Putting “Corporate Scandals” in Perspective
| Peter Klein |
Enron, WorldCom, Arthur Andersen, Parmalat. . . . The list goes on and on. Maybe you didn’t hear about this one though:
The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity’s total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years.
If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case — even though the entity is the U.S. government.
This is from a letter by the US Comptroller General appearing in the 24 December Washington Post (via Don Boudreaux). See also James Sheehan’s prescient 2002 article, “Real Accounting Fraud,” about the post-Enron frenzy in Washington, DC. “It is particularly frightening that a group of people skilled mainly at feeble speechifying and crass fund-raising would consider itself qualified to stand in judgment of corporate accounting scandals. All members of Congress are direct participants in the biggest accounting fraud going — the federal government — and have never lifted a finger to bring it under control.”