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Juli Niemann: How companies can hide the truth

Bernard Madoff walks out from Federal Court

Jeremy Hobson: Now let's get to the other big economic story this morning, this one out of Japan. The 92-year-old camera maker Olympus has admitted it's been hiding financial losses for decades. The company's stock plunged almost thirty percent in Tokyo today.

For more, let's bring in Juli Niemann, analyst at Smith Moore and Company who's with us live from St. Louis as she is every Tuesday. Good morning.

Juli Neimann: Morning, Jeremy.

Hobson: How can a company like Olympus hide the truth from everyone for so long?

Neimann: Well, this is a time when generalizations apply. My favorite Uncle Warren's adage: you don't know who's swimming naked until the tide goes out. And that means bad economic times expose fraud.

In 2001, we had Enron, Global Crossing, Sunbeam, World Com. Now we have Bernie Madoff, Bear Stearns, Lehman, AIG, and Olympus in Japan -- so it really is international. When times are really good, fraud's papered over with money and that's campaign contributions to everybody who's doing the governing. They look the other way, they don't enforce the laws that Congress is passing.

You know, Congress passes a lot of really good laws to protect consumers, the environment, you know, everybody, but they slash the budgets of the agencies so they have little ability to enforce. So everybody is outmanned, outgunned, and the fraudsters get away with murder.

Hobson: And Juli, quickly, is there any way to recover, regain trust from something like this?

Neimann: Well, assuming the companies still have some base that's viable -- economically viable -- and most of them have to liquidate, the only way you regain credibility is to fire everyone but the janitor and change the name. And hopefully, there's collective amnesia in the future.

Hobson: Juli Niemann, analyst with Smith Moore and Company, thanks so much.

Neimann: You bet.

About the author

Juli Niemann is executive vice-president for research and portfolio management with Smith, Moore and Company.

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