Only after the market dropped did it become apparent that the stock boom of the 1990s had been fueled in part by fraud. For a time in 2001 and 2002, Americans were treated almost daily to revelations of incredible greed and corruption on the part of respected brokerage firms, accountants, and company executives. During the late 1990s, accounting firms like Arthur Andersen, giant banks like J.P. Morgan Chase and Citigroup, and corporate lawyers pocketed extravagant fees for devising complex schemes to help push up companies’ stock prices by hiding their true financial condition. Enron, a Houston-based energy company that epitomized the new economy—it bought and sold electricity rather than actually producing it—reported as profits billions of dollars in operating losses. Brokers at respected Wall Street firms advised favored clients to sell risky stocks while foisting them on ordinary customers. When stock prices began to fall, insiders jumped ship while brokers urged hapless individual investors to hold on to their shares, many of which ended up being worthless.
Cartoonist David Jacobson’s comment on the Enron scandal.
In the early twenty-first century, the bill came due for many corporate criminals. The founder of Adelphia Communications was convicted of misuse of company funds. A jury found the chairman of Tyco International guilty of looting the company of millions of dollars. A number of former chief executives faced long prison terms. Kenneth Lay and Jeffrey Skilling, chief officers of Enron, were convicted by a Texas jury of multiple counts of fraud. (Lay died before sentencing.) Even reputable firms like J.P. Morgan, Chase, and Citigroup agreed to pay billions of dollars to compensate investors on whom they had pushed worthless stocks.