New at Reason

Julian Sanchez | January 16, 2006

John Berlau explains how accounting regulations let government squeeze uncooperative journalists.

Comments

|1.16.06 @ 11:49AM|#

Speaking of journalists, when are we going to get the lowdown on Fumento?

If you can't trust someone who consistently writes in favor of biotech companies and big Pharma, who can you trust?

|1.16.06 @ 12:01PM|#

Let's see. Big Media cheerleads for "corporate reform", appearently due to some unthinking antibusiness bias. Big Media does not realize that the reforms could be used against them. Big Media gets burned.
This could almost serve as a libertian fable. Be careful when you give government power to use against people you don't like. It could be used against you too.
Will Big Media learn from this situation?
Forgive me, but I'm skeptical.

|1.16.06 @ 12:05PM|#

Whoops! That should be "libertarian", not "libertian".

Larry A|1.16.06 @ 12:19PM|#

We need a variation on the Miranda; "Any regulation you pass shafting the other guy can be used against you in a court of law."

R.J. Lehmann|1.16.06 @ 2:26PM|#

Berlau's lede is writing checks the body of his story can't cash. Fitzgerald never claimed that Time Inc., its directors, or its CEO had violated any statutory provisions of Sarbanes-Oxley. The 6th Circuit decision Fitzgerald cited actually predates implementation of SOX, with the underlying case predating even the Enron affair that inspired SOX to be passed in the first place. Failure to comply with a court order has ALWAYS been a criminal offense, and that would be just as true whether the order was directed to the directors or officers of a publicly traded company -- those who are covered by SOX -- or the principals of a privately held company, or a partnership, or a sole proprietorship, or simply an individual.

SOX doesn't speak to whether the notes or conversations of journalists who work for publicly traded companies would be covered as "business records," and I'll stipulate that we'll likely see case law to test that proposition eventually. But I don't really think there's too much of a threat there. If I were mounting a defense for such a media company, I'd start by noting that the whistleblower provisions of the law DO specifically exempt from record-keeping requirements the records of conversations that employees may have had with members of the media. That exemption would mean very little if it were possible to just go ahead and seize the other side of the coversation.

|1.16.06 @ 3:13PM|#

My company spent US$7M complying with SOX, almost entirely to lawyers and CPA's. THAT'S why the bill passed. That it had to do with Enron is laughable. SOX passed long after Enron, et al., went down.

R.J. Lehmann|1.16.06 @ 3:29PM|#

The trial bar certainly played a major role in getting the bill passed. The American Academy of Actuaries, though they have clearly benefitted from the bill, not so much. As valuable as the additional business has been for them, most accounting firms were much more frightened by the bill's creation of the Public Company Accounting Oversight Board than they were heartened by the financial windfall from 404 compliance.

As for it passing "long after" Enron went down, the first signs of the Enron debacle came with the company's 3Q report in October 2001 showing millions in unanticipated losses. SOX was signed by President Bush in July 2002. In Beltway terms, that's a blink of the eye.

In any case, the claim is not that SOX in any way addresses the problems seen at companies like Enron, but it certainly would never have come to pass if Enron hadn't happened.

R.J. Lehmann|1.16.06 @ 3:32PM|#

Sorry, substitute American Institute of Certified Public Accountants where that reads American Academy of Actuaries.