Saturday, February 18, 2023

Hamilton and F1 stars warned time and place for free speech

Issued on: 17/02/2023 

Paris (AFP) – Lewis Hamilton and his fellow F1 drivers were told on Friday they can still speak out on controversial issues -- as long as they choose the right time and place.

Ruling body, the FIA, clarified its directive over a clampdown to prevent "political, religious or personal" comments without prior approval.

Seven-time world champion Hamilton had reacted to the rule by insisting: "Nothing will stop me from speaking on the things I am passionate about".

On Friday, the FIA said drivers will be able to "express their opinions on any political, religious or personal question" in "their own space and outside the framework of competition".

This would include during media interviews and via their own social media channels.

On the other hand, the FIA said "during the key moments of all motorsport competitions, such as the podiums, the national anthems and official activities", drivers will not be able to express their opinions.

The FIA did concede, however, that there could be occasions which would be treated "exceptionally and on a case-by-case basis".

Drivers who do not comply with the ban may be subject to various penalties, ranging from a warning to suspension.

Hamilton has been one of F1's most vocal drivers on social and political issues, including taking the knee on the grid in support of civil rights.

"The sport has a responsibility to speak out and create awareness on important topics, particularly as we are travelling to different places. So nothing changes," said the Mercedes star this week.

© 2023 AFP

Clashes at living cost protests in Suriname

Issued on: 17/02/2023 - 

Paramaribo (Suriname) (AFP) – Hundreds of people protested in Suriname Friday against rising living costs, clashing with security forces in the capital Paramaribo and looting city center shops, AFP observed.

The government, in a statement, cited reports that the National Assembly had been "forcibly entered, causing destruction," though it did not provide details.

The protesters chanted slogans against rising prices for food, petrol and electricity, and accused the government of corruption.

"Chan, out!" they shouted, referring to President Chan Santokhi whom they blame for galloping inflation and an enormous foreign debt.

Some threw bottles and stones at police, who replied with tear gas and fired rubber bullets.

With a weak currency and ever-worsening economic crisis, the South American nation's 600,000 people are finding it more and more difficult to make ends meet.

The government, meanwhile, has plans to eliminate subsidies for electricity, gas and other essentials in line with IMF-required spending cuts.

In January, it replaced a 12-percent sales tax with a value-added tax of 10 percent, saying prices would not increase though consumers report that they have.

"I left work early to join the protest. I do not even make it to the middle of the month," said Agnes, who did not want to give her last name.






















Protesters accuse the government of corruption
© Ranu Abhelakh / AFP

"I have three children to feed and two jobs," she told AFP.

In the statement, the government said "condemns the destruction committed today in the most serious terms" and promised "vigorous action" against those involved.

"The government has set up a special task force whose task it is to locate, apprehend and hand over to the judicial authorities as soon as possible those responsible for these actions," it added.














© 2023 AFP
Iran sees first unrest in weeks as protesters mourn executed men

Issued on: 17/02/2023 -
01:57
A Kurdish rights group posted video footage of what it described as a burning roadblock during protests in western Iran. © FRANCE 24 screengrab


Text by:NEWS WIRES|
Video by:FRANCE 24

Protesters in Iran marched through the streets of multiple cities overnight in the most widespread demonstration in weeks amid the monthslong unrest that's gripped the Islamic Republic, online videos purported to show Friday.

The demonstrations, marking 40 days since Iran executed two men on charges related to the protests, show the continuing anger in the country. The protests, which began over the Sept. 16 death of 22-year-old Mahsa Amini after her arrest by the country's morality police, have morphed into one of the most serious challenges to Iran’s theocracy since the 1979 Islamic Revolution.

Videos showed demonstrations in Iran's capital, Tehran, as well as in the cities of Arak, Isfahan, Izeh in Khuzestan province and Karaj, the group Human Rights Activists in Iran said. The Associated Press could not immediately verify the videos, many of which had been blurred or showed grainy nighttime scenes.

In Iran's western Kurdish regions, online videos shared by the Hengaw Organization for Human Rights showed burning roadblocks in Sanandaj, which has seen repeated demonstrations since Amini's death.

Hengaw shared one video that included digitally altered voices shouting: “Death to the Dictator!” That call has been repeatedly heard in the demonstrations, targeting Iran's 83-year-old Supreme Leader Ayatollah Ali Khamenei. Other videos purportedly shot in Tehran had similar chants, as well as scenes of heavily protected riot police in the street.

Protesters also marched in Iran’s Sistan and Baluchestan province near Pakistan after Friday prayers, online videos showed. Anti-government demonstrations have been happening for months as well on Fridays in the restive province, which is a majority Sunni region. Its Baluch people long have complained about being treated as second-class citizens by Iran’s Shiite rulers.

Iranian state media did not immediately acknowledge the demonstrations.

07:35

Since they began, at least 529 people have been killed in demonstrations, according to Human Rights Activists in Iran. Over 19,700 others have been detained by authorities amid a violent crackdown trying to suppress the dissent. Iran for months has not offered any overall casualty figures, though the government seemed to acknowledge making “tens of thousands” arrests earlier this month.

The demonstrations had appeared to slow in recent weeks, in part due to the executions and crackdown, though protest cries could still be heard at night in some cities.

Forty-day commemorations for the dead are common in Iran and the wider Middle East. But they also can turn into cyclical confrontations between an increasingly disillusioned public and security forces that turn to greater violence to suppress them, as they had in the chaos leading up to Iran's 1979 revolution.

Iran's hard-line government has alleged without offering evidence that the demonstrations are a foreign plot, rather than homegrown anger.

The country's rial currency has collapsed to new lows against the US dollar. Tehran continues to enrich uranium closer than ever to weapons-grade levels after the collapse of its nuclear deal with world powers and has enough of a stockpile to build "several" atomic bombs if it chooses. Meanwhile, Tehran has been arming Russia with the bomb-carrying drones Moscow has been using in the war in Ukraine.

(AP)
Angry Bing chatbot just mimicking humans, say experts


"They can really go off the rails" 


Issued on: 17/02/2023 - 

San Francisco (AFP) – Microsoft's nascent Bing chatbot turning testy or even threatening is likely because it essentially mimics what it learned from online conversations, analysts and academics said on Friday.

Tales of disturbing exchanges with the artificial intelligence (AI) chatbot -- including it issuing threats and speaking of desires to steal nuclear code, create a deadly virus, or to be alive -- have gone viral this week.

"I think this is basically mimicking conversations that it's seen online," said Graham Neubig, an associate professor at Carnegie Mellon University's language technologies institute.

"So once the conversation takes a turn, it's probably going to stick in that kind of angry state, or say 'I love you' and other things like this, because all of this is stuff that's been online before."

A chatbot, by design, serves up words it predicts are the most likely responses, without understanding meaning or context.

However, humans taking part in banter with programs naturally tend to read emotion and intent into what a chatbot says.

"Large language models have no concept of 'truth' -- they just know how to best complete a sentence in a way that's statistically probable based on their inputs and training set," programmer Simon Willison said in a blog post.

"So they make things up, and then state them with extreme confidence."

Laurent Daudet, co-founder of French AI company LightOn, theorized that the chatbot seemingly-gone-rogue was trained on exchanges that themselves turned aggressive or inconsistent.

"Addressing this requires a lot of effort and a lot of human feedback, which is also the reason why we chose to restrict ourselves for now to business uses and not more conversational ones," Daudet told AFP.
'Off the rails'

The Bing chatbot was designed by Microsoft and the start-up OpenAI, which has been causing a sensation since the November launch of ChatGPT, the headline-grabbing app capable of generating all sorts of written content in seconds on a simple request.

Since ChatGPT burst onto the scene, the technology behind it, known as generative AI, has been stirring up fascination and concern.

"The model at times tries to respond or reflect in the tone in which it is being asked to provide responses (and) that can lead to a style we didn't intend," Microsoft said in a blog post, noting the bot is a work in progress.

Bing chatbot said in some shared exchanges that it had been codenamed "Sydney" during development, and that it was given rules of behavior.

Those rules include "Sydney's responses should also be positive, interesting, entertaining and engaging," according to online posts.

Disturbing dialogues that combine steely threats and professions of love could be due to dueling directives to stay positive while mimicking what the AI mined from human exchanges, Willison theorized.

Chatbots seem to be more prone to disturbing or bizarre responses during lengthy conversations, losing a sense of where exchanges are going, eMarketer principal analyst Yoram Wurmser told AFP.

"They can really go off the rails," Wurmser said.

"It's very lifelike, because (the chatbot) is very good at sort of predicting next words that would make it seem like it has feelings or give it human-like qualities; but it's still statistical outputs."

Microsoft announced on Friday it had capped the amount of back-and-forth people can have with its chatbot over a given question, because "very long chat sessions can confuse the underlying chat model in the new Bing."

© 2023 AFP

For a best friend to Florida bees, each rescue is personal


Issued on: 18/02/2023 -

Coral Gables (United States) (AFP) – Melissa Sorokin sees herself as "a bee advocate," deeply passionate about helping to rescue the at-risk creatures that play such a critical role in biodiversity.

Often called in by spooked or concerned residents, she acts as emergency responder for the vital pollinators, spending the substantial time it takes to move threatening or threatened hives to safer locations.

Sorokin, who lives in Florida, says rescuing hives is infinitely better than homeowners or businesses allowing pest control services to swoop in and simply kill the bees.

"If they don't call me, as a beekeeper, they are most likely going to get an exterminator, who instead kills the bees. It's easy, it's quick, it's good money, cheap for them," says Sorokin, 54.


On the other hand, "I'm like a bee advocate, a bee tender," she says. "I love them. And I have a friendship with them."

Sorokin's mission is vital, she adds, because bees are under threat from climate change, pesticides, large cultivation of single crops, urbanization and invasive species.
Bees are under threat from climate change, pesticides, large cultivation of single crops, urbanization and invasive species © Jesus Olarte / AFP

The honey bee population is in freefall. A December study from Penn State University found that the United States experienced a 43 percent colony loss between April 2019 and April 2020.

The knock-on effects are immense, with the US Food and Drug Administration noting that about one third of food eaten by Americans comes from crops pollinated by honey bees, including apples, melons, cranberries, pumpkins and broccoli.

On a sunny afternoon, Sorokin heads to a client's garden in Coral Gables, near Miami, to remove a beehive.

She first scouts out the place where she suspects the bees are hiding: a shed attached to a house.

Once the presence of the insects is confirmed, she burns pieces of wood in a smoker, dons a mesh head net, and blows smoke into the shed's eaves to calm the bees.

She then grabs a chainsaw and cuts a wooden rectangle in the roof eave. Pulling back the planks reveals a humming, heaving hive.

Sorokin, wearing protective gloves, carefully removes panels of honeycomb covered with bees, and places them like racks in an artificial hive.

"It's not very complicated to move bees. They sleep at night. So you can move them at night or you can move them in the morning keeping everything nice and close," she explains.

"My goal, my wish," is to help the bees, she says. "I hope that they have a better life with me because I help them."

When Sorokin finishes transferring the insects from the shed, she closes up the new box hive and takes it to her car, where she straps it in with a seat belt.

© 2023 AFP
Recycling gives Rio carnival costumes new life

Issued on: 18/02/2023 

Capim Branco (Brazil) (AFP) – Holding a dazzling jewel-encrusted crown decorated with green and orange feathers, Brazilian art teacher Regina Coeli places it on her head, making sure the fit is just right for her upcoming carnival parade.

She won't however be marching in the streets of Rio de Janeiro -- where her sparkling crown was created, worn once and then thrown away.

Each year, Coeli and other members of her samba school in the small town of Capim Branco rescue piles of discarded costumes from Rio's world-famous carnival.

Small armies of seamstresses at Rio's top samba schools spend months making the giant, glittering, sequin-studded costumes that are the trademark of the city's carnival parade competition.

But the world's biggest carnival ends every year with thousands of those costumes discarded on the ground, too unwieldy to fit inside the packed cars, buses, subways, trains and planes taking their owners home.
In the absence of an official recycling program, the finish line at the iconic beach city's "Sambadrome" parade venue becomes a free-for-all for connoisseurs, opportunists and smaller samba schools looking to give the thrown-out costumes second lives.

Coeli's samba school travels around 500 kilometers (more than 300 miles) from Capim Branco, population 10,000, to the "mecca" of carnival, rescuing cast-off costumes and decorations.

The school was among the first to start recycling the costumes when members began driving a pickup truck to Rio a decade ago, says its president, retired teacher Maria Lucia de Souza.

A member of the Capim Branco samba school tries on a recycled costume 
© DOUGLAS MAGNO / AFP

Their method is simple: they spread a tarp on the ground and put up a sign saying, "The Capim Branco samba school thanks you for your donation."

Souza says they particularly target foreign tourists, who pay prices of around $500 to participate in the parades, but struggle to transport their voluminous costumes home.

Her group reuses everything.

"Some of the costumes are still in one piece. For others, we take the cloth, pull off the jewels and use the materials to make new outfits," says Souza, 75, in a bustling shed-turned-workshop at her house.

Like Rio, Capim Branco will celebrate carnival Sunday and Monday. Unlike Rio, its parade will have around 150 participants -- compared to 30,000 at the Sambadrome.


Around 80 percent of Capim Branco's costume materials are recycled from Rio 
© DOUGLAS MAGNO / AFP

Around 80 percent of the material is recycled from Rio.

Coeli, 59, beams as she tries on her crown and cape.

"Everything is made so painstakingly," she says.

"It looks sensational."

'Priceless'

The school's workshop is covered in dazzling costumes: a sumptuous silver mask decorated with real feathers, a flowing pink gown with sparkling accoutrements.

"To us, these costumes are priceless. To the environment, too, because we use them and reuse them," says Souza.

"The first year we went to the Sambadrome, we saw a garbage truck actually crushing the costumes directly."


Souza has turned a shed at her house into a makeshift costume recycling workshop 
© DOUGLAS MAGNO / AFP

Although Rio's samba schools recover and recycle, resell or donate some of their costumes, many end up in the trash, part of around 1,000 tons of carnival garbage each year.

The waste total rises to around 3,500 tons when other cities with large carnival celebrations are included, according to the Retornar Foundation, which is calling to cut down on plastic at carnival and reuse costumes and materials.

Just four percent of solid waste is recycled in Brazil, it says.

In Rio, organizers are making an effort to limit waste: this year, they launched a trailblazing recycling operation, with the goal of turning carnival into "one of the biggest zero-waste events on the planet."

© 2023 AFP
Protecting high seas off Chile's coast depends on UN vote in New York

Issued on: 18/02/2023 -

Santiago (AFP) – In international waters off the coasts of Chile and Peru, the ocean teems with plant and animal species -- some do not exist anywhere else and many are endangered.

Urgently seeking to prevent biodiversity loss in these waters, Chile is pushing for a new marine protected area (MPA) to be created, and hoping to seal the deal during an upcoming summit at UN headquarters in New York.

With more than 6,400 kilometers (3,970 miles) of coastline, the South American country already has 42 MPAs covering some 150 million hectares or 43 percent of its exclusive economic zone, according to the environment ministry.

Now it is looking further afield: to international waters surrounding the Salas y Gomez and Nazca ridges -- two seamount chains that flourish with biodiversity but are unprotected by law because they fall outside any national jurisdiction.

Those parts of the ridges that fall within Chile's exclusive economic zone or EEZ are already protected, as well as a portion that belongs to northern neighbor Peru.

But 70 percent of the ridges -- two chains of more than 110 undersea mountains formed by volcanic activity that jointly stretch over 2,900 kilometers (1,800 miles) -- are not subject to any conservation or management measures.

It is home to whales, sea turtles, corals, sponges, starfish and a myriad of fish, molluscs and other crustaceans.

"Every time we go to that area and take samples, we find new species," Javier Sellanes, from the Center for Ecology and Sustainable Management of Oceanic Islands at the Catholic University of the North, told AFP.


Map showing the Exclusive Economic Zones (EEZ) of countries and the international waters of the high seas © Sylvie HUSSON / AFP


'Unique diversity'

Sellanes, one of few Chilean researchers to have studied this remote area, describes the ridges as "a kind of oasis in the middle of a marine desert."

"Protecting that unique diversity on the planet is of high importance," he told AFP.

The high seas begin at the border of nations' EEZs, which under current international law stretch no more than 200 nautical miles (370 kilometers) from the coast.

Under no state's jurisdiction, the high seas cover nearly half the planet.

A 2021 study in the academic journal Marine Policy said the high seas areas of the Salas y Gomez and Nazca ridges are "under threat from a variety of stressors, including climate change, plastic pollution, overfishing, and potential deep-sea mining in the future."

As UN member states meet in New York next week in the hopes of finalizing a long-awaited treaty on high seas protection, Chile has already started work on having the area around the two ridges declared an MPA.





















International waters bordering Chile's territorial jurisdiction host a Pacific paradise home to many endemic species, dozens of them endangered © Pablo COZZAGLIO / AFP/File

It could become the world's first, but time is of the essence.

"Importantly, fishing and other commercial activities are at low levels in international waters of this region, so there is a time-sensitive opportunity to protect its unique natural and cultural resources before they are degraded," the Marine Policy study said.

New UN High Seas Treaty


According to the High Seas Alliance of NGOs, the sea floor in this region contains cobalt and other highly-prized mineral deposits which could one day be targeted by deep sea mining.

"By permanently closing the area to fishing and mining and establishing a high seas MPA through a new UN High Seas Treaty, we can protect the Salas y Gomez and Nazca ridges for ourselves and for future generations," it states in an online report.

"While no contracts have yet been issued for exploration, neither are any of the areas officially closed to mining."

If adopted, the high seas treaty will allow UN members to propose the creation of MPAs for approval by majority vote. The document does not specify how protective measures will be financed or enforced.

As part of its campaign, Chile submitted a scientific report to the South Pacific Regional Fisheries Management Organization in 2021, in which it stressed that the benefits of the ocean, including food and climate stabilization, "are fundamental to life on Earth."


Map locating the Salas y Gomez and Nazca submarine mountain ranges and Chilean offshore sites © Gustavo IZUS / AFP

"The science is clear," read the presentation. "If the ocean is to remain sustainably productive, we must rebuild its health and urgently stop marine biodiversity loss."

© 2023 AFP

Friday, February 17, 2023

India lashes out at critics after BBC raids
HINDUTVA IS ANTISEMITIC
Issued on: 18/02/2023 

Sydney (AFP) – India's foreign minister on Saturday hit out at "scaremongering" critics who claim the country's democracy is being corroded, singling out billionaire George Soros -- a popular target for right-wing ire.

At an event in Sydney, S. Jaishankar rejected accusations that multiple raids on the BBC's India offices showed Prime Minister Narendra Modi and his government were veering toward authoritarianism.

Jaishankar defended the prime minister, painting detractors as "scaremongering", holding an antiquated "Euro-Atlantic view" of democracy and failing to respect the Indian people's democratic choice.

"There are still people in the world who believe that their definition, their preferences, their views must override everything else," he said.

Indian tax authorities raided the BBC's offices in New Delhi and Mumbai just weeks after the broadcaster aired a documentary on Modi's actions during deadly sectarian riots in 2002.

Jaishankar singled out philanthropist Soros, who recently highlighted Modi's close ties with fraud-accused businesses run by ally Gautam Adani and suggested that while India was a democracy, Modi "is no democrat".


Jaishankar denounced the 92-year-old Hungarian-born financier as "old, rich opinionated and dangerous" and someone who "still thinks that his views should determine how the entire world works."

"He actually thinks that it doesn't matter that this is a country of 1.4 billion people -- we are almost that -- whose voters decide how the country should run."

Soros has long funded projects promoting transparency and democracy, making him the subject of countless conspiracy theories and politically motivated attacks.

"People like him think an election is good if the person we want to see wins. If the election throws up a different outcome, then we actually will say it's a flawed democracy," Jaishankar said.


© 2023 AFP



Food insecurity may increase cognitive decline in older adults

Peer-Reviewed Publication

PENN STATE

UNIVERSITY PARK, Pa. — Older adults living with food insecurity are more likely to experience malnutrition, depression and physical limitations that affect how they live. The Supplemental Nutrition Assistance Program (SNAP) is the largest federally funded nutrition-assistance program in the United States, and research has shown that SNAP has reduced hunger and food insecurity in the general population.

Little evidence is available, however, on how SNAP may impact brain aging in older adults. To bridge this knowledge gap, Muzi Na, assistant professor of nutritional sciences at Penn State, led a team of researchers who investigated the relationship between food insecurity, SNAP and cognitive decline. They found that food sufficiency and participation in SNAP may help protect against accelerated cognitive decline in older adults.

In a new article published in The Journal of Nutrition, the researchers analyzed a representative sample of 4,578 older adults in the United States using data from the National Health and Aging Trends Study, 2012-20. Participants reported their experiences with food insecurity and were classified as food sufficient or food insufficient. The SNAP status was defined as SNAP participants, SNAP-eligible nonparticipants and SNAP-ineligible nonparticipants. The researchers found that food insecure adults experienced cognitive declines more rapidly than their food secure peers.

The researchers identified different trajectories of cognitive decline using food insufficiency status or SNAP status. Rates of cognitive decline were similar in SNAP participants and SNAP-ineligible nonparticipants, both of which were slower than the rate of SNAP-eligible nonparticipants. The greater cognitive decline rate observed in the food insecure group was equivalent to being 3.8 years older, whereas the greater cognitive decline rate observed in the SNAP-eligible nonparticipant group was equivalent to being 4.5 years older.

“For an aging population, roughly four years of brain aging can be very significant,” Na explained. “These results really point to the importance of food security for people as they age and the value that SNAP can have in improving people’s cognitive health as they age. We need to make sure that people have access to — and encourage them to use — the SNAP program as they age.”

Future studies are warranted to investigate the impact of addressing food insecurity and promoting SNAP participation on cognitive health in older adults, said Na.

Nan Dou of Penn State, Monique Brown of University of South Carolina, Lenis Chen-Edinboro of University of North Carolina Wilmington, Loretta Anderson of University of Maryland School of Medicine, and Alexandra Wennberg of Karolinska Institutet in Stockholm all contributed to this research.

This research was supported by funding from the Broadhurst Career Development Professorship for the Study of Health Promotion and Disease Prevention and the National Institute of Mental Health.

This press release is based on a version created by The Journal of Nutrition.

CRIMINAL CAPITALI$M

Two out of three corporate frauds go undetected, research finds

Study says that at least 10% of U.S. companies involved in fraudulent activity

Peer-Reviewed Publication

UNIVERSITY OF TORONTO, ROTMAN SCHOOL OF MANAGEMENT

Professor Alexander Dyck 

IMAGE: ALEXANDER DYCK IS A PROFESSOR OF FINANCE AND ECONOMIC ANALYSIS AND POLICY AT THE UNIVERSITY OF TORONTO'S ROTMAN SCHOOL OF MANAGEMENT AND HOLDS THE MANULIFE FINANCIAL CHAIR IN FINANCIAL SERVICES. HE IS A GRADUATE OF WESTERN UNIVERSITY (BA) AND STANFORD UNIVERSITY (PHD). HE IS ACADEMIC DIRECTOR OF THE DIRECTOR’S EDUCATION PROGRAM, DIRECTOR OF THE CAPITAL MARKETS INSTITUTE, A FELLOW AT THE MICHAEL LEE-CHIN FAMILY INSTITUTE FOR CORPORATE CITIZENSHIP, AND SERVES ON THE ACADEMIC ADVISORY BOARD OF THE CANADIAN COALITION OF GOOD GOVERNANCE, AND ON THE EXTERNAL ADVISORY BOARD, OSFI, CULTURE AND CONDUCT RISK DIVISION. PREVIOUSLY, HE WAS ASSOCIATE PROFESSOR AT THE HARVARD BUSINESS SCHOOL WHERE HE TAUGHT IN THE MBA, DOCTORAL AND EXECUTIVE EDUCATION PROGRAMS, AND HAS BEEN A VISITING SCHOLAR AT INSEAD AND YALE. view more 

CREDIT: ROTMAN SCHOOL OF MANAGEMENT

Toronto - To professor Alexander Dyck, corporate fraud is like an iceberg: a small number is visible, but much more lurks below the surface.

How much more, he wondered? And, at what cost to investors?

Prof. Dyck and his team found that under typical surveillance, about three percent of U.S. companies are found doing something funny with their books in any given year. They determined that number by looking at financial misrepresentations exposed by auditors, enforcement releases by the U.S. Securities and Exchange Commission (SEC), financial restatements, and full legal prosecutions by the SEC against insider trading, all between 1997 and 2005.

However, the freefall and unexpected collapse of auditing firm Arthur Andersen, starting in 2001, due to its involvement in the Enron accounting scandal, gave Prof. Dyck, from the University of Toronto’s Rotman School of Management, and other researchers the chance to see how much fraud was detected during a period of heightened scrutiny. It represented “a huge opportunity,” that rarely comes along, said Prof. Dyck, putting 20 percent of all U.S. publicly traded companies – the slice that had been working with Andersen and were forced to find new auditors -- under a higher-powered microscope due to their previous association with the disgraced accounting firm.

 

Those companies did not show a greater propensity to fraud compared to other companies in the 1998 to 2000 period. But that changed once the spotlight was turned on beginning Nov. 30, 2001 – the date when Andersen client Enron began filing for bankruptcy – until the end of 2003, the period the researchers looked at. The new auditors, as well as regulators, investors and news media were all looking much more closely at the ex-Andersen companies.

 “What we found was that there was three times as much detected fraud in the companies that were subjected to this special treatment, as a former Andersen firm, compared to those that weren’t,” said Prof. Dyck, who holds the Manulife Financial Chair in Financial Services and is the Director of the Capital Markets Institute at the Rotman School.

The researchers used the finding to infer that the real number of companies involved in fraud is at least 10 percent. That squares with previous research that has pegged the true incidence of corporate fraud between 10 and 18 percent. While the researchers were looking at U.S. companies, Prof. Dyck speculated that the ratio of undetected-to-detected fraud is not significantly different in Canada.

Given those numbers, the researchers estimated that fraud destroys about 1.6 percent of a company’s equity value, mostly due to diminished reputation among those in the know, representing about $830 billion in current U.S. dollars.

The figures also help to quantify the value of regulatory intervention, such as through the Sarbanes-Oxley Act, or SOX, introduced in 2002 in response to Enron and other financial scandals. Its not hard to come up with the compliance costs of SOX. What their study shows is that the legislation would satisfy a cost benefit analysis, even if it only reduced corporate fraud by 10 percent of its current level.

The results should capture the attention of anyone with responsibility for corporate oversight and research, Prof. Dyck says: “I spend a lot of time running a program for directors of public corporations and I tout this evidence when I say, ‘Do I think you guys should be spending time worrying about these things? Yes. The problem is bigger than you might think.’”

The research was co-authored with Adair Morse of the University of California at Berkeley and Luigi Zingales of the University of Chicago. It appears in the Review of Accounting Studies.

Prof. Dyck will present his research during an event hosted by the Capital Markets Institute on February 23, which will also include a discussion with representatives from academia, the plaintiff’s bar, regulators, and accountants. Further details are online.

Bringing together high-impact faculty research and thought leadership on one searchable platform, the new Rotman Insights Hub offers articles, podcasts, opinions, books and videos representing the latest in management thinking and providing insights into the key issues facing business and society. Visit www.rotman.utoronto.ca/insightshub.

The Rotman School of Management is part of the University of Toronto, a global centre of research and teaching excellence at the heart of Canada’s commercial capital. Rotman is a catalyst for transformative learning, insights and public engagement, bringing together diverse views and initiatives around a defining purpose: to create value for business and society. For more information, visit www.rotman.utoronto.ca

-30-