Securities and Exchange Commission Historical Society

In the Midst of Revolution: The SEC, 1973-1981

Foundation for Renewal

Glories of Right Conduct and the Wages of Sin

"We have learned that in Central America serious credence is given to the suspicion that our Commission's celebrated concern for corporate disclosure is a cover story. What we are really doing is substituting for the CIA in trying to topple local governments while that agency's attentions are otherwise occupied – a misapprehension that would be amusing if it were not pitiful."

June 27, 1975 "Homily on the Glories of Right Conduct and the Wages of Sin" – Address by SEC Chairman Ray Garrett Jr. to the American Society of Corporate Secretaries

The Watergate scandal, which began as an investigation about the misuse of campaign funds, had morphed into an investigation over the use of illegal corporate campaign contributions that funded political dirty tricks, illegal wiretapping, and eventually the break-in at the Watergate complex and the resulting cover-up.(6)

Garrett ordered an SEC investigation into whether those corporations had disclosed the payments to their shareholders in the public filings. The investigation found that over 450 American corporations had made questionable or illegal political contributions, kickbacks or other payments to foreign or domestic officials, which caused a public uproar.

For the SEC, it was not simply the payments that created a concern. The investigation also demonstrated that the illegal payments had not been disclosed in corporate financial statements. In addition, the payments subjected the companies to criminal liability, both of which were material facts that the SEC believed should have been disclosed to shareholders. As a result of the investigation, the SEC began to more closely examine the issues of corporate governance, financial accounting, and the role of corporate officers and boards in making illegal payments inimical to the interest of the shareholders.(7)

The SEC's investigation of corporate payment malfeasance provided most of the evidence for Congressional investigators, and led to the passing of the Foreign Corrupt Practices Act in 1977.(8) The accounting profession came under much closer scrutiny as Congress conducted hearings about accountants' responsibility to provide accurate and complete information in the financial statements they prepared.

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(6) Kurt Hohenstein, Coining Corruption (Northern Illinois University Press: DeKalb, 2007), 217-228

(7) Foreign Corrupt Practices Act, 15 USC §§78m, et seq.

(8) Ibid

Related Museum Resources


October 31, 1973
document pdf (Courtesy of the estate of John Evans)
June 27, 1975
image pdf (Government Records)
September 12, 1975
image pdf (Government Records)

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