Journalist Kurt Eichenwald

DATE July 25, 2002 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A
NETWORK NPR
PROGRAM Fresh Air

Interview: Kurt Eichenwald discusses current corporate scandals
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Today's newspaper headlines brought more bad news of what's gone wrong in
corporate America. The founder of the cable company Adelphia was arrested
with his two sons, who are former executives, on charges of looting the
company of more than a billion dollars and using it as a personal piggy bank.
And AOL's accounting practices are now being investigated by the Securities
and Exchange Commission. In its attempt to end this kind of bad news,
yesterday a joint House-Senate committee approved a measure to overhaul
corporate fraud, accounting and securities laws.

My guest, Kurt Eichenwald, is a financial investigative reporter for The New
York Times. He's covered corporate fraud for the past 15 years. Lately, he's
been focusing on Enron, Arthur Andersen and WorldCom. I asked him what the
proposed legislation might accomplish.

Mr. KURT EICHENWALD (The New York Times): Well, probably the biggest hope is
that it's going to get some of the concerns that are in the marketplace about
the reliability of the financial numbers that are being put out, get some of
that concern calmed down so that the market can get back on track, that people
can begin to assess companies based on their actual values and we can move on.
The reality of that, how they're going to go about doing it, is basically
they're stepping up a series of enforcement mechanisms. We now have some
fairly strict enforcement procedures. What we have found out that we don't
have is particularly good oversight.

From the 1930s until now, there's been a huge reliance on the integrity of
accountants, the integrity of corporate officers to truthfully represent their
financial positions. What has happened over the last number of years is that
far too many of those folks have been figuring out ways to get closer and
closer to the line, and sometimes over the line, in ways that ultimately
misrepresent the true nature of a company's financial performance.

So what this legislation would accomplish is stepping up the dangers of doing
that, stepping up the potential criminal penalties, for example, that a
corporate officer or an accountant would face for crossing the line. It also
would set up an oversight board for the accounting industry, which, you know,
there has been many, many weeks of debate about how much power that group
should actually have. But ultimately, it's going to serve--you know, once
this is signed, it's going to serve as a new check on the accounting industry
and one that can be used almost as a, you know, Good Housekeeping Seal of
Approval. So that, along with a stepped-up budget for the SEC, and other
actions are certainly going to make the oversight functions of our securities
laws and our corporate laws much stronger.

GROSS: So if we can't rely on the conscience of the accountants and the
corporate heads, we're at least hoping that the fear of punishment will keep
them in line.

Mr. EICHENWALD: It's a sad commentary on where we are, but that's exactly it.
I mean, one of the disturbing elements of the last few months is not that it's
come out that corporations were doing things that were illegal. It's the
things they were doing that were, in fact, legal that completely
misrepresented their financial condition. Those have created too many
incentives for people who are particularly clever to wheedle their way around
the rules and put out financial statements that are not representative of the
companies. But they have, in fact, followed each rule to the letter,
ultimately undermining the spirit of the legislation. And hopefully, that
kind of behavior, when you increase the punishments for being cute, is going
to be a little bit less tempting.

GROSS: The founder of Adelphia and two of his sons have just been arrested,
accused of looting the company and using it as their personal piggy bank. Is
it any coincidence that so many big companies are going down at the same time?

Mr. EICHENWALD: No, this is not surprising. This is the consequence of
having years of a market bubble. What happens in those circumstances time and
time again, whether it's in a sector or the entire market, is that corporate
executives and investors start to think that the rules of business and
investing have changed. They start to think that basically they can get away
with pretty much anything, that you can invest in a stock on Monday, sell it
on Wednesday and you'll make money and you can do it forever, that corporate
executives believe they can partake of the cash of a company and the company
will do just fine because it's been doing so well in the past, `And besides,
look at our stock price.'

Ultimately, the bubble pops, and when the bubble pops, it splatters a lot of
people. And that's what we have here. Everybody was getting loose.
Everybody was getting comfortable. Everybody was getting greedy, all of us.
And the consequences of that are going to play out for a while.

GROSS: You recently wrote a piece asking, `Now that capitalism has won over
communism, can capitalism survive the capitalists?' What do you mean by that
question?

Mr. EICHENWALD: Well, it's something I've always found fascinating, that the
first people to step up to argue against capitalism tend to be the capitalists
themselves. Capitalism, the fundamental concept of it, is those who produce
the best product at the lowest price. When people start to lose, they run to
Washington, they ask for trade sanctions, they ask for all sorts of other
actions. Now I'm not saying that those are always wrong, but frequently
they're being put in place because a company simply can't cut it.

In this instance, what we have are capitalists going for excised profits,
capitalists going for profits beyond what the market would give to them if
they weren't trying to fool the market. And to me, that is far more damaging
to capitalism than anything else. Capitalism requires that people have some
fundamental bedrock of faith that the system is functioning, that companies
are working and putting out numbers and the numbers they're putting out are
reflective of what the companies are doing. And, therefore, they're able to
take this risk of investing.

If it becomes much more of a crap shoot, if it becomes, `Well, these numbers
are a guesstimate of what actually might be happening, I have no way of
knowing,' you're going to see what's been happening. You're going to see
people pulling their money out of the markets and putting it on the sidelines
until they have faith that the only risk they're taking is the risk of their
investment, not the risk of fraud and the rest. That is what the capitalists
have done that is undermining the system: the relentless pursuit of personal
profit, the relentless pursuit of higher stock prices. When the market is
telling them it's not working anymore, that's where these kind of frauds come
out of and that's the damage to the system.

GROSS: Kurt Eichenwald is my guest. He's a financial investigative reporter
for The New York Times. He covers corporate fraud, and has been doing that
for about 15 years.

Corporate fraud is nothing new. I don't have to tell you that. But is there
anything that holds all these recent corporate and accounting scandals
together, anything in the techniques or the style that makes these scandals
any different from earlier ones?

Mr. EICHENWALD: Well, what's interesting about this one, what you didn't have
in things like the insider trading scandals of the 1980s or the savings and
loan scandals--what's interesting about this one is what we've witnessed is a
complete breakdown of the checks and balances of the corporate oversight
system. The accountants failed, the boards failed, the institutional
investors who were supposed to be playing a role in overseeing corporate
governance failed, the SEC failed, the Congress failed. Many of these issues
have been presented to the Congress, and they listened to the words of the
industries and said, `No, we don't need to make any changes.' So a lot of the
outrage you're seeing these days on Capitol Hill is a consequence of, you
know, them hoping that people don't realize how much of these probabilities of
these events happening have already been presented to them and they
sidestepped it.

So that breakdown is different than anything else, because we're not just
seeing the consequence of greed. We can deal with that. We've dealt with
that in the past. We will deal with that forever. What we're seeing is a
consequence of sloth. In other words, people stopped caring--investors
stopped caring, boards stopped caring, Wall Street stopped caring, analysts
stopped caring, accountants stopped caring. All anybody wanted was for the
stock price to go up for the next day. And when you have that as the single
overriding factor, regardless of how it's done, this is the consequence. We
haven't seen something on this scale, with this much significance, since the
late 1920s. And the 1930s played out with the same kind of information coming
out; the level of arrogance, the level of recklessness, the level of just
plain fundamental criminal activity going on in corporate America. And out of
that grew the decision to establish the Securities and Exchange Commission so
we could have some oversight of the markets. Clearly, it's time for those
types of oversights to be stepped up again.

GROSS: Well, meanwhile, Harvey Pitt, the head of the Securities and Exchange
Commission, is asking that his position be elevated to a Cabinet position, and
that the position be given a raise in salary, as well. A lot of people are
laughing, thinking like, `Oh, what a ridiculous time for the head of the SEC
to be asking for a raise.' But what would it mean if that position was
elevated to a Cabinet position?

Mr. EICHENWALD: That everyone in Washington had left town except for Harvey
Pitt. I don't mean that to belittle him. Harvey Pitt is actually a brilliant
man. He is one of the smartest securities lawyers out there. But he came in
with not a good message. When he began, his message was `kinder, friendlier
SEC.' The chairman who preceded him, Arthur Levitt, was very aggressive. But
now it's coming out that Arthur Levitt was very right. He was saying that
there needed to be significant reforms in the accounting industry. He lost on
that. He has said publicly that that's his single biggest regret is that he
backed down on that.

When Harvey Pitt started saying `kinder, gentler,' it wasn't too long after
that that these scandals started. And he had a little bit of delay in
shifting his position and getting into the point of recognizing the magnitude
of what was going on, and also understanding that he was now in somewhat of a
political position and that his words had different meaning than they might
have if he was still back at his offices at Fried, Frank. So I'd say if he
didn't get it before, he gets it now.

But I think the smartest thing for him to do is not to elevate his position
anymore, not to try and draw attention to himself, because he is somewhat of a
lightning rod right now, fair or not. And he instead should just be the
chairman of the SEC, do that job, work at it aggressively, recognize that
right now he is one of the single most important government officials in
Washington right now. He's certainly the one that's attracting the most
attention, as people wait to see what he's going to do next. And I think the
proof is in the pudding. You know, trying to counter the criticism is not
necessarily effective, but going off and doing the job is.

GROSS: My guest is financial investigative reporter Kurt Eichenwald. He
covers corporate fraud for The New York Times. We'll talk more after a break.
This is FRESH AIR.

(Soundbite of music)

GROSS: We're talking about the string of corporate scandals that have shaken
America. My guest, Kurt Eichenwald, is an investigative financial reporter
for The New York Times. He's covered corporate fraud for 15 years.

Do me a favor. Just run through a list for us of some of the investigations
under way right now in the corporate world.

Mr. EICHENWALD: It'll take the rest of the hour. You have Enron, which, of
course, is now the grandaddy of them all even though it started in October.
That is both criminal and civil, both SEC and criminal case. You have
Adelphia, which is both SEC and, as everyone knows since the Rigas family was
arrested, is criminal. You have WorldCom. You have Tyco. You have Martha
Stewart. I always look on that as sort of the People magazine portion of the
corporate fraud scandals. You had Andersen, but Andersen is now dying. It'll
be gone by next month.

GROSS: You mean the whole company will be gone by next month?

Mr. EICHENWALD: The part--yeah, they're not going to be auditing any public
companies after August 14th, I think it is.

GROSS: Mm-hmm.

Mr. EICHENWALD: And, I mean, that's the death of an accounting firm. You
have Dynegy. You have--I mean, the list just goes on and on and on and on and
on. You have Qwest, which is out in Denver, which is now under criminal
investigation by the US attorney out there. You have Xerox. Now that one is
just an SEC case that was already settled, but they've had problems with their
accounting.

And what we're really seeing is both the problems that I described earlier of
the dirty little secrets that have been going on coming out, and now a lack of
tolerance for games playing, a lack of tolerance for things that come close to
the line, but clearly result in misrepresentations of financial statements.
And it's just spreading rather widely.

GROSS: Let's zoom in on one of the stories you've been covering, which is
WorldCom. WorldCom filed for bankruptcy this week. It's the largest
bankruptcy in history. What does bankruptcy mean for a company like WorldCom?

Mr. EICHENWALD: Bankruptcy was almost beside the point. I mean, once it was
known the level of the accounting fraud--and at WorldCom, it is accounting
fraud--that took place, that company was dead. And these discussions about,
`Would they go into bankruptcy or wouldn't they?' to me were on par with, you
know, `Is this sun going to come up tomorrow?' It might not, but in all
probability it will.

The effect of the bankruptcy at WorldCom is actually bigger on the other
telecom companies, which is sort of a weird side effect. In bankruptcy, it
doesn't mean you're out of business. It means that your debts and obligations
are put on hold. You no longer have to pay them, and then a negotiation is
reached with creditors and you pay a certain amount on the dollar or you give
them stock in a new company or you sell off pieces of the company and use that
to pay them back, something along those lines.

What that does is now WorldCom's biggest expenses--among their biggest
expenses, their debt expenses, are gone. They don't have to pay them. Other
competing telecom companies that aren't in bankruptcy do. So suddenly, their
flexibility is freed up. They are in a better position today than they were
last week. And they're in a markedly better competitive position today than
some of their competitors are. But the flip side of that is that the
creditors control the company. The people who are owed the money have a lot
of say over what goes on from now on. And WorldCom's not going to emerge from
bankruptcy as some giant behemoth that controls the world. It's probably
going to be split up into its component parts.

GROSS: So who are the creditors that are going to be fighting with each other
about the destiny of WorldCom and who gets paid first?

Mr. EICHENWALD: That's what bankruptcy's all about, is figuring out that
list and figuring out who gets the biggest say. I mean, the banks are going
to be the first in line. That's Citigroup, JP Morgan and General Electric
Capital. Those three are the ones that are providing it financing on an
ongoing basis. They're giving them up to $2 billion, and they get paid first
because that's debtor-in-possession financing. Those banks, as well, and
other banks are lenders to WorldCom, and they are owed money going forward.

Everyone from the Wall Street firms that provided securities underwriting to
the guy who stocked the candy machine at the WorldCom headquarters in Clinton,
Mississippi, is a creditor, is somebody who's owed money. And all of them are
owed different amounts. It's the ones that are owed the most, the banks, that
tend to have the most influence over the Creditors Committee as you go forward
in bankruptcy.

GROSS: Kurt Eichenwald covers corporate fraud for The New York Times. We'll
talk more in the second half of the show. I'm Terry Gross, and this is FRESH
AIR.

(Soundbite of music)

(Announcements)

(Soundbite of music)

GROSS: Coming up, more on the now bankrupt WorldCom. We continue our
conversation with Kurt Eichenwald. He covers corporate fraud for The New York
Times. Also, Ken Tucker reviews "Adult World," the new solo album by Wayne
Kramer, formerly of the MC5.

GROSS: This is FRESH AIR. I'm Terry Gross.

Back with financial investigative reporter Kurt Eichenwald. He covers
corporate fraud for The New York Times. Lately, he's been occupied with
Enron, Arthur Andersen and WorldCom.

I'm sure a lot of people already understand this, but can you briefly describe
the nature of the WorldCom fraud?

Mr. EICHENWALD: Sure. Actually, WorldCom, on some level, is a little bit
boring because, unlike Enron, which has just endless wheels within wheels
within wheels of accounting manipulations, WorldCom is simply, you know, we
took money from here and we put it over there. What they did is every year,
companies spend money for the purpose of producing their products. That money
is an operating expense. An operating expense would be salaries for employees
or the costs of delivering something, things like that. Every company has
them.

There are also capital costs, and I'll try not to get technical. Capital
costs is like big machinery, something that you buy that you use for a long
time that decreases in value over time. Under accounting rules, you're
allowed to take a capital expense, and rather than taking it all up front,
rather than saying, `OK, I just spent $300 million on building a new factory,
I have to charge that against my earnings this year.' What you're allowed to
do is say, `Well, we're going to use this factory for 30 years. So we will
take the cost, divide it up by 30 and charge that against our expenses year
after year after year. So rather than charging $300 million, you charge $10
million.

A very common way of committing fraud is to take the operating expenses that
occur every year and call them capital expenses. So you only have to charge a
tiny percentage of the amount against your earnings. That's what WorldCom
did. I hope I didn't confuse anybody. They shifted expenses that should have
been counted each year into another account that allowed them to play those
expenses out over many, many years. The total amount that they didn't declare
was $3.8 billion. That makes a huge impact on the actual financial
performance of the company.

GROSS: And were the numbers manipulated just enough so that they can meet
their profit expectations?

Mr. EICHENWALD: Oh, yeah. I mean, the thing that I found out about this
that I thought was fascinating was that if you look for--you know, the number
is $3.8 billion. Well, any time you move money around in a corporation,
there's got to be documentation for why you did that. If, you know, you move
100 bucks, there's got to be a receipt or something for why that money moved.
Well, they moved $3.8 billion and there was no documentation backing up how
they arrived at those numbers. Why $3.8 billion? Why not $3.9 billion? Why
not $6.2 billion? Why not $1.7 billion? The numbers seemed completely
arbitrary. But then when you go backwards and you look at what their
financial performance was and the profit margin that they were promising Wall
Street they were going to make, and you look at what they did each and every
quarter, the amount they shifted matched exactly what they would need to
reduce their expenses by in order to hit the profit margins that they were
promising Wall Street. That is the kind of evidence of fraud that is huge for
a prosecutor. Because what it demonstrates is a knowing intent to deceive.
You know, you can't say, `Well, you know, I was moving the money for a reason
other than hitting this target,' when there's no other documentation and you
keep hitting the target every single quarter.

GROSS: Right. And where do the accountants come in in the WorldCom scandal?

Mr. EICHENWALD: That's a really good question. One of the things that's
sort of the most unnerving about WorldCom is, again, we're not talking about
something that's sophisticated. We're not talking about something that's gray
or that, you know, different minds might disagree on whether it's appropriate.
It's completely inappropriate. It's just plain vanilla fraud that you see on
much smaller scales all the time. This is the kind of thing that auditors are
supposed to look at. They're supposed to find documentation for capital
expenses. They're supposed to look at what is called a journal entry. When a
transfer is made, it has to be written down somewhere. And that's done in
what's called a journal entry. Well, the accountants are holding up their
hands saying, `Well, the management lied to us. What are we supposed to do?'
And I'm not sure. I'm not an auditing expert. A lot of the auditors I speak
to say that's ridiculous, that obviously they should have caught it. But
let's give them the benefit of the doubt and say, `Well, you know, they
couldn't have caught it.' Well, then there's something wrong with the system.
Then there's something wrong with how we do audits in this country. 'Cause if
you can't catch a $3.8 billion fraud that is as simple and unsophisticated as
the WorldCom fraud was, then audits are a joke. And shareholders shouldn't
have to pay for them.

GROSS: What are some suggestions of how the system should be changed? Or is
that...

Mr. EICHENWALD: There are brighter minds than mine that are coming through
with solutions. I mean, I actually think one of the things that seems very,
very minor, but I actually love, is this idea of having the chief executives
and chief financial officers sign that to the best of their knowledge, the
financial statements are a fair reflection of the corporation's performance.
Lots of executives are whining and moaning about having to do that, which I
find fascinating. It's like all you're saying is that the information you're
putting out is true and to the best of their knowledge. And I think that
people are very frightened to sign that. And I think, good, they should be
frightened. Fear is a very great motivating factor to keep you away from the
line. And that's really what we're talking about, how to keep people away
from the line.

I think the accounting review board--you know, again, this is a
proof-in-the-pudding situation. But the accounting review board, if they
actually act with teeth, you know, under this new legislation, if they perform
an actual function, could be very good in keeping accountants in line. But,
you know, ultimately, I think one thing that will help in this scenario is the
lessons of the marketplace. I mean, we didn't have this happen 10 years ago.
I had to go back to the 1920s to find a scenario that was similar to this
where people were putting out numbers that were just bogus.

In this situation, people are going to jail, companies are going under, people
are losing their jobs. And by this, I mean corporate executives. More
important, they're losing their reputations. They're being dragged before
Congress and humiliated nationally. They're being forced to drop the aura of
great men and instead answer for their incompetence or criminality. And I'm a
big believer in shame. I'm a big believer that corporate executives who
aren't doing it right, if they know they face the probability of, or the
possibility of, having their greatness questioned, they're more likely to
think twice about it. And so to a lot of degree, I'm kind of happy with the
changes that are being made.

GROSS: My guest is financial investigative reporter Kurt Eichenwald. He
covers corporate fraud for The New York Times. We'll talk more after a break.
This is FRESH AIR.

(Soundbite of music)

GROSS: Kurt Eichenwald is my guest. He's a financial investigative reporter
for The New York Times, and he specializes in corporate fraud, and he's a
very busy man nowadays.

You've been covering the Enron story, WorldCom and Arthur Andersen. I'm just
wondering what it's been like for you to sit through the trials and to witness
up close this kind of corporate fraud, maybe like what's been most striking
about it to you.

Mr. EICHENWALD: The most striking thing is how surprised everybody is. I
mean, for me, it's sort of been years of howling in the wind. I mean, I have
seen fraud after fraud after fraud after fraud and then watched Washington
stand up and, you know, congressmen pound the table and say, `Well, there's
just too much enforcement and there are too many lawsuits and we really have
to protect corporations.'

Now bear in mind I think American corporations, for the most part, do a great
job. But there's a lot of money there, and money attracts criminals. And
money attracts sleazy people. And, you know, I guess like Reagan used to say,
`Trust but verify.' I mean, you have to be able to verify what's going on.
This is only a surprise to the extent of how much people are surprised.

And, you know, a couple of years ago when the market was booming and booming
and booming, I was talking to my wife and I said, `You know, I'm going to be
really busy in a year or two,' because you could just look at it and say you
know that something's going on. The tide's going to go out, and when it does,
you're going to see all the litter that was brought up. And that's where we
are. And I didn't imagine it would be as rapid fire as it's been. I thought
it would play out over, you know, a longer period of time.

But, you know, the fact that this is happening is merely a statement that it
has always been happening and it will always happen again. And what we have
to do is make sure that we protect the marketplace, we have the rules in place
to protect the marketplace and stop writing enforcement rules to the needs of
the honest executives. We have to recognize there are dishonest executives
out there.

GROSS: Do you have any favorite moments from the recent fraud trials that
you've sat through?

Mr. EICHENWALD: I do, but, I mean, one of the stranger moments was when
Arthur Andersen was putting on its defense against document destruction for
impeding investigations, and the fellow testifying on cross-examination began
saying, `Well, of course, we destroyed documents to keep them out of the hands
of plaintiffs' lawyers because they're just going to misrepresent them. And
if we don't destroy them, they'll misrepresent them. And everyone will
misrepresent them.' And I'm sitting there going, boy, now we know why--I
mean, this sense of arrogance.

Like if you're in this industry--I know plaintiffs' lawyers can go too far. I
know government can go too far. I know regulators can go too far. But the
problem is you don't want them going not too far. It's better that they go
too far and make it a little harder for everybody else and make things, you
know, a little bit more involved rather than having what has happened here
happen, rather than having the bad guys slip through the cracks and the entire
marketplace pay the price.

GROSS: I wonder if there's any editorial guidelines that regulate how a
financial investigative reporter like yourself at The New York Times can
invest? You know, are there any editorial guidelines for your personal
investing, since you are covering these people and, you know, might
conceivably have inside information?

Mr. EICHENWALD: Pages and pages and pages. We have an entire policy that is
very, very aggressive. I am not allowed to invest in any individual stock. I
am not allowed to invest in a sector fund, for instance. I can't do anything
that allows me to in any way profit off of anything I write.

Now there are times when it works the other way. I was invested in a stock
fund in 1997 that had as its single highest holding Columbia/HCA, which I
found out about three weeks before I had a 4,000-word story on the front page
that said that Columbia was riddled with fraud. And in the end, it cost them
billions of dollars and the management got thrown out and, you know, I
probably lost money.

But, you know, in the end, you know, people who cover AT&T have to have a
phone. I have to be able to put money somewhere. And so I'm allowed to do
things where I can't individually profit off of directions of stocks or
sectors.

GROSS: And do you miss being able to do that, or are you just as happy?

Mr. EICHENWALD: Well, the thing is if I wasn't covering the stuff I was
covering, I wouldn't know as much as I do about how to invest.

GROSS: Right.

Mr. EICHENWALD: So I would be allowed to invest, but then I wouldn't know
anything. So in a way, I think I'm probably better off...

GROSS: Right.

Mr. EICHENWALD: ...because I can make broad decisions, you know, I want to
get out of the market now, or I want to reduce my exposure to the market now,
or I want to increase my exposure to the market now. And, you know, those are
actually good enough. I do just fine.

GROSS: I don't mean to imply that you would be enjoying things at the expense
of everybody else who is suffering right now, but, you know, has it been
interesting for you to cover these stories and to be as widely read as you are
now? A lot of people often might skip over the financial story, but right
now, it's like the main event for a lot of people.

Mr. EICHENWALD: I would be lying if I said I didn't enjoy it. The one thing
that I think is actually--I actually think this whole period is very, very
healthy. I know a lot of people are suffering. I know a lot of people are
having trouble. But we kind of have to look at it from the long-term
perspective. This is the culmination of problems that I have been seeing year
in and year out in corporate America, and I would write about it, write about
it, write about it and very, very little would change. And I would be in the
homes of blind little old ladies who, in fact, had lost their homes. I would
see families who had been ruined. I would see people year after year after
year who had their faith in this country and in this system wrecked by
corporate fraud. But it never rose to the level of people saying, `You know,
this is really bad.'

Now you're seeing the culmination of that lack of attention. You're seeing
everybody recognizing how bad it is, how damaging it is. And in a way, it
seems like it had to get this bad until it finally attracted somebody's
attention. Lots of changes are being made. In the long run, I think it's
going to be very, very healthy for this country and for this economy.

I actually have much more faith in the marketplace today than I had two years
ago when we were up at 11,000. And, you know, anybody thinking it through for
a minute would probably agree with that. You know, we have greater commitment
to oversight. We have greater commitment to keeping things right. We have
people afraid of doing things wrong. And that's reality. If you puff up the
numbers and fake the numbers and we all make money, it's all going to come to
an end someday.

So I'm very, very sorry that so many people had to be hurt in order for us as
a country to recognize both the power and damage of corporate fraud, but
hopefully now that everyone's attention is riveted to it, and Congress is
willing to do something about it and the president is willing to do something
about it, maybe we'll fix things. Maybe we'll be able to go for a decade or
two without it happening again.

GROSS: Well, thank you for finding an optimistic note to end on. Kurt
Eichenwald, thank you so much for talking with us.

Mr. EICHENWALD: Thanks for having me.

GROSS: Kurt Eichenwald covers corporate fraud for The New York Times.

(Soundbite of music)

GROSS: Coming up, Ken Tucker reviews a new solo album by Wayne Kramer,
formally of the MC5. This is FRESH AIR.

(Soundbite of music)

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Review: Wayne Kramer's new album "Adult World"
TERRY GROSS, host:

Wayne Kramer's career has lasted for a sizeable portion of rock 'n' roll
history. As a founding member of the '60s Detroit band the MC5, Kramer has
always made raucous, often political rock, as both a guitarist and vocalist.
The new solo album by the 50-something Kramer is called "Adult World."
Rock critic Ken Tucker has a review.

(Soundbite of music)

Mr. WAYNE KRAMER (Musician): (Singing) I got a great big amp. It's got a
great big sound. I play it really loud. I'll never turn it down. I got a
great big amp.

KEN TUCKER reporting:

The MC in the MC5 stood for Motor City, the Detroit where Wayne Kramer took
the inspiration to make music that would shake people out of preconceived ways
of thinking. In 1969, that meant an album called "Kick Out the Jams," powered
not only by Kramer's guitar but by the radical politics of John Sinclair's
White Panther Party, for whom the MC5 was sort of the house band. Sinclair
liked to quote the surrealist Andre Breton's phrase, `Revolution is poetry.'
These days, Wayne Kramer is espousing a different kind of poetry.

(Soundbite of "Nelson Algren Stopped By")

Mr. KRAMER: Nelson Algren stopped by last week. `Chicago, City with the
Big Shoulders,' he said.

`Hog butcher to the world,' I said. `Gateway to the West, huh?'

`No, kid, that's St. Louis,' he corrected, `home of the White Sox. Boss
Daley runs things 'round here.'

House of Capone. Chicago, a city on the make.

`Nelson, you want a sandwich, a piece of fruit or something?'

`Nah, kid. I've gotta meet the dealer in a few. Plus, the punk has a poodle
with a girlfriend, cheap.'

TUCKER: That cut, called "Nelson Algren Stopped By," is a bit of jazz poetry
saluting not Detroit but Chicago, home of Algren, hipster author of the "The
Man With the Golden Arm," among many other books. Kramer has remained true
to his surrealist beginnings, though. Those lines have a nicely hallucinatory
stream of consciousness, which I suspect was supplied in large part by
Kramer's old pal and frequent collaborator in recent years David Was of Was
(Not Was). Even when he chips away at a more conventional chunk of rock, like
the album's title song "Adult World," Kramer maintains a free-associating
intensity.

(Soundbite of "Adult World")

Mr. KRAMER: She had a smile so big you could sky write on it. She had a
voice so deep, it sounded like tires. She had hard sweatered breasts that
matched her thighs. Drove with one hand on her hipbone. She says, `You can
call me Aphrodite. Let me slip into my nighty.' They were a skillful
impersonation of success and living in an adult world.

(Singing) Adult world. Adult world.

TUCKER: Over the course of this album, Wayne Kramer offers a song disguised

as a love letter from Fidel Castro deep in the jungles of Cuban revolution,
another expressing sympathy for a teen-age runaway and some piffle about "The
Slime That Ate Cleveland." Then there's really solid, if perplexing music
like "Brought a Knife to the Gunfight."

(Soundbite of "Brought a Knife to the Gunfight")

Mr. KRAMER: (Singing) Brought a knife to the gunfight. Somehow it's not
enough. Walked in with a swagger. Now all I do is bluff. Inside a suit of
armor, come up a little short. Bought myself a ticket. I got my passport.

Brought a knife to the gunfight. And I can't even up the score. I need a
secret weapon. I need a little more. There's a woman...

TUCKER: When the MC5 broke up in the early '70s, lead singer Rob Tyner tried
his hand at being a songwriter for hire and a photographer. Guitarist Fred
"Sonic" Smith toured with Iggy Pop and then married Patti Smith, and they made
beautiful music together until he died of heart failure in 1994. Wayne Kramer
did time for drugs and launched the solo career that has persisted onto this
album. It's a fine piece of work, one that `kicks out the jams' as well as
anything he's done over three decades.

GROSS: Ken Tucker is critic-at-large for Entertainment Weekly. He reviewed
"Adult World," by Wayne Kramer.

(Soundbite of music)

(Credits)

GROSS: I'm Terry Gross.

(Soundbite of song)

Mr. KRAMER: (Singing) The slime that ate Cleveland came in off the lake.
Whistling in the winter wind, when no one was awake. The slime that ate
Cleveland left dead boys in its trail. Mary got sick of him and every girl
turned pale.

The slime that ate Cleveland with purple and profane. ...(Unintelligible) as
best they could, but it drove them all insane. And the slime that ate
Cleveland had people in its grip. But they had the suits and the rubber
boots, and they gave the thing the slip. The slime that ate Cleveland brought
misery and gloom...
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