L. Dennis Kozlowski and Mark H. Swartz have been in jail since 2005, but were not officially prevented from engaging in their business after committing accounting fraud. The SEC final judgments against Kozlowski (former CEO of Tyco) and Swartz (former CFO). The judgements bar the men from serving as directors of public companies.

Sarah N. Lynch reports:

“The judgments bar the men for life from serving as a director of a public company and enjoin them from violating securities laws. The SEC had accused them in its civil case of failing to disclose hundreds of millions in executive indebtedness and executive compensation.

They were convicted for their roles in the criminal case and sentenced to serve terms [of various lengths]. They also paid $134 million in restitution to Tyco and criminal fines of $70 million and $35 million, respectively.

The final settlements are still subject to approval by a federal New York judge.”

SEC is just jumping right into these things, huh?  Part of the problem is that soo many of these scams/failures can be detected long before they blow up.  The SEC needs to get more aggressive in their approach.

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On July 1st, the SEC voted on several new measures that were aimed primarily to increase investor confidence by providing investors with tools to increase corporate accountability. First, the commission approved a measure that requires a shareholder vote on executive pay in proxy solicitations involving companies that receive money from the Troubled Asset Relief Program (TARP).  The Commission also voted to propose a measure requiring public companies  better disclosure of executive pay in their proxy statements. A New York Stock Exchange rule was changed as well, as the SEC now prohibits brokers from voting proxies in corporate elections without customer input.

These types of programs are all well and good but a fundamental issue remains and that is the SEC actually taking action against the fraudsters in the industry.  Until the SEC starts using the tools it has to catch the fraudsters, even the very obvious ones (for example: Madoff), investor confidence will remain lower than it could and should be.

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