Rudolph Giuliani on Corporate Reform
N E W Y O R K, July 26, 2002 -- Rudolph Giuliani, New York City's former mayor, weighs in on corporate reform on ABCNEWS' Good Morning America.
ABCNEWS' CHARLES GIBSON: We turn now to Rudolph Giuliani, New York's former mayor, also aformer federal prosecutor who made his name prosecuting some of WallStreet's biggest financial criminals back in the 1980s. Corporatereform is a major topic of discussion in New York and Washingtonthese days, so an appropriate guest for us. And he joins us now. Good to have you with us.
RUDOLPH GIULIANI, FORMER NEW YORK CITY MAYOR: Nice to be with you, Charlie.
GIBSON:Has this gotten out of hand? There's a pattern, executives falselybuilding up the profits of their company, the stocks go through theroof, they cash out. They've got millions to build mansions, and thepensioners and the other people, or stockholders are left holding thebag. Has it gotten out of hand?
GIULIANI:Well, sure. I mean, yeah, it's gotten out of hand in the sensethat a lot of it has happened all at once, at one period of time.Probably this has been going on for a long time, meaning maybe ahundred years in one way or another, or more. But the reality isa lot of it has happened in the last several years, maybe as aresult of the economy, the market and everything else.
GIBSON:Exacerbated by the moment, the markets are.
GIULIANI:Right. And we're finding out a lot more about it. Andalthough this a horrible thing, and it's a horrible thing for thepeople directly affected by it, as a society, this is a good thingfor us. Because …
GIBSON:Why?
GIULIANI:Because we correct it. There's this imperfect way in whichwe get better; we find out about the bad things people are doing, theway in which they can abuse an otherwise good system, and then wecorrect it. And I think that's what you see happening in Congress. Ithink the president will sign the bill. And that, again, won't beperfect, but it'll be an improvement.
GIBSON:Are we correcting it, though? This bill yesterday, the House andSenate combined, 522 votes for the bill, only three against.
GIULIANI:Right.
GIBSON:The president, who was wavering about this, now with this kind ofmomentum, obviously, will sign …
GIULIANI:Right.
GIBSON:…this bill. Is this bill going to do something about the problem?
GIULIANI:Imperfect. It'll probably be somewhat of an overreaction. It'llprobably miss the mark in a few places. But the idea of moretransparency, more openness, more regulation, putting--putting a lotof this information out there so people can assess it. If you thinkabout--think--think about the way in which a lot of this was done, inwhich debt was hidden. Well, if you put that debt out there, and youget people to see it, and you get them to be able to assess it,then--then we're getting closer to what a free market should be, onein which people have the information to assess the investments theyshould make. Whereas if you--if you hide it, then people think acompany's a lot more profitable than it is. Then, all of a sudden, it all falls apart.
GIBSON:As a former prosecutor, what's your idea of the best way to restoreconfidence? Is it simply to get information out there, trueinformation in financial statements? Or is the thing you need to doto restore confidence, literally, to put some of these guys behindbars?
GIULIANI:Both, it's both, and they're doing both. The reality is, when peoplecommit serious crimes--these are serious crimes--they take a lot ofother people's money, which--which they've done. You have to havevery strong criminal penalties. This bill provides for that,and--and the Justice Department, I think, is moving very aggressivelyto make point. But the second thing--you can't just do it one caseat a time. Then you have to look at what went wrong and try tocorrect the system, and I think that--think that's what we're doing.And trying to correct the system means getting more information out,full disclosure, open disclosure. And if I could give advice tocorporate executives having to sort of face this new era: If there'sbad news, don't be euphemistic about it, get it out. Explain it.Put it out. It protects you. If you put the information out, peoplecan discount it. They can deal with it.
GIBSON:Second question for a former prosecutor. These are very hardcases to prove in most cases, when you go into court and you have toget juries to understand things like special purpose entities andcomplex derivatives and whatever. That's not easy. Can it be done?
GIULIANI:Sure. That's what makes a very good trial lawyer on either side. Imean, that's what makes a very good prosecutor. The idea of taking avery, veyr complex idea--booking debt, how you book it, whether youcapitalize it or you expense it or--try to put that into languagethat people can understand. Give them examples that they canunderstand. And one thing people can understand very, very quickly,if you prove it correctly, is cheating. It doesn't matter if thecheating is for $10 or $10 million, people can understand that. Youknow, someone hiding how much debt there is.
GIBSON:Is there accountability in this bill as far as you're concerned?You always worry, the accountants say, `No, no, no.The company executives did it.' The company executives say, `No,no, no, the accountants approved this.' And everybody points at oneanother.
GIULIANI:That's what …
GIBSON:And nobody gets blamed.
GIULIANI:That's what the trial, ultimately, that's what the criminal trial isall about. I mean, ultimately, the criminal trial is about was itdone knowingly and, obviously, all these people will defend on thegrounds that their lawyers and their accountants gave them some kindof advice. But then, you know, you see how reasonable that is. Andin many cases, it sounds unreasonable.
GIBSON:One other question for you before you go. The 9/11 memorials, therenow have been six plans presented. They all have business officeretail space as well as memorials, transportation complex. You'vewanted a full memorial down at that site. Do you like any one ofthese six plans?
GIULIANI:I think they're a start from which we can discussit. I wouldn't subscribe to any one of the six. I thinkthat this has to be mostly about a memorial, a library, amuseum, something that enshrines, a hundred years from now...
GIBSON:You're now saying …
GIULIANI:…the sacrifice.
GIBSON:… mostly memorial, though, as opposed to totally memorial.
GIULIANI:Well, the footprint has to be totally memorial. The area wherethe attack took place should be all memorial, whether--whether--likeat 7 World Trade Center, you build a tower or something like that,that's OK. But if you're talking about the actual site, the site thatwe began to refer to as ground zero, that you saw many times, and Ialmost lived that for a while … GIBSON:Right.
GIULIANI:…that should be a memorial. That should be reserved forremembering the sacrifice of these extraordinarily brave people. Ahundred years from now people are going to judge us based on how wehandled this. Let's not cover it over out of, you know, I don't know,some immediacy.
GIBSON:Rudy Giuliani, good to have you with us, as always.
GIULIANI:Thank you. GIBSON:All the best. Thanks for being here.