By On the occasion of our 20th anniversary
By Gustavo Arellano
By R. Scott Moxley
By Alfonso Delgado
By Courtney Hamilton
By Joel Beers
By Peter Maguire
By Charles Lam
In the wake of the Enron, WorldCom, Citigroup, Global Crossing and Tyco scandals, you'd think that a president worried about economic stability would be looking for safe—dare we say conservative—regulationof Wall Street. Yet President Bush would have us believe that Newport Beach Congressman Christopher Cox, an Ayn Rand devotee, is the ideal man to head the U.S. Securities and Exchange Commission.
"Chris will vigorously enforce the rules and laws that guarantee honesty and transparency in our markets and corporate boardrooms," Bush said during a June 2 White House ceremony. "He'll do a fine job on behalf of the American people."
The president didn't mention the congressman's work on behalf of William E. Cooper in the 1980s. The convicted felon stole more than $136 million from thousands of investors—many of them elderly folks who lost their life's savings. When Cooper's con game was exposed, Cox minimized their relationship but was forced to change his story after contradictory documents surfaced. In 1995, a local Republican judge dropped the congressman as a defendant in a related civil case, although his employer, Latham & Watkins, settled for an undisclosed amount. Cooper went to prison. Cox rose to the No. 4 position in the House Republican leadership.
Interviewed on NPR, Claremont McKenna College professor Jack Pitney called Cox "well qualified for the [SEC] position" because the congressman has authored securities legislation, wrote a college thesis 28 years ago on taxation and is "one of the more cerebral" politicians in Congress. The only thing that could block Cox's appointment would be "extreme partisan" attacks by Senate Democrats, opined Pitney.
But Cox is the extremist. He believes that what's best for America's corporate bigwigs is best for America. In the early 1990s, the congressman managed to do the seemingly impossible: he alienated even some Newt Gingrich-era Republicans with his drive to create new loopholes for businessmen accused of screwing investors, relax corporate disclosure and soften accounting rules.
It's an unambiguous record: in 2001, he voted for $25 billion in rebates to companies such as Enron as well as to give a $6.5 billion tax break to U.S. financial corporations moving their operations overseas. In 2002, he voted to give Homeland Security contracts to U.S. companies that had moved overseas to dodge paying U.S. taxes. In 2004, he supported a plan to give federal loans to U.S. companies that move overseas and voted to allow certain companies to raid $80 billion during a two-year period from employee pension plans.
Big business loves the thought of Cox running the SEC. The president of the Securities Industry Association hailed Cox as an "excellent choice." A manufacturing industry executive predicted that the congressman will be "sensitive" about corporate resistance to post-Enron disclosure rules enacted in the 2002 Sarbanes-Oxley Act. BusinessWeekreported that corporate lobbyists were "almost giddy at the prospect of Cox" serving as the nation's top financial cop.
On June 3, Cox's hometown paper, TheOrangeCountyRegister,encouraged the would-be SEC chairman to adopt a philosophy centered on the belief that bankers, brokers, accountants and corporate executives have "self interest" to behave honestly. Therefore, according to the Register,Cox and the agency should "purposely avoid a system of coercive action" by the agency.
The Democratic National Committee hasn't been right about many things lately, but it correctly characterized Cox's nomination as a fox "guarding the hen house."
The congressman is certainly sly. In the mid-1990s, Cox demanded passage of the Securities Litigation Reform Act without originally publicizing the fact that the legislation authorized a major change to the federal Racketeer Influenced and Corrupt Organizations Act (RICO). Cox wanted wronged investors blocked from using RICO to bring nefarious executives like Lincoln Savings and Loan's Charles Keating (who cost taxpayers more than $1 billion) to justice. As the debate began in the Republican-controlled House, Cox claimed he'd "inadvertently" forgotten to share his plans with key Democrats.
"The problem that we have is that the gentleman's amendment is asking the Congress to believe that the biggest amendment for fighting civil fraud that has ever been put on the books was accidentally left out [of the debate]," said Congressman John Conyers, Jr. (D-Mich.).
Congressman John Bryant (D-Tex.) couldn't believe such a significant proposal had been suggested with "a handwritten amendment" at the "very last minute" of a "serious" debate that would "affect pension plans, people's stock investments and the stability of the market."
On the floor of the House, Cox responded with circular logic. "It is because of the initiative to change the legislation that we are now engaged in describing how to do that," he said. Then he added with all the sincerity he could muster: "It is, of course, important for all of us to participate in this debate."
The mainstream media likes to ignore the congressman's warts. They routinely describe Cox as he describes himself in his own press releases: brilliant. In their June 3 article, "Cox pegged as smart, 'natural problem solver,'" USATodayreported that "not everyone agrees" with Cox's positions but "there is a consensus" that he's "smart, most say brilliantly so."
The paper also tried to humanize the congressman, known even among his Orange County Republican fans as cocky, quirky and aloof. After repeating a declaration that Cox is "the smartest guy in Congress," reporter Del Jones offered this: "Yet, as husbands know, no man, ultimately, can claim to be smart until he pulls off a surprise birthday party for the wife. Cox succeeded last October for Rebecca Gernhardt, 50, a lobbyist for Continental Airlines. Christopher and Rebecca went out to dinner. Guests hid in the garage. When Rebecca pulled into the driveway and hit the garage door opener, they were there for a true surprise, says Andrea Newman, a friend and lobbyist for Northwest Airlines, who attended."
Well, there you have it.
Who now cares that in 1993 Cox guaranteed that Clinton's economic policies—which he called "the Dr. Kevorkian plan for the economy"—would spark a great depression? Who cares that during California's 2001 electricity debacle (based on a plan Cox supported), the congressman refused to protect his state's consumers—voters who saw Enron-driven power rates skyrocket from $30 per megawatt hour to $1,500? Who cares that Cox ranted against deficit spending when Democrats controlled Congress but in November 2004 voted to increase the federal debt ceiling? Who cares that Cox could have helped prevent the Enron scandal but repeatedly blocked conflict-of-interest rules to prohibit accounting firms from auditing companies in which they had a secret financial stake?
Cox—who will likely sail through Senate confirmation later this summer—certainly doesn't care. During his nomination ceremony in the White House Roosevelt Room, the congressman shamelessly talked about his record of "strengthening" securities laws and his commitment to public accountability. He then promised his mission is to "protect investors." He didn't say a word about what he plans to do for corporate executives. Cox is, after all, a smart guy.