Are Enron, WorldCom, Madoff, Goldman Sachs and McAllen, Texas Apps on Our Cellphones?

Are Enron, WorldCom, Madoff and Goldman Sachs apps on our cellphones? The answer might surprise you.

Remember Enron? Fortune named Enron "America's Most Innovative Company" for 6 consecutive years, from 1996 to 2001. The 7th consecutive year was not to be, because before "America's Most Innovative Company" had a chance at another year, it was revealed that its financial rise was due in large part to institutionalized, systematic, and creatively planned fraud. Kenneth Lay, the Chairman and Chief Executive Officer of Enron, was touted as a possible Secretary of the Treasury in the Bush administration, but, again unfortunately, before he had a chance to be confirmed he was found guilty of 6 counts of conspiracy and fraud. Fortunately, he died. Jeffrey Skilling, the Chief Operating Officer of Enron, was found guilty of 19 counts of conspiracy, insider trading, making false statements to auditors and fraud. Unfortunately, he lived and went to prison.

Then there was WorldCom. Unfortunately, WorldCom was not named "America's Most Innovative Company" - that spot had already been taken - but its Chief Executive Officer, Bernie Ebbers, was inducted into the Mississippi Business Hall of Fame. Unfortunately, he was subsequently found guilty of fraud, conspiracy and filing false documents; Scott Sullivan, WorldCom's Chief Financial Officer, was found guilty of securities fraud, conspiracy to commit securities fraud, and filing false statements; David Myers, WorldCom's Controller, was found guilty of securities fraud, conspiracy to commit securities fraud, and filing false statements; Buford Yates, WorldCom's Accounting Director, was found guilty of conspiracy and fraud charges; and Betty Vinson and Troy Noramnd, accounting managers, were found guilty of conspiracy and securities fraud. Remember them?

So what, you ask? Well, consider this: 3G cellphones started in the 2000s; the Enron and WorldCom scandals broke in the same decade. Do you think that was mere coincidence? More recently, but in the same decade, Bernie Madoff was found guilty of 11 counts of securities fraud, wire fraud, mail fraud, money laundering, making false statements, perjury, theft from an employee benefit plan, and making false filings with the SEC. And this week Goldman Sachs was indicted on one count of fraud. In other words, just as fraud has exploded, so has the popularity of cellphones.

And least anyone fantasize that Enron, WorldCom, Madoff and Goldman Sachs were just "one off" apps, let me quote William Black, the head of prosecution during the S&L crisis. (Remember the S&L crisis? Which was coincident with 2G cellphones?) Black says the recent financial crisis was caused by massive fraud.

Quote: "Let’s start with the repos. We have known since Enron in 2001 that this is a common scam, in which every major bank that was approached by Enron agreed to help them deceive creditors and investors by doing these kind of transactions. And so what happened? There was a proposal in 2004 to stop it. And the regulatory heads — there was an inter-agency effort — killed it. They came out with something pathetic in 2006, and stalled its implication until 2007, but it’s meaningless. We have known for decades that these are frauds. We have known for a decade how to stop them. All of the major regulatory agencies were complicit in that statement, in destroying it. We have a self-fulfilling policy of regulatory failure. We have the Fed, the Federal Reserve Bank of New York, finding that this is three card monty. Well what would you do, as a regulator, if you knew that one of the largest enterprises in the world, when the nation is on the brink of economic collapse, is engaged in fraud, three card monty? Would you continue business as usual? That’s what was done." Unquote.

If you want another, non-financial-crisis example of the fraud, read Atul Gawande's article in The New Yorker, The Cost Conundrum. It profiles McAllen, Texas, which is a border town in Hidalgo County. It has two claims to fame:
1.) It has the lowest household income in the country, and
2.) It has the most expensive health care in the country, except for Miami.

Why, you may ask. It turns out the reason is as simple as the reason for Enron, WorldCom, Madoff and Goldman Sachs. Fraud. Most doctors in McAllen, Texas, according to The New Yorker article, are out to game the system. They are not all that interested in medicine, even less in their patients; they are interested in profit. And they order many more tests and procedures than are necessary to give themselves the profit to which they have become accustomed.

So take your pick: Enron, WorldCom, Madoff, Goldman Sachs, the health care system in America, no doubt many other examples of gaming the system. Yes, you may be outraged. Outrage away! Write your politicians! Storm the Federal Reserve! It won't do you one bit of good, it turns out. (Much to my own surprise.) Why? Again, the answer turns out to be incredibly simple.

IT'S OUR CELLPHONES!

Yes, that's right, our cellphones. (Well, your cellphones, to be exact. I don't have one.) A recent study out of M.I.T. shows that people's moral judgment is adversely affected by the use of cellphones. That's because the part of our brain that deals with moral judgments turns out to be right behind our ear.

In other words, the solution to all this massive fraud, which started in the 1980s with Reagan and Thatcher and 1G cellphones, and which has been gathering strength until this very day with Obama and Harper and 3G cellphones, is:

JUST BAN THE BLOODY CELLPHONES!

Or, to paraphrase the Clinton campaign's James Carville:

IT'S THE BLOODY CELLPHONES, STUPID!