THE BLOG

Unfair Competition

02/27/2015 07:43 pm ET | Updated Apr 29, 2015

As a satirist I struggle to compete with reality. Last week, after declaring that, "There were mistakes made in Iraq," and "I am my own man" Jeb Bush announced that Paul Wolfowitz was one of his foreign policy advisers. I immediately ceased drafting a blog about Jeb Bush's cabinet. How could Secretary Treasury Bernie Madoff, Secretary of Health and Human Services Lindsay Lohan, and Attorney General Venero "Benny Eggs" Mangano, a Genovese capo, compete with Secretary of State Paul Wolfowitz?

Last week the Sarbanes-Oxley act of 2002 was again in the news. I can't compete with Sarbanes-Oxley. I can't make up stuff this good.

In response to the Enron scandal, Congress, in one of its more cockamamie acts (a very high hurdle), approved the Sarbanes-Oxley Act. Having colluded in the Enron fraud, the accounting profession generously offered a solution: more auditing. Section 404 of Sarbanes-Oxley act requires a company's external auditor to audit and opine on the company's system of internal controls. This enabled accounting firms to double their audit fees.

Enron did not go bust because its accounts payable system lacked proper internal controls. Enron went bust because it committed fraud while its external auditors conspired with the fraudsters. But why should such facts interfere with legislation that shifts billions of dollars from shareholders to accounting firms?

Aside from doubling audit fees, section 404 accomplished nothing. As Lehman Brothers went bankrupt in 2008 and triggered the great recession, Lehman's external auditors were signing off on scams such as "repo 105" and special investment vehicles (SIVs) that magically moved billions of debt off Lehman's balance sheet on quarterly reporting dates. Looking on the bright side, I believe Lehman did exercise adequate internal controls over its accounts payable system as it precipitated the financial meltdown.

Sarbanes-Oxley also imposes a maximum sentence of 20 years for the destruction of "any record, document, or tangible abject" to obstruct an investigation. Federal authorities applied this provision to a heinous crime: a fisherman tossed undersize grouper into the Gulf of Mexico.

Though not a single greedster above the level of janitor, who originated, packaged, rated, or sold sub-prime debt, thereby nearly destroying the world's financial system, has been charged with a crime, Sarbanes-Oxley penalizes undersize grouper tossing.

Try to write a blog as ironic as that.