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Corporate Fraud Initiative?Bad for Colorado Companies or Good for Colorado Investors? (Part 3)

By Pardis Ostadi

The Colorado Corporate Fraud Initiative, or Amendment 53 to the Colorado Revised Statutes, would hold business executives criminally liable if they break the law or stand by as others commit crimes.  This means that accomplices to criminal fraud cannot plead ignorance.  Under these circumstances, the amendment would also allow any Colorado resident to sue the executives.  The proceeds from successful suits will go back to the state.

The impetus for Amendment 53 comes from Protect Colorado?s Future, an alliance of advocacy groups.  Qwest?s troubles serve as motivation for Amendment 53, according to Jess Knox, executive director of Protect Colorado?s Future.  Knox stated that: 

• ?The economy will be much stronger in the long-term because we are raising the integrity of the corporate environment for those who want to come to Colorado and have a good business.?  

Lew Ellingson, a former Qwest employee and "the public face of the proposed ballot measure," said the proposal would hold top business officers individually accountable in an unprecedented manner.  Moreover, ?If nothing else, these folks in charge will think twice about cutting corners to make themselves look more profitable than they really are.?   Ellingson further stated, ?I don?t know who can oppose this.  This is common sense.  We need businesses to survive, but we don?t need criminals running them.?  Ralph Nader also stated, ?The amendment is long over due because the corporate crime rate is getting bigger and bigger and corporate wrongdoers are throwing their wrongdoings on the backs of state citizens to bail them out.?

The Official Summary for the initiative lists some arguments for the proposal.  These include:

• Amendment 53 addresses a gap in state law. While business entities themselves can be prosecuted, their executives can currently avoid responsibility for their businesses' failure to follow state law. The measure helps ensure that these executives are held accountable when they know of a legal duty that their business has failed to perform. Over time, Amendment 53 can foster a business environment that attracts and retains responsible employers.
• Amendment 53 may encourage a healthy and moral economic climate for Colorado. When businesses fail to comply with state law, the state's economy can be impacted in a variety of unexpected or far-reaching ways.  The measure seeks to eliminate cases where executives' failure to act or take responsibility for their businesses'  legal obligations affects the lives of employees, shareholders, or even the state's citizens as a whole.
  
• Amendment 53 could lead to additional disclosure about and charges for illegal corporate conduct. The measure establishes a defense from prosecution for executives, which may make executives feel more secure about reporting their business's failure to perform duties required under the law.
  

The proposed amendment is available here.

Full post as published by The Race to the Bottom on October 10, 2008 (boomark / email).