Ethics needs a big stick (Editorial)

Corporate fraud should carry tough sentences regardless of the perpetrator's record

Sometime in the distant future when business school students take their ethics courses, this decade should feature prominently.

It’s not that today’s leaders are any worse than those before them. Rather history has converged to bring North America to a defining moment in corporate responsibility. It started with Enron and WorldCom in the private sector. In the public sector, Canada’s federal sponsorship scandal and Toronto’s MFP computer-leasing fiasco provide textbook examples of accountability failures.

Nationally, Justice John Gomery’s ongoing inquiry into charges that the federal government inappropriately funnelled more than $250 million to Liberal-friendly ad companies in Quebec has borne witness to the unethical behaviour of politicians, bureaucrats and business people connected to the ruling party.

In Toronto, Justice Denise Bellamy wrapped up her inquiry in September, detailing how a $40-million computer leasing deal between the city and MFP turned into a liability of more than $100 million. Findings include the tale of a former city treasurer, Wanda Liczyk, who had an inappropriate relationship with MFP salesperson Dash Domi, as well as with a high-priced consultant (and former lover) who sold Toronto a software program worth millions of dollars. And then there’s former Toronto budget chief Tom Jakobek, whom Bellamy accuses of taking a bribe from Domi and then lying, lying, lying… Toronto’s mayor has called for a police investigation to take the matter further.

Yes, there are laws against this kind of thing. The United States is trying a number of high-flying executives from firms driven into bankruptcy by management fraud and greed. Earlier this year, WorldCom CEO Bernard Ebbers was sentenced to 25 years in prison for his role in defrauding his own firm of $11-billion US.

Fearing that top executives and boards of directors need some help with accountability, the U.S. passed the Sarbanes-Oxley Act, which places governance responsibilities upon firms and their leaders. Canadians are becoming very familiar with Sarbanes-Oxley due to business and subsidiary connections with the U.S.

While courts and legislators are dealing with corporate fraud in the U.S., Canadians have been hearing tales of greed via the Gomery and Bellamy inquiries, and hoping suitable punishments are proscribed. So far, they have reason to doubt the process.

The first person to be tried in the sponsorship scandal, ad executive Paul Coffin, pleaded guilty to 15 fraud charges totalling $1.5 million and received a two-year sentence (less a day) to be served in the community. Coffin will be speaking to business students about ethics.

The prosecution asked for Coffin to get 34 months in jail, but Quebec Superior Court Justice Jean-Guy Boilard spared him jail time, noting his clean record, expression of remorse and actions to repay $1 million to Ottawa. In sentencing Coffin, Justice Boilard also gave him credit for having had a clean record and being unlikely to re-offend.

Justice Boilard’s reasons for a community sentence ring hollow.

It’s not likely that an executive facing fraud charges will appear with a long list of petty pilfering or “that big doozy” of a swindle he got away with last time. As for re-offending, is anyone really worried Coffin will get a chance to tap government coffers again?

Corporate fraud sentences need to send a message to corporate leaders that such practices won’t be tolerated. Instead the message is “don’t get caught twice.” Ethics demands more.

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