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Investors who got a midsummer haircut last week during the Dow’s 735-point drop from 14,000 probably aren’t singing Happy Birthday for the Sarbanes-Oxley Act, which is 5 years old today. But maybe they should be.

If you think last week’s sell-off was bad, recall the summer of 2002. Enron had imploded, WorldCom admitted to fabricating billions of dollars in earnings, and prosecutors were swirling around Tyco and Adelphia. From May 24 of that year to July 23, the Dow dropped from 10,104 to 7,702, a plunge of 24%.

That wasn’t a haircut, or a correction. It was a full-blown crisis. The public, and even the White House, demanded action.

In response, Congress passed the Sarbanes-Oxley Act on July 30, 2002. The law forced public companies to spend much more money having their books thoroughly audited, and it increased the penalties for executives who defrauded investors. Since the bill’s passage and implementation, nervous investors who had yanked trillions of dollars from the market have returned.

USA Today: Sarbanes-Oxley law has been a pretty clean sweep

Sarbanes-Oxley world continues to turn. And although many claim that it is spinning out of control, signs are beginning to indicate that a move to a more stable and rational environment is pending. Let me highlight just a few of the reasons for the roller coaster ride and some of the relief that is on the way.

Real or perceived drastic events result in drastic measures. The nine?month period that ended with the passage of the Sarbanes-Oxley Act of 2002 was no exception. A quick look at the major headlines during that time tells the tale of a crisis in the making.

• Nov. 8, 2001 — Enron restates earnings for past five years, reports $586 million in losses
• March 27, 2002 — Adelphia says $2.3 billion borrowed by Rigas family not on books
• June 4, 2002 — Tyco CEO indicted on tax evasion charges
• June 12, 2002 –ImClone CEO Samuel Waksal arrested on insider trading charges
• June 25, 2002 — WorldCom admits to inflating earnings by $3.8 billion

LocalTechWire: As the World Turns, Businesses Continue To Struggle With Impact of Sarbanes-Oxley

In response to Enron, WorldCom, Tyco, Peregrine and some of the biggest accounting firms playing a shell games with the corporate books, Congress enacted The Sarbanes-Oxley Act in 2002.

Today Siemens, based in Munich, Germany is being eyed for over 500 million dollars worth of bribes to public officials in Asia, Eastern Europe and Africa and other questionable payments by the company which occurred without top managements knowledge, according to the International Herald Tribune.

In Germany it is a crime for corporate officials to bribe a public official. It is a crime in most modern countries to report embellished earnings or hide essential facts to their investors. Essentially, Sarbanes-Oxley and every other codification of bad conduct cannot prevent anyone hell bent on greed from devising a plan of deception.

American Chronicle: Sarbanes-Oxley Can’t Beat Culture of Good Old Fashion Greed