"An angry mob of investors and taxpayers is assembling, and they want to see some executives' heads on pikes," reports Fortune magazine's Roger Parloff. "The question for the courts will be, Who was just foolish with our money -- and who was lying, cheating, and stealing?" Under the law, corporate executives are guilty of securities fraud if they misrepresent the truth about their companies' financial condition. When times are tough, Parloff notes, CEOs are tempted to "willfully paint a disingenuously rosy picture featuring lots of gilded lilies. The problem with this tack is that, while it might get the company through a rough patch, the executive is certainly committing civil fraud, and if the company crashes and burns anyway, he may also go to prison." Some of the companies he thinks may help populate prison include:
- Bear Stearns, where the founder and portfolio manager of two hedge funds have been charged with making false statements in the final months of the funds' demise, and whose CEO declared "Our liquidity and balance sheet are strong" just 36 hours before seeking emergency funding.
- AIG's Joseph Cassano, who said he was "highly confident that we will have no realized losses" on the company's credit default swaps portfolios less than three months before they posted more than $11 billion in losses.
- Lehman Brothers CEO Dick Fuld Jr., who assured investors that the company had $42 billion in liquidity just five days before the company filed for bankruptcy. "How does $42 billion vanish in five days," Parloff writes, "and did Lehman officers know then of any harbingers of doom that they weren't sharing?"
- The former CEOs of Fannie Mae and Freddie Mac, who made reassuring statements about their companies' capitalization levels two months before it turned out they were $75 billion short.