Executive Prison Sentences and Fraud Deterrence

One of the key parts of Sarbanes-Oxley, the legislation created to address the problem of massive financial statement fraud at public companies like Enron and WorldCom, was the increased prison sentences for executives participating in fraud.

Supporters of the legislation cheered harsher potential punishment for executives as one of the keys that would help prevent fraud.

Others weren’t so sure that longer prison sentences would really do anything to deter executives who want to commit fraud. If you’ve studied corporate fraud for any length of time, you have seen that fraud by executives is often fueled by feelings of arrogance and entitlement. These are important pieces of the fraud puzzle for executives, and they are part of the reason why executives may be unphased by penalties for committing fraud.

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Former CEO of Refco Cries His Way to a Guilty Plea

Phillip Bennett, the former CEO of Refco Inc. pleaded guilty today while crying… Refco was one of the world’s largest commodities brokerages, but it went down in flames a few weeks after going public in August 2005. The reason? Management concealed the fact that a company controlled by Bennett owed Refco $430 million. The SEC … Read more Former CEO of Refco Cries His Way to a Guilty Plea

Refco’s Broker-Dealer Unit Owes Customers $4.16 Billion

The unregulated broker-dealer unit of Refco Inc., Refco Capital Markets Ltd, says it owes customers about $4.16 billion. This is $486 million more than previously estimated by the parent company. Refco Inc. has filed for bankruptcy protection, and in those filings, it showed Refco Capital Markets owing $3.68 billion to customers. Total liabilities for the … Read more Refco’s Broker-Dealer Unit Owes Customers $4.16 Billion