Washington Post: High Court's Fraud Case Widely Seen as Stand-In for Enron [View All]

http://www.washingtonpost.com/wp-dyn/content/article/2007/10/04/AR2007100402254.html

By Carrie Johnson and Robert Barnes
Washington Post Staff Writers
Friday, October 5, 2007; Page D01

The largest corporate frauds in recent history could not have happened without the brainpower of accountants, bankers and lawyers who partnered with executives at the troubled firms. Often, these third-party businesses are the only wealthy sources left for investors to tap after such schemes unravel in massive collapse.

That's why Robert Van Der Volgen, whose pension fund invests the retirement savings of 750,000 teachers, says the outcome of a dispute to be heard by the Supreme Court on Tuesday will help determine nothing less than the integrity of the financial system.


Justice Anthony M. Kennedy last month said rulings against business interests helped U.S. markets lose ground to competitors. (By Spencer Platt -- Getty Images)


"The security of our members really depends in a large part on having some honesty as to the statements being made by large corporations," said Van Der Volgen, a lawyer at the California State Teachers Retirement System. "All these fraud cases really have been attempts to mask the returns of a company."

On one side of the Supreme Court case are resourceful plaintiff lawyers trying to recoup money that their clients lost through fraud and who see other businesses as accessories to the crime. On the other side are some of the nation's most powerful industry lobbyists, who argue that regulators already have the authority to punish lawbreakers and say that allowing investors to expand the targets of their lawsuits will only put U.S. companies at a global disadvantage.

The fight has unleashed so much passion and so many opportunities for fundraising that a Washington law professor calls it the business community's equivalent of Roe v. Wade.

Indeed, the dispute is widely viewed as a stand-in for one of the most notorious frauds of the past decade -- Enron. In ruling on this case, the high court also could tip the balance of a lawsuit that Enron shareholders filed against Credit Suisse, Merrill Lynch and other banks that allegedly helped the Houston energy firm disguise its financial problems. That case is on hold, but a judgment in support of investors could revive it.

FULL story at link.