Readers Report
The Meaning of the Ken Lipper Saga
A sizable portion of "The fallen financier" (Cover Story, Dec. 9) dealt with what Ken Lipper knew and when he knew it--relative to the law. I believe that Ken Lipper is guilty of a far greater crime: The courts will wrangle over legal questions, but it is clear that Ken Lipper has dishonored his own name.
There was a time when putting your name on the door of a business meant personally taking responsibility for its actions. I believe most people in business still adhere to this time-honored standard.
Whether Lipper knew what his traders were doing--he should have--is immaterial. It happened on his watch at his company under his name. That should stand for something.
Michael Atherton
Arlington, Va.
"The fallen financier" was an extreme example of schadenfreude. I have known Kenneth Lipper since the late 1970s at Salomon Brothers. I remember being on the trading desk when the stock-buying blitz of Becton, Dickinson & Co. that Ken helped to complete occurred. It was called LHIW ("let's hope it works"). There may have been an attempt to push the limits of the Securities & Exchange Commission rules at that time, but there wasn't any illegal intent. Similarly, Ken may have miscalculated the hedging strategy using convertible bonds, but it is unlikely that he intended any fraudulent activity, particularly if his own family funds were invested along with his clients' funds.
Investors had a right to rely on Ken's experience, and most sophisticated investors understand that high returns involve high risk. Clearly, the traders' role was to be on the firing line while the management was left to Ken. The financial losses are serious, and the emotional impact is understandably difficult, but let's wait to hear the legal defense of Lipper & Co. before we heap scorn on an accomplished individual.
Steven A. Ludsin
New York
I worked as a high-yield-bond analyst and trader at Lipper & Co. from 1993 to 1995 and was shocked to read about the firm's recent closing. What I witnessed was a disciplined approach to investing--with genuine concern shown for investors' assets. All analysts and traders were required to arrive by 7:30 in the morning, read three newspapers, and remain abreast of all investments. Lengthy meetings were held to discuss any new investment ideas. Ken Lipper encouraged employees to act as a team, and unprofessional behavior was not accepted. Yet, outside of the strict "Wall Street" atmosphere, Ken always made me feel I was part of a family. I have nothing but fond memories of the people at Lipper & Co.
Charles Kempf
Chicago
The New Philanthropy: What Gives?
"The new face of philanthropy" (Cover Story, Dec. 2) gave me hope for the future. But the feeling of hope did not last long. It was replaced with only one question: What about the people in America who are destitute and unnamed with no "foundation" behind them? I found many worthy humanitarian causes with global reach, yet I found few causes listed that would perhaps help the poor and destitute of America.
Why must philanthropy be used for "creating a community foundation to fund already successful nonprofit leaders as they expand the scale and scope of their operations" rather than giving directly (not blindly) to organizations that would not have to market themselves?
Charlotte Cox
Phoenix
As a longtime subscriber to BusinessWeek, I am compelled to respond to your excellent article, up to and excluding "possible philanthropic laggards" and your search for them in the "public records." What part of "private" and "anonymous" do you not understand? How dare you vilify people who want to do good works in private?
Chris Horne
Arlington, Va.
Get Off the Golf Course, Tech Investors
Hooray for Robert D. Hof telling it like it is ("The kick in the pants that tech needs, News: Analysis & Commentary, Dec. 9). Venture capitalists and "angel investors" have abandoned the market and are hiding out on golf courses. The really sad part is that they continue to encourage early startups to waste valuable resources and time on funding pitches they have no intention of considering. I wonder how many early-stage startups have failed just jumping through hoops that angel groups and VCs continue to encourage?
Patrick Kearns
Cardiff, Calif.
What Robert Barro Doesn't Know about Dockworkers
Robert J. Barro characterizes the International Longshore & Warehouse Union's workers as "semi-skilled" ("The best little monopoly in America," Economic Viewpoint, Dec. 9). With respect, it's obvious he has never set foot on a West Coast dock--where he would have witnessed a highly skilled and thoroughly trained workforce operating computerized cranes and various other sophisticated and often dangerous cargo- moving equipment.
As for having the muscle to damage the U.S. economy, Barro could have been more generous and shared some of his accolades with the Pacific Maritime Assn. After all, it was the PMA that exercised its muscle in locking out the ILWU in their recent contract dispute.
Richard S. Adams
Willard, Mo.
Slurs Fell on Alabama
Having grown up in Alabama, I was taken aback to read in "The populist on the banking committee" (Finance, Dec. 2) that Richard C. Shelby "hails from a state that has no big financial institutions."
Last time I checked, three of the country's 25 biggest commercial banks were headquartered in Alabama. Hardly the stuff of free toasters.
Dave Benditt
Kansas City, Mo.
A Faithful Reader Spots an Evergreen Idea
When I read "Productivity gains: The good news and the good news" (Business Outlook, Nov. 25), I was reminded that some 30 years ago, while riding to work on the South Shore train from Indiana to Chicago, I read a BusinessWeek article on the importance of productivity to our economy. I agreed with the article then...so much so that I wrote a letter to your editor (not published). It's interesting to note that certain economic principles survive the "test of time," as I agree with the recent article more than ever.
Dan Molinaro
Houston
No Skirting the Rules to Sell Tech in China
I believe there was a misunderstanding in "High tech in China" (Cover Story, Oct. 28), implying that Semiconductor Manufacturing International Corp. (SMIC) engineers can tinker with the chipmaking equipment to "skirt the ban" on the sale of advanced technology to China. That is not what I said. I was talking about the possibility of our engineers making smaller transistors by adjusting their process-engineering methods. SMIC does not modify equipment to circumvent regulations. We strictly follow conditions prescribed by governing authorities.
Joseph Xie
Senior Director for
Business Development
SMIC
Shanghai
Give the Accountants More Credit
On behalf of the American Institute of Certified Public Accountants (AICPA), I take exception to "So much for cracking down on the accountants" (Economic Viewpoint, Nov. 18). Several of Robert Kuttner's points are in error. First, the Financial Accounting Standards Board defines accounting standards, not auditing standards as Mr. Kuttner stated. Auditing standards have long been the responsibility of the AICPA's Auditing Standards Board, which reflects a wide cross-section of the accounting profession and its most highly regarded professionals. With the passage of the Sarbanes-Oxley Act, standard-setting now rests with the new Public Company Accounting Oversight Board, which has been given broad latitude in determining the best way to set standards going forward. The AICPA has always espoused broad public participation in setting standards, to strengthen its own standard-setting capability, and is redoubling efforts to encourage the participation of institutional investors and other users of financial statements in its process.
Second, the accounting profession did not resist the recommendations of the 2000 Audit Effectiveness panel, as Kuttner asserts. In fact, the AICPA used those recommendations to help frame a new fraud standard (Statement on Auditing Standards No. 99) that makes mandatory procedures to be performed in every audit engagement to help detect fraud.
Contrary to Kuttner's assertion that the accounting profession is attempting "to reverse reform by stealth," the profession is fully committed to implementing the Sarbanes-Oxley Act. We believe that a new discipline model for our members is critical and that an independent body is the best way to achieve this. In fact, the accounting profession has been calling for an independent oversight board since last January. Finally, Kuttner charges that "the AICPA spent only a few million dollars a year on self-policing." During fiscal year 2002, we spent $10.7 million on SEC Practice Section peer reviews, ethics investigations, and Trial Board activities.
Linda E. Dunbar
Director of Public Relations
AICPA
New York
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