really need a cook as an adviser – we might as well ask Nora Daza.

Without a doubt, corporate America has been getting away with a lot of "cooking." With the urgent call for corporate governance all over the world, the Philippines still has a long way to go. It is high time shareholders are amply protected. Definitely, we have to start somewhere. Perhaps, SEC Chair Fe Barin, who is close to GMA, should sic her own Doberman Spitzer on the various corporate cooks or crooks in the country.

Most especially, those hiding behind the loud voices preaching "good governance" when in reality they themselves are involved in big-time "cooking" or in Tagalog lutong-luto. The worst part is the small shareholders are being "fried in their own oil." In other words, lutong makaw.

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