The bad news for investors is that given the scandals of the last year, only justice will bring higher stock prices. And that will take time.

But there's good news, too. After badly overreaching in the Andersen debacle, the Justice Department has acted reassuringly regarding WorldCom. And the speed with which the feds have brought charges in this case suggests perhaps an era of more ethical behavior isn't so far off.

Investors are living in a period without parallel. Sure, every downturn saddles some investors and wage earners with heartbreaking setbacks. But rarely has there been a group that benefitted as disproportionately at regular people's expense as the corporate insiders of the current age.

At no other time have so many large corporations faced the wrath of regulators and law enforcement agencies. And when was the last time so many high-level executives were being arrested?

No Rally This Time

The latest to be cuffed, of course, are WorldCom's former financial chief, Scott Sullivan, and ex-controller David Myers. The two surrendered to the FBI in New York Thursday after being hit with federal fraud and conspiracy charges.

It is alleged that, when at WorldCom, they were involved in moves aimed at hiding $3.8 billion of expenses. The company last month filed for bankruptcy protection after the decline of its shares wiped out billions of dollars in shareholder value.

Thursday's arrests failed to set off a broad market rally, in contrast to last week's much-ballyhooed apprehension of Adelphia founder John Rigas. In part, that may be because the market senses that it was WorldCom's weak business, not the financial follies, that contributed most heartily to the company's collapse.

But progress in the Adelphia and WorldCom cases strongly suggests that the Justice Department, which is tasked with pursuing federal charges in securities fraud cases, is learning from earlier mistakes and that investors can indeed expect to see misdeeds punished.

The stakes are high. If the law enforcement authorities are too weak and fail to bring individuals to justice, investors will lose even more faith in the market. But if the authorities overstep their mark -- and indict whole corporations, for example -- the results could be even worse.

Book-cooking Maneuvers

Some observers contend that the relative simplicity of the alleged book-cooking at WorldCom may have pushed the feds to nab Sullivan and Myers as quickly as they did. The execs' booking of so-called line costs as capital costs rather than expenses struck many bookkeeping experts as an Accounting 101-type error, in contrast to the mind-boggling off balance sheet maneuvers that led to the collapse of Enron. Similarly, the charges against the Rigases recount a straightforward, easy-to-follow series of events.

But even if that's true, Thursday's developments in the WorldCom showcase the feds' desire to punish alleged perpetrators rather than innocent bystanders. This is an important distinction.

In the Andersen case, the government had an opportunity to demand lasting financial reform and essentially remake the accounting profession. Instead, prosecutors chose to put Andersen out of business for the sake of grabbing a few headlines. Meanwhile, earlier and more complicated scandals such as the collapse of Enron have failed to generate even a single high-profile arrest. This remains a sore point with many observers.

Multiple Probes

This question now hangs over the multiple probes into matters such as the role of Citigroup ( C) and J.P. Morgan ( JPM) in Enron's collapse, as well as the accounting aggression at AOL Time Warner ( AOL), Qwest ( Q) and Dynegy ( DYN).

But regardless of how straightforward the case appears to be, few would have guessed the government would have charged anyone in the WorldCom case, which broke barely a month ago, by the first day of August. This suggests the feds are faster and more focused than critics have suspected.

In the end, firmwide prosecutions may please the hang-'em-and-flog-'em crowd, as well as deflect the Democrats' complaint that the Republicans are soft on corporate crime. They may even frighten companies into behaving better.

But what happens if the government loses any future firmwide cases, just as nearly happened with Andersen? The result could mean guilty people going free and the government losing credibility, which lead to a further disillusionment with the justice system in the country and a feeling among investors that the cleanup is losing its momentum. And, from an ethical point of view, it's just not fair if thousands of innocent people lose their jobs because of the malfeasance of a few.

Justice only works if it's precise. Sentences must match crimes. Defendants must be real people, not whole companies. After Andersen, the feds seem to understand that. That's bad for Jeff Skilling, Andrew Fastow and Joe Nacchio, but it's good for stock prices.

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