Tuesday, December 21, 2004
An Op-Ed in the New York Times (Dec. 21) by Professor Leonard Orland (Connecticut) questions New York Attorney General Eliot Spitzer's threats to institute criminal proceedings as part of an effort to oust the CEO of Marsh & McLennan. Professor Orland writes:
In the case of Marsh, Mr. Spitzer essentially forced the board to dismiss its chief executive, Jeffrey Greenberg, to avoid corporate criminal indictment. The sequence of events raises serious questions about the use (and potential misuse) of prosecutorial threats to a corporation and whether Mr. Spitzer's powers should be curtailed.
In October, Mr. Spitzer filed a civil complaint that accused Marsh of securities fraud and bid rigging. Mr. Spitzer also hinted at the possibility of a criminal indictment for the company unless Marsh's board ousted Mr. Greenberg.
The question Professor Orland raises about Spitzer's rather heavy-handed tactics has been voiced before, although companies are quick to settle civil charges because the cost of a criminal indictment can be so severe, much less a conviction--just ask Arthur Andersen. The problem is that it is rather difficult to fight a media darling whose approach is lauded by Congress and emulated by the SEC. Achieving balanced regulation that neither goes overboard nor permits companies to act with impunity is very hard to achieve, and Professor Orland's argument is worth considering. (ph)