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"Few episodes illustrate more clearly the pig’s ear the United States has been making of globalization than the scandal of “red collar crime.” The phrase has been coined by my Forbes colleague Joshua Brown to describe a pattern of stock scams emanating from mainland China and targeting millions of unsuspecting American investors. Until recently such scams, which have been facilitated by both the Wall Street investment banking community and by the American accounting profession, have been largely overlooked by the American and British financial press. Yet, according to an analysis by, American investors’ losses had already by last year totaled $34 billion.

Now finally the Securities and Exchange Commission has acted. SEC enforcement director Robert Khuzami yesterday charged the Chinese affiliates of five big accounting firms on Monday with violating securities laws because they had failed to provide requested documentation on the audits of several China-based companies under investigation for fraud.

This puts Washington and Beijing on what could turn out to be an epic collision course. Certainly, if Khuzami, a tough Lebanese-American lawyer, has the guts to follow through, we will be treated to a rare insight into where the masters of the universe really hang their hats these days."

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