Why is it that watching and reading about the current generation of corporate villains in front of Congress and elsewhere causes the average person’s blood to boil? Is it the arrogance, the lying and/or selective withholding of information, the seeming attitude that the concerns and morals of the rabble (us) are beneath them, or the fact that most of them will get away with it? Add to that a little dose of pomposity and phoniness by the Congressional interviewers and you have the reasons God invented double martinis. Where do these people come from, and why do they think they can lie and steal and get away with it?

As to where do these people and their morals come from, they are just the latest in a long line of corporate plunderers, and are probably not even all that innovative in their methods. It might be worthwhile to look at a little of that history in terms of both corporate thievery and the repercussions (or lack thereof) eventually befalling the scoundrels.

One of the residuals of my years working for Pullman Passenger is a nagging love of railroads and their history. Of particular interest is the original building of the roads, along with the associated interplay between the builders, shareholders, workers, elected officials, etc. I am currently studying the latest book written on the building of the transcontinental railroad entitled "Nothing Like it in the World" by Stephen Ambrose. Although I have read other books on the subject, this one seems to add particular emphasis to the behind the scenes dealings of the people involved. The very basic story is that visionaries, both inside government and in the private sector, felt it imperative to connect the eastern and western parts of the young U.S. by rail. No individual company had or could obtain the resources to do the job on their own, so the U.S. government was forced to become an active partner in the endeavor. The government essentially guaranteed bonds and issued land grants (ten square miles) for every mile of track completed by two competing companies.

One can imagine that it took seemingly forever to get this enterprise off the ground, especially since there was not even a railroad to Omaha (the eastern terminus) at the time, and supplies had to be brought by ship up the Missouri river. There was not even a consensus that the project could be completed. The officials of the Union Pacific railroad used the time and uncertainty to good personal advantage. They set up a separate corporation, known as Credit Mobilier, to act as the construction company for the line. This company was paid by check an amount guaranteed to create a profit on the construction phase of the undertaking, and would do so even if the line were never finished and the stock of the parent company became worthless. The officers and shareholders were, you guessed it, all the officers and insiders of the Union Pacific, plus a few politicians participating for good measure. It ranks up there with the best financial scandals of the nineteenth century. Do you think the people from Enron read this book?

Another interesting piece of this fascinating story is the disincentive when being awarded ten square miles of land for mile of track completed to go in a straight line. Directly out of Omaha, the very first section, was a great oxbow like swing that added twenty miles to the line. According to Mr. Ambrose the Chicago Tribune called the oxbow an “outrage” perpetuated by “a set of unprincipled swindlers.”

What were the repercussions of these actions? Virtually none. The railroad was completed to incredible fanfare, and the amazing work done by the engineers and construction workers overshadowed the knavery in a burst of national pride. No doubt the inclusion of many politicians in the list of shareholders of Credit Mobilier helped the shift in wealth to Credit Mobilier from the shareholders of the Union Pacific to go unpunished. The circuitous routes to get from point A to point B were also largely ignored in the afterglow of achievement.

Stories similar to this abound in the early history of corporate U.S. Every one of the robber barons had their moments before settling down to a life of non-interrupted philanthropy, not to mention the extreme examples of non-prosecuted bank fraud in the years prior to 1929. A more recent example of fraud on a large scale, with an almost blanket absolution of the perpetrators, is the savings and loan scandal of the 1980’s. Prior to roughly 1980, savings and loans had been relegated primarily to the mundane business of  providing home mortgages. In 1982 a bill was passed releasing the S&L’s from this requirement, following a bill passed in 1980 raising the federal insurance on S&L deposits from $40,000 to $100,000. This combination was deadly. By 1989 Congress was forced to pass a bill appropriating $157 billion to bail out the industry. Many books have been written detailing the crooked and well-connected loans, as well as other types of fraud. The Congressional bailout (with the exception of Charles Keating and a few others) essentially swept under the rug the fraudulent acts of literally thousands of people, from S&L officers to board members (like Neal Bush at Silverado), to undeserving loan recipients. Wouldn’t it have been interesting to just read the list of involved names?

Where are we going with this? Simply stated, we as a country have always had difficulty bringing to justice the bold and reckless white-collar criminal. It is a fine line between wasting valuable time and resources chasing every small transgression and being so lax as to create an atmosphere that some people or class of people are above morality, or the law. The formula appears familiar, involve as many politicians and pillars of the community as possible, and when caught, have them declare that it would be better to “look forward’ and not “dwell on the past or the negative” and “put this all behind us.” I fear that the Enron and various other corporate problems will take this same route. In a few weeks we will start to hear garbage like “We need to have faith in our corporate leadership” and “Everyone has learned their lesson going forward.” Maybe if we had been harder on the S&L thieves these people may have had a second thought. Make no mistake. Many people need to be prosecuted and literally thousands of corporate hacks need to return bonuses based on phony numbers. Why do I think that this will not happen? They will get away with it because they always have.
   

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