From Sutherland to SOX: The Saga Continues

A short history of fraud-fighting studies and laws

By Novella Noland Clevenger, JD, CFE, CPA, CGFM

This bird's-eye view of five corporate crime studies in the last 50 years may help predict the future of fraud-fighting efforts in the post-SOX era. 

Financial statement fraud slammed its way into public awareness with hurricane force in 2002. Reacting to a need to shore up public confidence in financial markets, the U.S. Congress and president acted swiftly to pass legislation known as the Sarbanes-Oxley Act. As we all know, the Act imposed rigid procedures on corporate officers and on the accounting profession to improve the reliability of the financial statements of public corporations. Penalties for noncompliance were increased to what many saw as draconian levels.

It will be interesting to observe, in 10, 20, or 50 years, whether the public looks back on 2002 as a watershed year in corporate governance and reliability of financial statements. Will current legislation have the desired effects? One way of predicting the future is to revisit the past. In this article, we'll take a bird's-eye view of five studies over the past 50 years that have dealt with the issue of corporate crime including financial statement fraud. We'll conclude by comparing some findings of those studies with relevant provisions of SOX to predict the likelihood of the Act's effectiveness in combating financial statement fraud.

[For even more current data and analysis, see the ACFE's Report to the Nation on Occupational Fraud and Abuse (The Wells Report) at]

Sutherland: sanctions not effective
In 1949, Edwin H. Sutherland, well-known sociologist and political economist, published his monograph, "White Collar Crime," a work (1) that remained in print for more than 30 years and was translated into several languages.(2) The monograph was an analysis of law violations, including financial fraud and violation of trust, by 70 large U.S. corporations. The sources for his study included decisions of federal, and state and municipal courts, as well as published decisions of several federal administrative agencies, including the Securities and Exchange Commission (SEC).

Under pressure from his publisher, who feared legal reprisals, Sutherland deleted from the original publication the names of the target corporations. A complete and uncut version of the study, including the names of those corporations, was published in 1983.

For full access to story, members may sign in here.

Not a member? Click here to Join Now. Or Click here to sign up for a FREE TRIAL.