Chapter 7. Neither Prevent nor Punish


“Do you want to hear the bad news first, or the very bad news?”

 --Call from a broker to an investor

“The US system of corporate governance presumes that directors, accountants, equity analysts, investment banks, accountants, and regulators are all independent of both management and each other. During the past decade this independence was replaced by a rather incestuous relationship...”[117]

 --Richard Katz

The extensive checks and balances that exist in America’s financial system did not work in the scandals cited in Chapter 2. Is it likely that they worked in the cases of all other corporations? Certainly not. But if not, how did it happen?

Once-trusted institutions—accounting firms, banks, brokerage houses, ...

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