Businesspeople and corporations are at greater risk of criminal liability than ever before.

A wave of corporate fraud starting with the 2001 collapse of Enron Corp. has led to potent new weapons for prosecutors such as stiffer financial penalties and prison terms. The Securities and Exchange Commission has more money and manpower to pursue civil-fraud cases.

Once rare, the threat of criminal indictment of corporations themselves has become more common as the Justice Department employs what are known as deferred-prosecution agreements. A list of blue-chip American companies have submitted to these pacts, including American International Group Inc., Monsanto Co. and Time Warner Inc. Under the arrangements, the government charges the company with criminal behavior but puts the prosecution on hold in exchange for a promise of reform. At an agreed-upon date, the potential charges expire. Since 2003, there have been at least eight such pacts.

Business wrongdoing, and the government's response, comes in waves. But this crackdown has gone further than any in the past. It has fundamentally changed the terms of engagement between the authorities and their corporate quarry.

The Justice Department says that since the formation of a special task force in mid-2002, it has charged more than 900 individuals in more than 400 corporate-fraud cases. So far, more than 500 of those defendants have been convicted, the department says, but it couldn't provide the number of acquittals. Comparable statistics weren't kept before 2002, but prosecutors and white-collar defense lawyers agree that many more cases are being brought.

Prosecutors' latest victory came Friday, when former Tyco International Ltd. Chief Executive L. Dennis Kozlowski and another top executive were convicted of larceny and securities fraud in the pillaging of millions of dollars from the company. That case was brought by Manhattan District Attorney Robert Morgenthau. In a separate case, the Justice Department is threatening the criminal indictment of KPMG LLP for marketing unlawful tax shelters. Trying to avert the charges, the Big Four accounting firm did what many companies have been doing: try to shift blame to individuals. KPMG publicly apologized on Thursday and admitted that former partners had acted illegally. Also last week, the U.S. attorney's office in Newark, N.J., indicted two former Bristol-Myers Squibb Co. executives and announced a two-year deferred-prosecution agreement with the company to settle charges of fraudulent accounting.

The crackdown on white-collar crime has suffered some setbacks in recent weeks. The Supreme Court tossed out the criminal conviction that sank accounting giant Arthur Andersen LLP. A former Bank of America Corp. stock broker was found not guilty of improperly trading mutual funds in a high-profile case brought by New York Attorney General Eliot Spitzer. In Birmingham, Ala., a jury examining charges against Richard Scrushy, the former HealthSouth Corp. chief executive accused of orchestrating a massive fraud, has deliberated for 16 days without a verdict, a discouraging sign for prosecutors. At the SEC, William Donaldson, the chairman who approved the agency's tougher stance, is being succeeded by California Rep. Christopher Cox, a prominent advocate for business.

Still, the attack on corporate wrongdoing shows no sign of abating. With the public suspicious of big-business behavior, prosecutors who might have ignored white-collar crime as too complex and time-consuming, now see they can score political points by going after powerful executives.

"The government's focus on corporate crime is now self-sustaining," says David Pitofsky, a former federal prosecutor and now a criminal-defense attorney in New York. "As more prosecutors and SEC lawyers have worked on complex corporate-fraud cases in recent years, they've acquired the necessary skill set. Where some used to be intimidated by these cases, now they go looking for them."

More of those lawyers are staying in government longer at least in part because Congress has given the SEC authority to award more merit raises. Lawmakers also allowed the agency to expedite hiring, and it has added 850 positions since 2002. Its overall budget in fiscal 2004 was $842 million, up from only $483 million two years earlier.

Faced with this environment, companies that might once have resisted government investigations now scramble to cooperate. Corporate directors in particular have grown leery of appearing to defend any sort of impropriety. For one thing, they're more worried about their own pocketbooks: Earlier this year, former directors of WorldCom Inc. agreed to personally pay $24.8 million to settle a shareholder class-action lawsuit against the telecommunications giant. Former Enron board members agreed to pay $13 million to resolve a separate shareholder suit.

Critics, including defense attorneys, say the government's posture has made it difficult for companies to challenge an investigation -- even when they don't believe the conduct warrants sanctions. Companies essentially have no choice but to settle with the SEC and force executives to do the same.

"It's a lot like the scene in 'The Godfather' where Marlon Brando explains how he's going to make an offer they can't refuse," says Joseph Grundfest, a Stanford University professor of business and ethics and former SEC commissioner who is researching the government's growing power to force cooperation.

The new willingness in the boardroom to cooperate with government investigations is on vivid display in the case of the huge insurer AIG. Early this year, as state and federal investigators explored allegations that AIG's financial results had been improperly manipulated, the AIG board moved quickly to distance itself from Chief Executive Maurice R. "Hank" Greenberg, who had long dominated the directors.

Even as AIG hired outside lawyers to look into the allegations, directors put their audit committee in charge of a separate inquiry on their behalf. That gave the committee's outside attorney an influential role and full access to regulators, according to people familiar with the situation.

In March, while Mr. Greenberg was telling the board that the various investigations were inconsequential, Richard I. Beattie, the audit committee's attorney, was in frequent contact with Mr. Spitzer, the New York attorney general, and the SEC, according to people familiar with the matter. Through those discussions, Mr. Beattie learned that Mr. Spitzer was zeroing in on Mr. Greenberg's involvement in one particular dubious transaction and that the prosecutor had evidence from phone recordings. In mid-March, directors forced Mr. Greenberg to relinquish his title as chief executive.

As investigators uncovered more questionable deals, some directors had secret conversations with Mr. Spitzer to test the accuracy of what Mr. Greenberg was telling them. Mr. Spitzer made clear that he would indict AIG if Mr. Greenberg stayed on in the midst of a struggle over documents. The board then forced Mr. Greenberg to retire from the chairman's post as well. He lambasted the directors for acting based on a "one-sided review" and without his input.

In May, Mr. Spitzer filed a civil lawsuit in New York state court against AIG, Mr. Greenberg and the company's former finance chief. The suit accuses them of employing accounting tricks to improve quarterly financial reports. AIG has said that it hopes to settle the case and that it is cooperating with continuing investigations by the SEC and Justice Department. Mr. Greenberg will defend himself against the allegations, a spokesman said. (The AIG deferred-prosecution agreement stemmed from an unrelated case.)

Traditionally, companies went on the offensive in response to government investigations: prepping employee-witnesses to offer only minimal information, filling the room with aggressive lawyers and dumping boxes of documents on government staff attorneys the night before a deposition.

In high-profile cases like those in the late 1980s involving the now-defunct Drexel Burnham Lambert, the investment bank mounted a publicity campaign lauding its star, Michael Milken, as "a national treasure." He eventually served two years in federal prison on racketeering and fraud charges.

The fall of Enron, and a wave of ensuing corporate scandals, put an end to all of that. In 2002, Congress passed the Sarbanes-Oxley law, which requires executives to take responsibility for their financial books and tighten oversight of accounting. The law boosted civil and criminal penalties for corporate wrongdoing. It also created incentives for companies to identify bad-apple employees and help the government go after them. A federal Corporate Fraud Task Force was created to improve cooperation among government agencies. Soon, regional U.S. attorneys began asking the SEC to send them cases for possible criminal prosecution, and the Federal Bureau of Investigation showed more interest in such probes.

On Jan. 20, 2003, then-Deputy Attorney General Larry Thompson upped the ante with a 10-page memo making clear to U.S. attorneys that they should consider indicting a corporation itself if its executives and directors didn't swiftly and voluntarily cooperate with federal investigators. Mr. Thompson encouraged deferred-prosecution agreements, an idea borrowed from local prosecutors who suspend drug prosecutions of first-time offenders who agree to seek treatment and obey the law.

In a corporate deferred prosecution, the company agrees not to contest a list of alleged violations. If it then behaves to the prosecutor's satisfaction for a specified period the charges are set aside. During that time, however, the company remains vulnerable to being swiftly convicted of the violations. An independent monitor, chosen by prosecutors and paid by the company, is appointed to report any problems to the government.

Deferred prosecution is the way Computer Associates International Inc. fended off an indictment last year. Federal prosecutors in Brooklyn, N.Y., had begun in early 2002 to look into accounting practices at the Islandia, N.Y., software company. According to the government, the investigation ran into high-ranking resistance, with some employees coached to mislead investigators.

In April 2004, the government threatened to indict the company if it didn't replace top management, attorneys on both sides say. An indictment would have been devastating to the company's already-tarnished reputation, and a finding of guilt would have precluded CA sales to the federal government, a major customer.

Two days later, Sanjay Kumar, the company's longtime chairman and CEO, stepped down. In September 2004, he was indicted along with the company's former head of sales on charges of securities fraud and obstruction. Trial dates haven't been set. On the same day as the indictments, CA entered into an 18-month deferred-prosecution agreement related to allegations of accounting and securities fraud and agreed to pay $225 million into a fund for investors.

Tim Coleman, a senior Justice Department lawyer and its representative on the Corporate Fraud Task Force, says Computer Associates "is a good example of a case in which a deferred-prosecution agreement, combined with the indictment of individual wrongdoers, was used to send a strong deterrent message, recover significant compensation for victims, and ensure the company's continued cooperation, all while giving the organization a chance to reform."

In some cases, companies are going so far as to provide authorities with a guide to past fraud that prosecutors then use to bring civil and criminal charges. In February 2003, after the fall of Enron and WorldCom, Dutch supermarket chain Ahold NV contacted federal authorities. Ahold wanted to confess that its U.S. Foodservice operation had fraudulently inflated payments it received from food manufacturers.

To avoid the sort of corporate death sentence that came with the indictment of Enron auditor Arthur Andersen, Ahold launched an internal investigation of all 18 of its multinational units. It fired 39 executives and managers and made even European employees available to U.S. investigators. Four former U.S. Foodservice executives were hit with an array of criminal and civil allegations. Two have pleaded guilty, while the others are fighting in court.

In exchange for the company's cooperation, the government allowed Ahold to settle civil fraud charges in October 2004 with only a promise of tighter internal oversight, and no fine. A government lawyer involved with the case says Ahold saved the SEC "years of work."

In some cases, the SEC is going after executives for conduct that only a few years ago might not have led to any government action. At Time Warner, three finance executives agreed in March to settle civil charges that they played a role in improperly recognizing $400 million in revenue on a questionable transaction with Bertelsmann AG. The SEC had acknowledged that the executives, including the chief financial officer, hadn't orchestrated the transaction and were misled by subordinates. But the agency contended in a civil administrative complaint that the executives should have been more vigilant and charged with them with causing Time Warner to file misleading annual reports.

During negotiations, SEC lawyers made it clear that the three men could face more severe civil-fraud accusations, according to attorneys familiar with the situation. Time Warner urged the executives to settle, according to the attorneys. The trio did settle, without admitting to or denying the less severe allegation. They kept their jobs, and their only punishment was a government order that they cease and desist from improper conduct.

In a related case, the SEC in March hit Time Warner with a $300 million fine, the government's second-biggest in history. The agency said the company had overstated advertising revenue and aided and abetted three other securities frauds. Only three months earlier, Time Warner entered a deferred-prosecution agreement with the Justice Department in connection with criminal charges concerning the relationship between the company's AOL unit and PurchasePro.com. A Time Warner spokeswoman declined to comment.

In some cases, the threat of substantial prison time has become a more real danger for executives. The U.S. Sentencing Commission in 2003 significantly increased potential prison time for corporate wrongdoers. An officer of a publicly traded company who defrauds more than 250 employees or investors of more than $1 million can now receive a sentence of more than 10 years in prison -- almost double the previous penalty. Longer sentences apply for larger dollar amounts. Given that major corporate frauds often involve hundreds of millions or more, the potential now exists for life sentences for former executives.

Federal prosecutors in San Diego hammered that point home in the October 2004 criminal arraignment of eight former Peregrine Systems Inc. executives and three others who worked with the software company. All were accused of participating in a conspiracy to inflate Peregrine's financial results. During the hearing in federal court, the defendants were reminded that in theory, they could face life terms because prosecutors estimated shareholders had incurred a loss of some $4 billion in equity.

The company itself hasn't been indicted. One of the Peregrine executives has pleaded guilty and awaits sentencing. Trial dates for the others haven't been set.

Some companies that do fight the government assert that they are punished for defending their legal rights. Last year, settlement discussions between Raymond James Financial Services and the SEC fell apart after the firm objected to standard settlement language saying that it wouldn't admit to or deny the SEC's "findings." The company and two of its executives were being accused of failing to supervise an employee who bilked investors out of $16.5 million and was sentenced to 15 years in prison.

The SEC said in a legal brief that the firm's failure to stop the employee's actions "borders on complicity with, if not ratification of" his conduct. Raymond James was prepared to settle a civil "failure to supervise" allegation but objected that the word "findings" in the settlement could expose it to liability in private suits. Months-long talks broke down, and the SEC staff, armed with new information gathered from its investigation of the dishonest employee, told the company it would recommend that the commission file more serious fraud charges against Raymond James.

On July 21, 2004, Thomas James, the firm's president and CEO, complained in a letter to the five-member commission that his company was being made "to pay an extraordinary price" for challenging the enforcement staff. But the commission supported its staff's recommendation and filed fraud allegations against the firm in October. An administrative law judge is expected to rule on the case this summer.