WorldCom and Livedoor

The fraud of WorldCom is similar with Enron case. WorldCom overstated the income, and misled investors. The US Securities and Exchange Commission (SEC) alleged that “WorldCom, led by Chief Executive Officer (CEO) Bernie Ebbers, misled investors from at least as early as 1999 through the first quarter of 2002” (Vasilescu and Russello 2005: 4). In July 2002, WorldCom entered bankruptcy. Carson summarises “the Enron and WorldCom cases highlight some serious problems with rosy view of laissez faire capitalism endorsed by many defenders of capitalism and the shareholder theory” (2003: 392).

The case of Livedoor, a Japanese internet company, is also similar with Enron and WorldCom. According to the Financial Times, the executives were arrested in January 2006 because of “suspicions of accounting fraud and market manipulation” (Nakamoto and Lucas 2006).[3]

The Sarbanes-Oxley Act

The Sarbanes – Oxley Act was signed into law in 2002. It is to protect the investors by improving the accuracy and reliability of corporate disclosure. This act is created based on the reflection of Enron’s fraud. It established the Public Company Accounting Oversight Board, which oversee the public companies’ auditors for fairness and independent audit reports. According to Vasilescu and Russello, “prosecutors provided the DOJ [the US Justice Department] and the SEC [the US Securities and Exchange Commission] with powerful tools to pursue corporate misconduct” (2005:7). For example, it “provided for new crimes for securities fraud and conspiracy to commit securities fraud” (2005: 8).

Senator Paul Sarbanes, one of the authors of this act, describes this on his website as “The legislation creates a strong independent oversight board to oversee the auditors of public companies and enables the board to set accounting standards, and investigate and discipline accountants”[4].

Cases of Insider Trading in News Organisations

The Mirror

In 2000, the Press Complaints Commission (PCC) condemned two columnists and one editor of The Mirror for their financial actions (Sanders 2000: 124). Anil Bhoyrul and James Hipwell were the columnists of ‘City Slicker’ of The Mirror, and they purchased shares which they featured in their column. According to the BBC reports (2005, 2006), Bhoyrul pleaded guilty and was punished a one hundred eighty-hour work for the benefit of the community, and Hipwell was found “guilty of conspiracy to breach the Financial Services Act”. Hipwell was jailed for stock market abuse in February 2006 (Hipwell 2006)[5].

Moreover, Piers Morgan, the editor at that time, also bought shares that had been tipped by these columnists. He confesses it in his dairy book, ‘The Insider’ as follows:

“MONDAY, 17 JANUARY

I’ve been dabbling a bit in the stock market and bought shares today in a company called Viglen Technology, one of Alan Sugar’s companies. Our ‘City Slicker’ columnists, Anil Bhoyrul and James Hipwell, have tipped them several times since the start of the year, and both my broker and my uncle have also recommended them to me recently, so they sound a good bet” (2005:249).

He does not seem to have any ethical guilty feelings at this moment. However, he writes his restless feelings a few days later.

“SUNDAY, 23 JANUARY

A small piece appeared in the Sunday Business Newspaper today saying the Financial Services Authority were having a look at trading in Viglen shares to see if anyone had been ‘insider dealing’. It leapt off the page. I am now seriously uneasy. I was a bloody fool to be buying shares without checking what they were tipping in their column” (2005: 250).

The PCC summarises that Morgan’s and two columnists’ behaviour as “serious breaches of financial journalism provisions of the Code of Practice” and “Mr Morgan had not taken sufficient care to ensure that his staff were acting in accordance with the Code”. [6]

In the investigation of the PCC, Morgan’s amounts of purchase were reported as 20,000 pounds. However, in 2005, during Hipwell’s trial, it was revealed as 67,000 pounds. In 2006, a former editor of The Mirror, Roy Greenslade requested to reopen the Commission and the reassessment. He assumed that the Trinity Mirror management “had conspired to give false evidence to the Commission” even though he had told the total cost as 67.000 pounds. The PCC confirmed the company and concluded it could not find the evidences to suggest the conspiracy to present the false information to the Commission. In addition, it recognised that the value of the shares was irrelevant to this matter. As a conclusion, the PCC criticised the company that “non-disclosure affected the integrity of the PCC’s work” and The Mirror’ s case is “Serious breaches of the Code of Practice” (The PCC 2006).

Nikkei

In Japan, one employee in advertising section of Nihon Keizai Shimbun, Inc. (Nikkei) arrested because of insider trading by accessing the companies’ data for its advertisement (AFX 2006). In July 2006, this person was arrested by the Tokyo District Public Prosecutors Office on suspicion of insider trading. This employee made his profits by accessing buying the shares of five companies which brought Nikkei their unpublished legal notifications as advertisers. The information should be kept as confidential. Nikkei told employees in the editorial, advertising and sales bureaus to stop trading in stocks.

Дата добавления: 2015-11-14