Adapted from

NYT, Letter by N. G.


Published: February 22, 2004,
Section 6, Page 8, Column 4.

The Company They Kept
Those who lost money because of John Rigas may still respect him because entrepreneurs who have big hearts need not have accounting degrees. Repeatedly, Roger Lowenstein (Feb. 1) wonders why bankers, accountants and lawyers ignored signs of Adelphia's slide into insolvency. Part of the blame lies with the Supreme Court, which 10 years ago repealed aiding-and-abetting liability for securities fraud with its Central Bank of Denver v. First Interstate Bank of Denver opinion and dismantled accountants' gatekeeping role. Would the accountants have been able to miss internal audits before "Central Bank"?
The reversal of roles has been completed with the Sarbanes-Oxley Act of 2002, which makes executives like John Rigas vouch for the financial statements of their auditors. No longer is it enough for entrepreneurs to bear business risk; they must also bear the risk of their accounting statements and their advisers' financial engineering. It is not surprising that foreign companies like Porsche chose to forgo listing their stock in the United States capital markets. The ills from letting the gatekeepers take risks and placing the liability on entrepreneurs are accumulating.
Nicholas Georgakopoulos
Professor of Law
Indiana University School of Law - Indianapolis