While I have always believed the white collar crime pays very well in the United States and that the American justice system suffers from Alzheimer’s disease, I frankly had a little more confidence that the Enron scandal would provoke some meaningful change in our treatment of fraud. Unfortunately, I was too optimistic.
We have to ask ourselves why officials at both Citigroup and Dynergy were not criminally prosecuted given the enormity of their scam. That is, Dynergy claimed that a $300 million dollar loan from Citigroup was $300 million in revenue!
Recently, a Robert Doty, a senior executive of Dynergy, a power company that competed with Enron and was located also in Houston, paid a paltry fine for his massive misdeeds. Specifically, Mr. Doty was part of a financial group at Dynergy that improperly reported a $300 million dollar loan from Citicorp as revenue.
As recompense for this fraud, Dynergy did pay a $468 million dollar settlement to settle a class-action lawsuit, and Citigroup paid $19 million. Mr. Doty, who was the “Andy Fastow” of Dynergy paid only $377,000 to settle accusations by the Securities and Exchange Commission and was not subject to criminal prosecution for this offense.
The stockholders of Dynergy lost billions of dollars when Dynergy stock imploded after the company admitted to a significant number of financial shenanigans.
