LONDON, 11 February — The collapse of US energy giant Enron Corporation seems to have had a knock-on effect, which is keeping regulators and enforcement agencies of all kinds busy in the New Year.
The US Securities and Exchange Commission (SEC) has launched a fresh investigation into the Irish pharmaceuticals firm, Elan Corporation, which has been the subject of allegations of off balance sheet accounting practices aka Enron. Elan’s shares have collapsed from a high of 30 pounds to 927.5 pence last Friday.
The FBI is investigating a $750 million financial scandal at AllFirst Bank, the US subsidiary of the Allied Irish Bank. It is alleged that a currency dealer amassed the losses on a secret trading program designed to recover losses incurred on the Nikkei currency markets.
The bureau is also investigating the $54 billion collapse of Beverley Hills-based telecoms company Global Crossing, in which George Bush Sr., the former president and father of the current US president was a shareholder. The FBI inquiry and one subsequently by the SEC, come after allegations of fraud and off balance sheet auditing practices. And once again the company’s accounting firm was Andersen. The founder of Global Crossing was Gary Winnick, a colleague of Michael Milkin, the 1980’s “junk bond king” who was jailed for insider trading.
Global Crossing’s collapse, the fourth largest in US corporate history, comes only weeks after the collapse of Kmart, one of the largest retailers in the US and whose accounting practices once again have been called into question.
These collapses and scandals have come to the fore after the fact, with enforcement agencies left to investigate any allegations of wrong-doing.
They are a sad reflection of the US regulatory authorities’ ability and capability to monitor corporate financial and accounting practices.
The fact that the Bush administration and family is embarrassingly linked to two of the largest and potentially most damaging collapses (Enron and Global Crossing), is hardly surprising. For the line between business and politics, whether in America, Japan, Germany, the UK, France, and Italy, is very often blurred.
Some might even argue that this is a perfidy of the ideals of liberal democracy and makes a mockery of the strident high-mindedness of the Western democracies.
To be fair to the Western media, they have probed and reported on these scandals and collapses with relish. But once again after the fact. The media seems to have lost that investigative edge especially of the last three decades.
However, for both the US regulators and Western media there seems to be a dichotomy when it comes to financial and business corporations owned and run by Muslims and domiciled in the Muslim countries.
It is time the US and the West come to terms with their Sept. 11 grief and subsequent paranoia, and move on to create a truly global consensus against terrorism and the causes of terrorism through a shared humanity based on common values; as opposed to a selective consensus against terrorism based on geopolitical and economic considerations and alliances.
For the banks and companies from the Muslim countries it is a question of dignity and integrity. And for the countries a question of sovereignty.
But as far as the mainstream Islamic financial institutions are concerned, NO evidence has been put forward till now. The US authorities have gone out of their way to eke out the most tenuous of associations, which would not stand up to scrutiny in any US court of law. And they know this.
To their discredit the mainstream Western financial media seem to have lost their investigative edge and are merely echoing the partial pronouncements and perceived prejudices of the US Treasury officials, the Office for Foreign Assets Control (OFAC), and other such agencies.
This is why the efforts of one Bahraini bank should be commended. It was gratuitously libeled in the days after Sept. 11 in an article published in Le Monde, a paper at the forefront of the witch hunt against Islamic banks, as one of the banks on the suspect list of institutions laundering terrorist money. The bank is suing both the journalist and the paper for libel, and a small apology buried in the inside pages simply won’t suffice. It wants closure through the courts.
It is time other Islamic financial institutions consider the same action. Spending millions on futile PR campaigns is not going to buy sympathy with regulators or the public. Only the PR companies in the West are the beneficiaries.
Transparency and disclosure is fine. But corporate image is just as important. And sometimes financial institutions and corporates need to stand up and be counted even it means going to court over unsubstantiated and gratuitous reports in the media, or lobbying regulators and law-makers both at home and abroad. If ever there was such a time for Islamic financial institutions to act, it is now.
