Jarret Wollstein, NewsMax.com
Wednesday, July 17, 2002

The list of companies going bankrupt or discredited in just the past few months reads like a "Who’s Who” of corporate America.

Unquestionably CEOs who lie about the health of their companies and cash in big stock options just days before declaring bankruptcy deserve to be criminally prosecuted. However, in the heat of the moment, is Congress now going too far in imposing new business regulations? After all, isn’t fraud already against the law?

On Monday, in a 97-0 vote, the U.S. Senate approved the most sweeping changes in business regulations since the Great Depression.

Under the bill (which must be reconciled with legislation now pending before the House and then signed by the presidents) corporate CEOs and CFOs who certify false financial reports could be imprisoned for 5-10 years and fined $500,000 to $1 million.

The House of Representatives tried Wednesday to show it was tougher on corporate crooks by taking the Senate's doubling of penalties and doubling them again.

Punishing executives who mislead the public is one thing, but what about imposing drastic new regulations on all businesses and even regulating how much you can be paid? The Senate bill already takes a giant step in that direction by banning personal loans by companies to their top executives.

Feds 'Regulating Salaries'

As Scott McNeally, CEO of Sun Microsystems, says: "This is America. You get paid what people are willing to pay you. The day the government starts regulating salaries is the day the country is headed down the hopper.”

The Senate bill also creates a quasi-private oversight board for the accounting industry, which in turn would be controlled by the SEC. That comes dangerously close to government management of industry.

However, others want to go much further and have the government set corporate salaries and seize any business that violates government "rules.” A good question is, "What rules are they talking about?” There are 10 million laws in force in the U.S. today, and many contradict each other.

Big Brother Knows Best

Consider, for instance, the plight of one Maryland businessman I know who owned a large chain of health clubs. The state government told him he absolutely had to have a certain type of filter system on his swimming pools. However, the Baltimore city government told him the device the state ordered was prohibited by city laws!

Such conflicting rules are widespread, and destructive government economic regulations are multiplying faster than oversexed rabbits in a carrot patch. The pro-free-market Cato Foundation reports that in recent decades thousands of minor paperwork errors, which previously resulted in $50 fines, have been converted into crimes – in effect criminalizing honest mistakes by businessmen.

Today, in America, any business can be destroyed in an heartbeat by unlimited administrative fines imposed by the FTC, SEC, FCC, EPA and dozens of other regulatory agencies.

One law, for instance, allows the Department of Health and Human Services to impose fines of up to $1 million a violation on pharmaceutical manufacturers. Even worse, you won’t even be allowed to go to an independent court to contest the fine without paying it first!

(The other alternative is to go before an administrative law judge who works for the same agency that imposed the fine. Not surprisingly, such judges decide in favor of the agency they work for 95 percent of the time, making kangaroo courts look like models of fairness.)

Soviet America

Where is all of this economic regulation taking us? Before the economic collapse of the Soviet Union, 70,000 communist bureaucrats dictated every aspect of business, commerce and trade. The result was widespread famine, grinding poverty and, ultimately, the collapse of an empire.

Today, America seems to be rapidly moving toward in the same direction.

Corporate America has been the major engine of growth for much of the world for more than 100 years. Corporate America has given us air conditioning, central heat, 500 channels of TV, stereophonic sound, the Internet, mass-produced cars, cheap international air travel, the computer revolution, life-saving wonder drugs, gourmet frozen food, the world’s best-stocked supermarkets, and a host of other wonders and luxuries the have made us the envy of the world.

Those on the left who sneer at such material comforts nevertheless seem to enjoy them as much as anyone.

Economic socialism or fascism is not an economic alternative. All they have "given” the world are poverty, famine, war, secret police and the gulag.

In the midst of the worst corporate scandals in 50 years, Americans need to pause, think twice and consider if the solution is really more regulations and more government agencies – or should we demand enforcement of existing laws against fraud. In our rush to "improve” free market capitalism, we must be very careful that we don’t destroy it.

Jarret Wollstein is a correspondant for NewsMax.com and a contributing editor for Financial Privacy Report.

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