San Jose Mercury News, Calif., Dan Gillmor Column

Sep. 10–PROSECUTOR, SEC CHIEF HELPING SAVE CAPITALISM: New York’s corporate crime-fighting attorney general, Eliot Spitzer, has taken another crack at the sleaze permeating Wall Street. Moreamazingly, the head of the federal Securities and Exchange Commission has shown some overdue gumption, too.

This is bad news for the powerful people who still think the financial system is their plaything for self-enrichment. It’s modestly good news for everyone else.

Spitzer is digging in, hard, to figure out what some major mutual funds are doing with their clients’ money — and if their alleged funny business is doing more serious damage to the nation’s economy.

He should investigate the hedge funds even harder because they are the scariest operators around. They gamble billions upon untold billions in markets that have no serious oversight. If we’ve seen anything in recent years, transparency and scrutiny are essential if we’re going to trust our markets.

The federal prosecutor in New York has joined the investigation into mutual funds’ practices, according to news reports. New York’s securities laws are tougher than federal laws, but a double team on these matters makes sense.

Meanwhile, the new SEC chairman, William Donaldson, is challenging the staggering $140 million pay package recently awarded to Richard Grasso, the head of the New York Stock Exchange. (Tuesday, the NYSE revealed that Grasso actually was supposed to receive an additional $48 million in compensation, which he has agreed to forgo.)

In a letter to the chairman of the exchange’s compensation committee, Donaldson said the pay package “raises serious questions regarding the effectiveness of the NYSE’s current governance structure.” Talk about understatement.

This outlandish loot doesn’t just raise questions. It shouts of continued, unrepentant arrogance in the top ranks of America’s business community.

The nation’s stock exchanges did far too little self-enforcement while the stock bubble expanded. Times have gotten grim for shareholders, yet CEOs and other top executives are doing just fine, and new corporate scandals are still emerging from the not-so-old woodwork.

Wall Street is plainly incapable of self-correction. Spitzer and Donaldson, by pursuing the continuing abuses, deserve applause. They’re helping to save capitalism, a mission that entirely eludes the well-feathered corporate nests that do so much to undermine it.

ATTACKING THE CUSTOMER: To the surprise of absolutely no one, the recording cartel’s mad-dog front group has filed the first huge batch of cookie-cutter lawsuits against people who’ve allegedly traded copyrighted music online.

These cases are designed to scare people out of copyright infringement, a violation the industry calls outright stealing, even though the two acts are not the same. The industry, a cartel with a long history of its own abuse of artists and customers alike, has even sued a 12-year-old girl, according to the New York Post. Nice target.

Infringing on copyrighted work to collect music you haven’t bought, or to let other people collect music they haven’t bought, is wrong. No one disputes that. But the record companies are sending tanks against pedestrians.

American copyright laws let the companies threaten these people with $150,000 penalties for every song they have illegally on their computers. This is grossly disproportionate to the infringement, but U.S. lawmakers have long since stopped caring about fairness. They are owned by the copyright industry, and they show it again and again.

Keep in mind that these lawsuits are not from the “Recording Industry Association of America,” as you’ve been hearing. They’re a product of the RIAA’s members, especially the overwhelmingly dominant Universal Music Group, BMG, EMI, Sony Music and Warner Music.

(By the way, if you even consider opting for the cartel’s lunatic “amnesty” for file-sharers, you’re even more stupid than they think you are. The amnesty offers little genuine protection and creates some serious potential risks.)

Universal, at least, has begun to recognize reality by cutting the price of music CDs.

The next step is to record and promote better music. That’s probably asking too much.

RESONANT MEMORIES: I’m in South Africa this week, speaking at a conference on journalism and technology in the small university community of Grahamstown. Being here brings back powerful memories.

Two years ago this same week I was also at this gathering, called Highway Africa. I’d joined a small delegation of journalists who’d been brought from around the world to help bring the power of information to a developing world.

Two years ago Thursday, we were on the way back to the airport in nearby Port Elizabeth when a mobile phone rang. A plane had just struck the World Trade Center, we were told. Not long after, another call told of another plane hitting the second tower.

We looked at each other, saddened and angry and frightened. Most of all, I think we were wondering what our world was coming to, and where it was going.

But the world didn’t unravel to match our worst fears. There’s been some progress, and some steps backward. We are, as usual, muddling along as a species. We can do better, and somehow I think we ultimately will.

News and views, culled and edited from my online eJournal (www.dangillmor.com).

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To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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