Cheating chiefs cloud Wall Street

THE GROWING list of American executives in the rogues' gallery of deceit come from different industries but have common traits. They were once the toast of Wall Street, apparently treated corporate coffers as private piggy banks and bailed out when the going got tough.

Wall Street has been rocked by financial scandals before but rarely have so many of the mighty fallen so fast. Corporate executives have traditionally been held in high esteem in America, as evidenced by the phenomenal sales of books by top executives such as General Electric's Jack Welch. Now, just a year after his book topped the best-seller lists, the world is seeing the underbelly of the boom years. At least a dozen corporate executives are under scrutiny and two have been criminally charged in the past week alone.

Last year, analysts on Wall Street waxed lyrical about Tyco's former chief Dennis Kozlowski's tax moves and Ken Lay's vision for an expanding energy trading empire at Enron. ImClone's ex-chief Samuel Waksal - charged this week with insider trading - was a popular fixture on New York's social circuit and the talk of the biotech industry for his 'breakthrough' cancer product, which failed the drug approval process.

'When bad news came to ImClone, Sam Waksal scrambled to protect himself and his relatives,' said the Securities and Exchange Commission's associate director Barry Rashkover.

Another social tycoon on the New York-London axis, Kozlowski traded fine art almost as often as Tyco did companies. Now the man who made $60m (£41m) last year is facing jail because he failed to pay a $1m tax bill from the sale of famous paintings. Ironically, aggressive tax avoidance strategies were what made him famous. By moving Tyco to Bermuda, he saved the company more than $400m in taxes, pleasing shareholders and spawning copycat moves.

The SEC cleared Tyco's accounting treatment of acquisitions but is now investigating whether Kozlowski misused company money and whether the offshore conglomerate properly disclosed loans and payments to executives.

Waksal is accused of tipping off family members before a public announcement of the unfavourable regulatory ruling. Waksal, who dated culture czarina Martha Stewart's daughter, faces years behind bars. Stewart denied she knew anything when she sold a chunk of her holdings shortly before the Food and Drug Administration rebuffed ImClone's application for cancer drug Erbitux.

Kozlowski and his chief financial officer quietly sold $500m in Tyco stock back to the company in recent years. Enron's Lay unloaded millions of his own holdings while assuring others the company was sound. Some of the most highly regarded executives apparently viewed the company treasury as a private lending facility.

Cable TV provider Adelphia's founder John Rigas and family borrowed $1.8bn from the company to buy shares and bonds, then used corporate funds to cover margin calls when the shares dropped. The firm also guaranteed loans the Rigas family used to build a golf course. Rigas lost control of the firm when creditors found out the extent of the double dipping, among other things.

Boom times are often followed by scandal. The go-go years of the 1980s were followed by a parade of Wall Street tycoons, including Ivan Boesky and Michael Milken, going to jail.

As allegations increase, public tolerance drops and official scrutiny is stepped up. Business ethicists believe this wave of scandal has eroded the mystique of the corporate executive and exploded the myth that America's outsize pay packages are based on performance. So far, only Lay has shown remorse.

The man who made $200m in compensation, testified with a cracking voice that he felt 'profound sadness' about Enron's collapse. Kozlowski, Rigas and Waksal have said little about their role in the decline of their empires.

ImClone's shares are off more than 80% since the FDA denied Erbitux approval and Tyco has lost $90bn in market value since January.