In 2002, the Sarbanes-Oxley Act was passed by Congress to hold corporate executives and their Boards responsible for the financial information that is reported. This law was a measure to address the devastating corporate scandals of the time that resulted as a lack of proper oversight. As you may recall, one of those scandals involved our very own Governor Bill Richardson:
The story is all too familiar. Several months ago, before WorldCom and in the wake of Enron and Global Crossing, Peregrine Systems, Inc., a lesser-known San Diego-based software company, announced it had overstated its earnings by $100 million, while “independent” accounting firm Arthur Andersen was overseeing the books. Another corporation, another lie, and another investigation by the Securities and Exchange Commission and the Justice Department.
As these scandals have unraveled, the term “independent” is bearing more
scrutiny. How “independent” are auditors? How “independent” are “outside”
Consider the Peregrine imbroglio and one of its “outside” board members, New Mexico’s Democratic gubernatorial candidate Bill Richardson. Upon the announcement of Peregrine’s misdeeds last May, Bill Clinton’s former energy secretary requested, through a letter to the company, an investigation into the accounting improprieties – a wise political tact and the obvious first move in beginning to distance himself from a company that would soon implode. Mr. Richardson, declaring publicly his concern as an “independent” board member, seemed to clear himself of any Peregrine taint. His letter was covered in New Mexico’s newspapers, and he stated outright, “I had no involvement because I was what was called an outside director.” Mr. Richardson resigned from the board in June. [read the full text]
This is not something that happened in the Governor’s distant past. Quite to the contrary, it is a case of financial fraud that occurred during the Governor’s watch just over three years ago. So the question is… did he learn from it? The short answer, sure.
Notice that the “wise political tact” of requesting an investigation after, but not before, the fraud became news was repeated recently in response to the State Treasurer scandal. He also learned that claiming “no involvement” seemed to appease the voters. Just check out this excerpt [subscription] from the Journal:
Treasurer’s Office investments are subject to the advice and consent of the state Board of Finance, which Richardson chairs and controls. The board also sets investment policy for the treasurer.
Richardson spokesman Pahl Shipley said the governor played no role [emphasis added] in the Treasurer’s Office investment business with Wachovia Securities.
Uh oh, now we have a problem. The Governor is the Chairman of the Board, and if we take Mr. Shipley at his word, then the Governor did not fulfill his duties to the citizens of New Mexico. If this were a publicly traded company, I believe under Sarbanes-Oxley Governor Richardson would be facing the prospect of some jail time.
Based on all of this, I’m of the same mind as Mr. Chavez.