"here we go loop-de-loop,
here we go loop-de-li..."
I love these guys. My, oh my!
To begin, please take a look at this short, bland, but typical wire service business earnings report story. I promise, it's brief.
Now, let's read it backwards, to see if we can follow the activities described and deconstruct the trail of what's actually contained in this article. And how it all impacts on you.
First:
"...corporate fraud..."
You (the consumer/small investor) are cheated, swindled or merely gouged by the actions of the Directors and/or Officers of any given public corporation.
Second:
You (and/or the proper authorities) approach said firm with the intention of giving it every opportunity to confess, say "Oops, our bad!" and make restitution, and then discipline/rebuke/terminate the people involved.
You (and/or the proper authorities) are summarily rebuffed.
Third:
"...numerous corporate fraud claims."
In your righteous indignation and anger, You (and/or the proper authorities) utilize the courts to compel said company to 'fess up and do the right thing.
Fourth:
The courts rule against the company, forcing it to come up with the funds to cover both the basic and punitive costs of their executives' crimes—whether the ruling also involves jail time for any or all of these corporate leaders, or not.
Fifth:
"...Insurers in general have been wracked by increased claims against companies' directors and officers. ..."
The penalized company then turns around and invokes a claim on the D&O insurance it has been carrying for just such an eventuality. The insurance company promptly covers the costs of the misdeeds of the corporation's Directors and/or Officers.
Hang in, here's where it gets creative and fun!
Sixth:
"...Premiums for D&O insurance have increased sharply in the wake of numerous corporate fraud claims...."
Yes, you saw it correctly. The insurance company actually covers the costs of a crime! The insurer then raises its rates for this corporation's D&O coverage.
The offending corporation now needs to cover those costs, so it raises its prices/rates/fees to You (the consumer/small investor) and reduces its workforce to cover the added expenses. By doing so, it won't take a hit on Wall St., and will look proactive in controlling its costs (of doing business in an illegal manner) and be able to keep its stock price up and its institutional investors happy. So, Your cost of using their products or services goes up, and if You're unlucky enough to work for this offending corporation, You also lose Your job.
It gets better!
Seventh:
"...the second-largest U.S. business insurer, on Thursday said quarterly profit rose helped by rate increases and growth in premiums in its property and casualty business, and that it will cut its work force by 5 percent to reduce costs.
The Chicago-based insurer, majority-owned by conglomerate ... , reported a second-quarter profit of $70 million, or 25 cents a share, compared with $31 million, or 14 cents a share, a year ago.
The company also said that its second-quarter results included a $308 million after-tax 'unfavorable net' reserve development. The reserve development involves charges for directors and officers coverages, workers compensation and an arbitration ruling involving a property loss and an interruption of business. ..."
Since this is now happening a lot, the insurance company needs to cover its shortfall from covering the fraud costs of our public corporation(s).
Somehow or other, of course, it escapes the Officers of the insurance company that no longer covering the results of a corporate crime might be a solution to their problem.
Happily, however, the insurance company realizes it can still end up smelling like a rose by availing itself of the opportunity to increase every business's premiums (who of course raise their prices, and lay off their workers) and lay off its own workers. By so doing, it looks fabulous to Wall St. when it releases its next quarterly numbers. So, Your cost of using this insurance company (not to mention all of the ripple-effect companies) rises dramatically and, yes, those of You unlucky enough to work for this insurance corporation (and all of the ripple-effect companies), You lose Your jobs as well.
All because the Directors and/or Officers of a major U.S. corporation committed a crime to line their own pockets and got caught.
And because You utilized Your right to not be ripped off.
We see, again, that no good deed goes unpunished.
And since these types of activities are just jake with everyone in the Bush administration, it's now easier to see just how the Republicans could have presided over the incredible hemorrhaging of three million jobs in only three years. And why everything around you seems to cost so much more—even though the Fed says there's no inflation!
"Victims' Rights" doesn't enter into this at all.
No. It's "just business."
***
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posted by Gotham 2:41 PM
