Demography Research
Dr. Mary Zey has published more than three dozen articles on organizational and corporate form and change. In addition, she has published eight books, two of which are empirical research monographs. She is presently studying the causes of corporate fraud, specifically accounting fraud and securities fraud, and analyzes the differences between corporations which are identified by the Securities and Exchange Comission (SEC) and the Securities Accounting and Auditing Enforcement Release (AAER) as having committed fraud and those that have not done so under the same external environmental conditions.
Dr. Zey is presently working on one an article with Dr. Don Warren, a colleague and two graduate students in the Department of Applied Demography, John Garza and Joey Campbell. She and Warren have four additional articles which were co-authored with Joe Roy and Tanya Granston, that are in one of the stages of the review process. One has been revised and resubmitted to Law and Society Review. The focus of this article is on corporate incentives to commit accounting fraud. A second article is methodological and compares the acyclic graphic design causal method with other more traditional methods of analysis. The third deals with methods of methods of external corporate control which are expected to prevent fraud and which did not do so at the turn of the century. The fourth is an analysis of board of director control of verses CEO control of corporate fraud.
In addition to these five manuscripts, Zey has written one original research monograph entitled the Failure of Corporate Governance and Corporate Control: Enron, Arthur Andersen, and their Bankers which she is still editing and will be published soon.
This manuscript is not an analysis of CEO’s internal control of corporate behavior. Rather it is an analysis of the fraud networks which were established by Fastow and Skilling, and approved by the board, and external accounts through which Enron, Andersen, their Banks and other Professional Firms organized eight types of fraud networks to defraud direct investors and individuals, though institutional investors at the turn of the 21st century. Corporate executives used the transformation of corporate form from multidivisional structures based on product production and distribution to multisubsidiary forms based on ownership forms which could be efficiently coupled and decoupled from the parent corporation and then re-coupled tax free to the parent company. This crime at the turn of the 21st century is compared to similar unregulated financial and corporate frauds organized by trusts at the turn of the 20th century. In addition, the fraud networks organized and implemented during the transition to Enron from a pipeline distribution firm to a trading firm at the turn of the 21st century is compared to the transition of Drexel Burnham Lambert form a traditional Fortune 100 investment banking firm to the leading junk bond trader at the end of the 1980s. Finally this book explains why various enforcement agencies and the SEC did not know Enron was involved in these fraud for the six consecutive years, from 1995 through and including 2001 while Fortune awarded Enron the status of “most innovative US corporation.” In addition Enron was awarded CFO by the leading Financial Business Mangazine, and best manged firm status by Fortune.
This was truly the legitimization and celebration of corporations which created false profits through the most effect method fraud, while agency theory financial scholars celebrated the Michael Jensen premise that effective the practice of binding management to the interests of stock holders through ever increasing levels of compensation achieved by not recognizing stock options as a corporate expense. We have again relearned the lesson that industrial corporations and corporate capital cannot monitor and regulate themselves as industries are deregulated. The same types of fraud networks were established in eight additional organizations for which Arthur Andersen was the external auditor, many of which did business with Enron and each other. These firms also failed before, during, and after Enron failed with little or no recognition of these relationships between these networks.
Submitted by Mary Zey, Ph.D., Professor Demography and Organization Studies.