Free Riding in the US

Fraud and Larceny in the US - at - the best of the international financial media

Anna Levine-Gronningsater for the Christian Science Monitor reports that with petrol prices above $2 a gallon, an increasing number of US car-owners are refuelling and then driving off the forecourt without paying.

'Drive-offs' apparently cost US gas stations $237 million last year and some analysts of oil theft suggest that this year's total will be higher. Americans evidently don't know what planet they're on: in the UK, petrol costs the equivalent of $6 a gallon and civil order has yet to break down.

A rather shameful spirit of thievery is not, apparently, restricted to North America's suddenly impoverished SUV drivers. Retail giant Wal-Mart has filed a suit against a former vice chairman, Thomas Coughlin, alleging that, in Bloomberg News' words, he 'looted the company of hundreds of thousands of dollars to reimburse himself for personal items ranging from underwear to puppy chow'. These allegations, if substantiated, will be all the more remarkable given that Mr. Coughlin was paid more than $15 million over the last two years.

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Coming hot on the heels of former Tyco CEO Dennis 'shower curtains' Kozlowski's conviction for grand larceny, securities fraud and conspiracy, Coughlingate - if the case is proven - would point to a particularly nasty tendency toward corporate excess that only Americans seem to have completely adopted. No other breed seems sufficiently shameless to pull it off.

This is a failure of the free market system and particularly a failure of the job market. Why does Wal-Mart, a high profile public company and one which presumably attracts a number of talented applicants for senior positions, have to pay its senior executives quite so generously? How much can ever be enough? And on receipt of such largesse, what makes the Kozlowskis of this world go truffle-hunting for further goodies to trouser? Could it be complete disdain for the rank and file shareholder?

If so, and if this vile-looking behaviour is even remotely indicative of the wider executive culture (numerous examples from Wall Street suggest it is), then US equity valuations are even more stretched and offensive than we thought they were.

One trusts that the sort of borderline or explicit criminality cited above is a minority activity within US financial markets but one senses that it speaks to an active minority which touches on a wider cultural problem - that of lazy money and widespread indifference to general ethical probity.

When capital is plentiful and cheap, both investors and consumers of capital in all its forms tend to become indiscriminate. US equity markets have massively lagged those in the UK and Europe this year which have happily managed to decouple for once. 'Robust' economic growth may not be sufficient to narrow the gap. And let's not talk about the problems that will be created eventually by a bust in the residential property market

Tim PricSenior Investment StrategisAnsbacher & Co Ltd.