NEW YORK (CNN/Money) - Financial scandals at Enron, WorldCom and other companies forced a disturbing conclusion this year: the late '90s bull market was built partially on fraud.

But the deepest legacy of 2002, with its revelations of falsified corporate results and executive indictments, may be the damaged investor confidence that could take years to restore.

Andrew Fastow

A money-making culture that turned Alan Greenspan, Abby Joseph Cohen and Jack Welch into financial heroes vanished this year, replaced by handcuffed chief financial officers, humbled equity analysts and a stock market headed for a third year of declines.

The occurrence of new scandals in 2003, and investors' ability to forget the old ones, could help decide whether stocks endure their first four-year losing streak since 1932.

"This year is almost unmatched in history," said Lynn Turner, a former chief accountant for the Securities and Exchange Commission, who likens the year's scandals to the corruption that emerged from the 1929 stock market crash.

This year brought the unraveling of Enron, the $104 billion bankruptcy of WorldCom and charges that CEOs at Tyco International and Adelphia Communications looted the companies.

Arthur Andersen, which signed off on Enron's and WorldCom's books, was the only firm convicted of obstruction of justice related to the scandals, and the once proud accounting giant is now prohibited from auditing public companies.

Turner links this year's deceptions to the roaring bull market that preceded them. During the boom years, he says, investors ignored many apparent conflicts of interest that have now returned to haunt the market.

"When people get successful, when people find that they are making a lot of money, it tends to bring with it certain things like arrogance and greed," Turner said. "There was a suspension of disbelief in the 1990s. No one wanted to roil the waters."

Turner has a point. Arthur Levitt, who ran the SEC when the Dow Jones industrial average peaked above 11,700 in January, 2000, challenged accounting firms to split their consulting and bookkeeping units to keep auditors conflict-free.

Opposed by the accounting industry and mostly ignored by the public, Levitt's views gained traction amid 2002's financial restatements at WorldCom, Qwest Communications, Global Crossing, Bristol-Myers Squibb and elsewhere.

Likewise, it was long argued that analysts' stock research at big securities firm was tainted by the investment banking fees their employers sought and earned.

Scott Sullivan

But it wasn't until late this year that Sallie Krawcheck, dubbed "The Last Honest Analyst" by Fortune magazine, was hired by Citigroup (C: Research, Estimates) to help split its equity research from its investment banking and underwriting activities.

By trying to win penalties from Wall Street while changing the way brokerage houses conduct stock research, pay analysts and appease clients, Eliot Spitzer, the New York State Attorney general, became the year's most visible securities regulator.

And for years, editorials argued that politicians could not fairly regulate companies like Enron that funded their campaigns. But this year's growing outrage over money and politics led President Bush on March 27 to sign into law the most significant changes to campaign finance laws in a generation.

It was a year of alleged villains. Authorities arrested the former chief financial officers of Enron and WorldCom, who were later indicted. Next year could bring trials of the two -- Andrew Fastow and Scott Sullivan -- along with Dennis Kozlowski, accused of bilking Tyco International of hundreds of millions when he ran the company, and John Rigas, charged with looting Adelphia Communications, the cable TV company he founded.

Dennis Kozlowski

The four men have all pleaded not guilty.

Samuel Waksal, the former CEO of ImClone Systems (IMCL: Research, Estimates), pleaded guilty in October to securities fraud charges related to insider trading and faces sentencing next year.

The e-mails of Jack Grubman, the former Salomon Smith Barney telecom analyst, became a lightening rod for critics who say stock research was tainted by pressure to lure investment banking business.

Martha Stewart's story may have generated the most attention. But from a financial standpoint, her alleged insider trading was small, grossing about $240,000 for a businesswoman Forbes magazine says is worth $650 million.

Stewart, the CEO of Martha Stewart Living Omnimedia (MSO: Research, Estimates), denies she sold nearly 4,000 shares of ImClone with insider knowledge that the company's cancer drug was about to suffer a regulatory setback.

Down 14 percent in 2002, the Dow Jones industrial average is closing in on its first three-year losing streak since 1941. How much the scandals led to 2002's losses is impossible to know during a year of scant economic growth, a stalled job market and sluggish corporate profits.

But for all the gloom, the market has enjoyed a solid year-end run; the Dow is up 18 percent since Oct. 9.

Regulators may have helped. Congress crafted the Sarbanes-Oxley bill that Bush signed into law in July. Among other things, the legislation created an accounting board to police the industry. For its part, the SEC required CEOs at more than 700 companies to swear by the accuracy of their financial statements.

And a handful of companies including Coca-Cola (KO: Research, Estimates) have agreed to expense stock options, a perk critics say gives executives incentive to falsify profits.

This year the financial myth-making, which could confer omniscience on some people, faded.

Federal Reserve Chairman Alan Greenspan, once lauded for steering the country out of a financial crisis in 1998, was criticized this year for not deflating the technology stock bubble sooner.

Divorce papers filed in the fall turned Jack Welch, the imperial CEO who built General Electric (GE: Research, Estimates) into the world's most-valuable company, into a symbol of corporate excess.

Abby Joseph Cohen, the Goldman Sachs (GS: Research, Estimates) strategist whose forecasts once moved markets, can no longer do so.

The most powerful person in finance this year was Bill Gross, who as manager of the $66 billion Pimco Total Return bond fund, buys the kind of securities that people run to for safety.

Gross, whose fund is up 8.48 percent this year, is downbeat about stocks, predicting in September that the Dow could fall to 5,000. "Earnings," Gross wrote at the time, "have been phonied up for years."

After this year, many investors may agree.