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Jewish World Review July 9, 2002 / 29 Tamuz, 5762

Robert W. Tracinski

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Consumer Reports

Small-time crooks | Reporters, commentators and politicians have whipped themselves into a frenzy over the recent corporate accounting scandals, heaping abuse on corporate executives in general and demanding to see the perpetrators led away in leg-irons. But is this feeding frenzy actually motivated by a legitimate outrage at fraud and theft?

Consider the frauds that have gone unnoticed and unmentioned by the crowd currently stoking the fires of the Enron and WorldCom scandals.

On Dec. 17, just as the Enron scandal was breaking, The Washington Times reported that seven government officials -- including biologists with the Forest Service and the U.S. Fish and Wildlife Service -- were caught planting hair from the Canadian lynx in samples taken from two vast federal forests in Washington state. This scam was an attempt by environmentalists to steal millions of acres in federal lands; under the Endangered Species Act, the lands would have been declared off-limits to logging, mining, grazing, and even skiing and snowmobiling.

Despite being caught red-handed, the fraudulent federal scientists were not fired, and officials initially refused even to reveal their names. The head of Forest Service Employees for Environmental Ethics defended the perpetrators, calling them "well-intentioned."

Similar frauds are suspected in surveys of bears and of the infamous spotted owl, costing the industry millions of dollars and putting thousands of loggers out of work. Yet while a dozen congressional subcommittees investigate Enron, only one committee has looked into the lynx fraud -- and the press has virtually ignored it.

Or consider another fraud. In 1996, Tulane University researcher Steven F. Arnold published a study supposedly validating a trendy new theory called "endocrine disruption." Environmentalists claimed that certain chemicals disrupted the body's natural hormones, increasing the risk of cancer and a list of other maladies. Arnold produced the only scientific data that seemed to back up this claim. Acting on his study, Congress passed a law requiring the EPA to conduct a massive survey looking for these "endocrine disrupters." The program costs the government $10 million per year and imposes untold millions in additional costs on private industry.

There is only one problem. No one could duplicate the results of Arnold's study, because, it turns out, he made it all up. Last November, the federal Office of Research Integrity ruled that Arnold had "committed scientific misconduct by intentionally falsifying the research results." His punishment? He was banned from receiving new federal grants for five years. After that, he will presumably be eligible to swindle the taxpayers once again.

Perhaps the reason these cases have largely escaped congressional notice is that our leaders are used to enacting frauds on a much larger scale.

An economist recently compared the WorldCom fraud to a Ponzi scheme. In this con-game, the victims are promised a fabulous return on their investment -- but they are actually paid back, not from the company's profits, but from money swindled from the next round of investors. Eventually, a Ponzi scheme always runs out of new suckers and goes bankrupt.

The world's largest Ponzi scheme is run, not by a corrupt corporation, but by the United States government. The Social Security program takes one-eighth of the income of the current generation of workers and promises them a secure retirement -- to be paid for by fleecing the next generation of workers.

Eventually, as with any Ponzi scheme, the number of new suckers coming into the system is not enough to pay the benefits owed to retirees. This is projected to happen in the next 10 to 15 years, causing Social Security to go bankrupt -- and no one in Washington is doing a darn thing about it. But they are all really upset about WorldCom.

The pattern is clear. The current scandal frenzy is not a campaign against fraud -- it's a campaign against business and capitalism.

The people leading the hysteria about "corporate crime" are eager to expose and condemn fraud by a private businessman -- but they ignore or excuse it when the lies are told by federal employees. They are eager to use a scandal as an excuse for new legislation and new controls on business -- but when another scandal would require Congress to repeal legislation and lift controls, they don't want to hear about it. They demand strict accounting regulations to prevent billion-dollar business frauds -- while they evade responsibility for a trillion-dollar government fraud.

To tolerate wholesale fraud and theft by government, while posing as a moralistic crusader against fraud by private businesses -- now that is a con-game that makes the crowd at Enron look like small-timers.

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