Making the rules and breaking the rules: the political origins of corporate corruption in the new economy

Recent scandals at companies like Enron and WorldCom have pointed to the systemic origins of many corporate frauds. This paper advances the argument that behind those scandals were strategic political actions that changed the regulatory and legal environment in which those firms operated and created criminogenic institutional frameworks that facilitated acts of corporate corruption. Three case studies involving (1) the California energy crisis of the late 1990's, (2) the regulation of energy derivatives, and (3) accounting treatments of stock options, are presented to illustrate how markets and the rules that govern them are the products of political processes and how they can create motivations and opportunities for corporate fraud. The implications these case studies have for the study of corporate crime and corruption are discussed.