A Roster of Awards Better Off Unawarded
By GRETCHEN MORGENSON
Measured by its stock market action
alone, 2001 was clearly a
disappointment. But judge the year instead
by the audacity of its corporate schemers,
Washington scalawags and Wall Street
rogues, and 2001 becomes tough to top.
Although most investors probably prefer to
look forward and not back, the end of the
year is always a splendid time to review with
fondness the players and the moves that
dominated the business stage. So it is time
again to announce the Augustus Melmotte
Memorial Prizes, named for the stock manipulator and arriviste at the heart
of "The Way We Live Now" by Anthony Trollope. Mr. Melmotte, a man of
uncertain fortune and lineage who nevertheless rose to the top of London
society in the late 1880's, met his downfall when he was caught selling shares
to investors in a railroad company that existed only in his imagination.
Come to think of it, didn't Enron (news/quote), the year's grandest corporate
disgrace, ultimately exist more in the imagination of investors than in reality?
Yes, but even Mr. Trollope, a master of the fictional fantastic, could not have
dreamed up the Enron story.
Although the wealth-wrecking crew at Enron could walk away with every
one of the Melmotte prizes this year, there were others whose actions should
be noted and appreciated.
Here are the prizes and their winners.
THE WHAT I DON'T KNOW CAN HURT YOU AWARD
To Kenneth L. Lay, the chairman of Enron, who presided over the loss of
$61 billion in investor wealth in 2001 and one of the quickest corporate
collapses ever. Claiming to be a somewhat bewildered bystander, Mr. Lay
told a reporter, "You're getting way over my head," when asked about
transactions Enron made with mysterious partnerships set up by company
insiders. Mr. Lay seemed happy to let his underlings act without interference,
a management style that hereafter may be known as Laysez-faire.
THE I ALSO HAVE A BRIDGE TO SELL YOU AWARD
To Jeffrey K. Skilling, the architect of Enron's rise to stock market stardom
but a man who takes no responsibility for its spectacular fall. Mr. Skilling,
Enron's chief executive for a six-month period that ended in August, has said
he knew nothing about the off-balance-sheet partnerships set up by Andrew
S. Fastow, Enron's chief financial officer, which benefited Mr. Fastow but
helped bring down the company. Mr. Skilling said he left his Enron post for
personal reasons he declined to specify. Mr. Lay was more forthcoming; he
said the reasons were "things with fairly short time fuses on them." Hmm.
THE HEADS I WIN, TAILS YOU LOSE AWARD
To Andrew S. Fastow, the former chief financial officer at Enron, who
pocketed more than $30 million from the behind-the- scenes partnerships he
set up as vehicles for the company's trading businesses. While the
partnerships enriched Mr. Fastow, they made paupers of Enron
shareholders, who were ultimately on the hook for some of the partnerships'
obligations.
A TURNAROUND IS MORE THAN TALK AWARD
To Gary C. Wendt, who since arriving at Conseco (news/quote) as chief
executive 18 months ago has told investors repeatedly that the company's
revival is just around the corner. Most of his forecasts, made in folksy
memoranda in which he attacked company doubters, have not transpired.
Shares of Conseco, which rose 17 percent when he was hired to save the
company, have lost almost 70 percent of their value this year.
THE ONLY THE LITTLE PEOPLE PAY TAXES AWARD
To Republican lawmakers who actually voted to repeal a tax intended to
ensure that wealthy corporations pay something in income tax. Never mind
that — thanks to the tax treatment on stock options — some of the nation's
largest and richest companies paid little or no taxes in recent years. Icing on
this particular cake was billions of dollars in rebates to companies like I.B.M.
(news/quote) and General Electric (news/quote). Thankfully, this dumb idea
died, a victim of partisan bickering.
THE OFTEN WRONG BUT NEVER IN DOUBT AWARD
To Ron Barone, the research analyst at UBS Warburg who covered Enron,
or perhaps more accurately, who through it all was one of Enron's loudest
apologists. On Aug. 17, after analysts met with Mr. Lay, the Enron chief,
Mr. Barone told Bloomberg News: "Ken met with us to reassure us that
there is nothing wrong with the company. There is no other shoe to fall and
no charges to be taken." Less than three months later, one of the biggest
shoes in corporate history descended when Enron announced that it would
restate earnings for the previous four years, eliminating $600 million. A
believer until the bitter end, Mr. Barone waited until Nov. 28, when Enron's
shares had more value as wallpaper than as stock, to replace his "strong buy"
label on the stock with a "hold."
THE IT WAS FUN WHILE IT LASTED AWARD
To Henry Blodget, who will abandon his post as chief Internet analyst at
Merrill Lynch (news/quote) tomorrow, after all but 2 of the 18 stocks he
followed collapsed in a heap. A certifiable bull-market genius, Mr. Blodget
learned how unfun bear markets can be — and that worshipful investors who
hang on an analyst's every word are far preferable to the tediously litigious
sort who sued him and Merrill in July.
THE BALANCE SHEET DOES MATTER AWARD
To Jack Grubman, the telecommunications analyst at Salomon Smith Barney
who has lost investors so much money that he could give new meaning to the
term "Neutron Jack." His breathless buoyancy on the sector drove investors
into dicey telecom stocks. Now that many of his former darlings have
dropped dead, victims of too much debt that his firm helped to pile on, he
has taken a new approach. He now has a "neutral" rating on 16 of the 26
stocks he follows. But those who followed his advice are probably anything
but neutral on him.
THE SELLER BEWARE AWARD
To Henry Silverman, the chairman of Cendant (news/quote), who finds his
company once again pained by an accounting mess of someone else's
creation. This time, the accounting irregularities showed up at
Homestore.com, a real estate Internet site whose largest shareholder is
Cendant and on whose board a Cendant representative serves. The
affiliation began last February, when Cendant sold its Internet subsidiary,
Move.com, to Homestore, producing a $525 million gain. Now, Homestore
shares have stopped trading until the depth of the accounting faux pas is
known. Of course, the impact of Homestore's woes on Cendant will be
nothing like the nightmare that grew out of the company's purchase of CUC
International in 1997. That deal resulted in the restatement of three years of
earnings by Cendant — which had to deduct a total of $640 million that
prosecutors said was created out of thin air at CUC.
THE STYLE IS NICE BUT SUBSTANCE RULES AWARD
To Carleton S. Fiorina, the chief executive of Hewlett-Packard
(news/quote), who can spin with the best, but whose delivery of the goods, a
k a earnings, has been lacking. Even though she's one of the best C.E.O.
cheerleaders out there, if she fails to complete her planned merger with
Compaq Computer (news/quote), she may go to the showers a loser. |
