The Enron Scandal
A National Debacle that
Reflects Systemic
Problems
in Our
Political-Economic System
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Fun
& Games at Enron:
"Kinder [former President of Enron]
receiving a budget report from then-President Jeff Skilling,
who played himself [in a January 1997 bar party skit].
When the pretend Kinder expressed doubt that Skilling could
pull off 600 percent revenue growth for the coming year,
Skilling described how it could be done.
"We're going to move from mark-to-market accounting to
something I call HFV, or hypothetical future value
accounting," Skilling joked as he read from a script. "If we
do that, we can add a kazillion dollars to the bottom line."
Skilling abruptly resigned from Enron in August 2001 before
news of its troubles surfaced, and has professed ignorance
about much of what went on under his watch."
12/16/200, Associated Press |
The Roll
Call
Enron: Players & Lies
Time Magazine Persons of the Year 2002
I have learned one very sad
lesson in American business- loyalty and integrity are rare
in the marketplace- only naked ambition and greed seems common. It can be
hypocritically couched in
flowery words, even religion, but the bottom line is making
money and more money... In the end however, the unjust will have
their just desert. For in old age, money is no consolation on one's deathbed-
when all one's past memories will float by and the pain
inflicted felt a thousand times. See also an article by
Dr. Paul Wong of the International Network on Personal Meaning:
"Lessons from Enron- Corporate Culture Matters!
Senate Investigates
the "Teapot Dome" Scandal
"The
Framers of the Constitution envisioned a system of government
whereby each branch of government would watch the other in a balance
of power system. The one development the Framers did not anticipate
was a system in which all three branches of government have become
unduly influenced by what is today the dominant power in American
politics: unaccountable global corporations. In that situation, the
citizens of the country must step in and reform the process. A first
measure in that process is a thorough and honest investigation which
will reaffirm Felix Frankfurter's maxim - that underpins the
Securities Laws of the United States -- that
"sunshine is the best
disinfectant.""-
Carl J. Mayer, from his 1/21/2002 press statement for the Citizens
Agenda for Reform/Enron Press Conference, See Also:
http://www.c-span.org/enron/;
Representative
Henry Waxman's Enron Tip Line for Enron Whistleblowers;
Bigger than Enron- PBS Frontline Report.
Arthur Andersen Found Guilty of Obstructing Justice; 6/15/02
Former Rite Aid Officials Indicted:
U.S. Says Executives Inflated Profits, Diverted Funds; 6/21/02
WorldCom Says Its Books Are Off By $3.8 Billion
U.S. Criminal Probe Reported; 6/26/02
Xerox Restates 5 Years of Revenue
'97-'01 Figures Were Off by $6.4 Billion; 6/28/02
Bush SEC Delay Called 'Mix-Up'
Under Scrutiny, White House Shifts Blame for '91 Late Filing;
7/3/02
U.S. Corporate Watchdog Served At Troubled Firm:
Providian Settled Allegations of Fraud; 7/12/02
Unconventional Transactions Boosted AOL Sales
Amid Big Merger, Company Resisted Dot-Com Collapse; 7/18/02
Ex-broker
says Salomon gave IPOs to CEOs to win business; 7/18/02
|
Players |
Lies |
|
Arthur
Andersen, LLP |
Enron's financial statements were fair,
accurate and independent. Destruction of
Enron/Andersen documents was due to a rogue Andersen employee
who did not know he was committing a crime.
See 5/14/02 Washington Post, article by Carrie Johnson,
"Enron Auditor Admits Crime: Andersen's Duncan Ordered
Shredding."
There is no conflict of interest between audit and management
advisory services. Audit results are seldom negotiated
with the management of the company being audited.
What's a little (half billion dollar)
overstatement in earnings and 1.2 billion
overstatement in shareholder equity? 50 million
dollar errors are "immaterial" and do not warrant restating
financials.
"See no SPEs (Special Purpose Entities),
Hear no SPEs." Regarding SPE's and other corporate "tricks"
used for the sole purpose of
keeping debts off the balance sheet and artificially inflating
stock prices (of stocks sold by insider top executives at
their peak value), see: Washington Post 2/1/02
article by David S. Hilzenrath and Albert B. Crenshaw,
"Firms Face Demand for Openness No One
Knows How Much Business Is Off the Books."
Fully cooperating with Enron, Congressional,
SEC and Justice Department investigations. |
|
Bush and
His Cabinet |
Didn't know about Enron collapse before
it was public and didn't dump Enron Stock as a result.
Bush hardly knew Ken Lay. Didn't have energy policies influenced by Ken Lay
and other Enron officials. See: Washington Post, 2/27/02:
"Judge Orders Release of Energy Task Force Records."
Actively involved conservation and consumer groups in
developing energy policy. See Washington Post,
3/26/02:
"Energy Contacts Disclosed
Consumer Groups Left Out, Data Show," and
NRDC
review of the work of the Cheney Energy Task Force.
Enron's failure is not different in kind from other
catastrophic business failures. Accounting industry can
police itself without oversight. No need for a Special Independent
Prosecutor. Accounting & energy industry lobbyists/top
executives don't/didn't influence
appointments to the SEC and FERC. Enron executives gave Bush 700K
because they liked him (but hardly knew him).
The SEC is aggressively investigating insider
trading allegations by Bush and the Bush cabinet.
The Enron collapse
will not increase pressure for real campaign finance
reform. It's not lucrative to work for who you once
regulated/audited, or regulate who you once worked for (the revolving
door).
Energy
deregulation had no impact on the California energy
"crisis" and the downfall of Enron. Army
Secretary Thomas White had no knowledge and/or
participation in Get Shorty, Fat Boy, Death Star,
Ricochet and other strategies used by the Enron
wholesale energy group to artificially raise and
manipulate energy prices during the California
2000-2001 energy crisis. |
|
Congress |
Large hard and soft money contributions to over 70 members of Congress
didn't influence laxness in energy trading regulation, energy
deregulation and lax SEC accounting industry regulation. Wasn't
aware of problems with 401K/ESOP tax/pension regulation and abuses.
Republican Senator Phil Gramm (and spouse) are going to be unscathed
by the investigations. Lie: Corporate tax laws are
fair. Truth: Enron didn't pay federal corporate income
taxes for four of the last five years- corporate welfare.
Truth: Congress has backed
off of strong accounting industry regulation
because of pressure from Accounting industry
lobbyists. See 5/12/02 Washington Post article by
Jackie Spinner,
"Sullied Accounting Firms Regaining Political
Clout." |
|
Enron
Enron: History of
Human Rights
Abuse in India |
Upheld the interests of Enron's stockholders and
employees- first. Did not lie about off shore accounts
and the company's financial condition to employees and
stockholders. Created a positive, humble and ethical business environment
free from corporate greed.
Put the interests of rank and file over senior management. Enron's
Executives (corporate cowboys) didn't dump over a billion dollars of Enron
stock prior to the collapse and make huge sums.
"Independent" Outside/Inside Corporate Directors,
Board Members and
top executives of Enron fulfilled their
fiduciary duties to
its' shareholders and were free from conflicts of
interest. Transactions between SPEs/partnerships
and Enron were at arms length and not tantamount to
embezzlement
by Enron corporate officers and top
executives.
Jeffrey K.
Skilling, former Enron CEO and Harvard Business
School graduate knew nothing about the
illegalities in Raptor and other partnerships- he
was an innocent victim.
Changing pension plan administrators when
Enron stock was under pressure (sinking) was an exercise in fiduciary
responsibility and not a deliberate attempt to keep employees
from dumping Enron stock. Didn't attempt to buy any politician,
journalist, bureaucrat, etc. who could influence energy
rules or regulations. See: 2/10/02 Washington Post
article by Joe Stephens:
"Hard
Money, Strong Arms And 'Matrix'-
How Enron Dealt With Congress, Bureaucracy"
Enron was a humane company that did not engage in
human rights abuses.
Enron Corp. did not manipulate the
California electricity market with such maneuvers
as transferring energy outside the state to evade
price caps and creating phony "congestion" on
power lines.
See 5/7/02 Washington Post article by Peter Behr:
"Papers Show hat Enron Manipulated Calif. Energy
Crisis." |
|
Wall Street and the Banks |
Didn't know that Enron's primary (and only
profitable) business was
trading unregulated derivatives, not energy production
and other "core" business areas. Credibility and
transparency of corporate financials statements
were frequently called into
question. Enron collapse will have little effect on faith in our
capital markets and is a unique case. Analysts seldom have conflicts of interests
with and financial relationships to the company's
they rate/trade. Analysts always disclose such conflicts.
The "Wall" is never pierced.
Citigroup, J.P Morgan Chase and
others did not help Enron disguise loans as
commodity trades, thus helping Enron keep millions
of dollars of debt of its books .
See 7/23/02 New York Times article by Richard A.
Oppel Jr. and Kurt Eichenwald, "Citigroup Said to
Mold Deal to Help Enron Skirt Rules." |
The above is not to belittle the integrity of the many ethical
individuals who work in academia, private industry and government. The
challenge is for them is to turn their good intentions into
lasting and constructive political and economic change. |
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