The Global Economy’s Corporate Crime Wave

Jeffrey D. Sachs
Project Syndicate

NEW YORK – The world is drowning in corporate fraud, and the problems are probably greatest in rich countries – those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world.

Hardly a day passes without a new story of malfeasance. Every Wall Street firm has paid significant fines during the past decade for phony accounting, insider trading, securities fraud, Ponzi schemes, or outright embezzlement by CEOs. A massive insider-trading ring is currently on trial in New York, and has implicated some leading financial-industry figures. And it follows a series of fines paid by America’s biggest investment banks to settle charges of various securities violations.
There is, however, scant accountability. Two years after the biggest financial crisis in history, which was fueled by unscrupulous behavior by the biggest banks on Wall Street, not a single financial leader has faced jail. When companies are fined for malfeasance, their shareholders, not their CEOs and managers, pay the price. The fines are always a tiny fraction of the ill-gotten gains, implying to Wall Street that corrupt practices have a solid rate of return. Even today, the banking lobby runs roughshod over regulators and politicians.


Corruption pays in American politics as well. The current governor of Florida, Rick Scott, was CEO of a major health-care company known as Columbia/HCA. The company was charged with defrauding the United States government by overbilling for reimbursement, and eventually pled guilty to 14 felonies, paying a fine of $1.7 billion.

The FBI’s investigation forced Scott out of his job. But, a decade after the company’s guilty pleas, Scott is back, this time as a “free-market” Republican politician.

When Barack Obama wanted somebody to help with the bailout of the US automobile industry, he turned to a Wall Street “fixer,” Steven Rattner, even though Obama knew that Rattner was under investigation for giving kickbacks to government officials. After Rattner finished his work at the White House, he settled the case with a fine of a few million dollars.

But why stop at governors or presidential advisers? Former Vice President Dick Cheney came to the White House after serving as CEO of Halliburton. During his tenure at Halliburton, the firm engaged in illegal bribery of Nigerian officials to enable the company to win access to that country’s oil fields – access worth billions of dollars. When Nigeria’s government charged Halliburton with bribery, the company settled the case out of court, paying a fine of $35 million. Of course, there were no consequences whatsoever for Cheney. The news barely made a ripple in the US media.

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