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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: RR who wrote (46267)	1/14/2002 12:22:46 PM
From: stockman_scott	Respond to of 65232

An interesting excerpt from Barron's on Enron... ____________________________________ This is the company, remember, that used quite devious schemes to gussy up its financial condition and deceive investors so as to kite the price of its stock, schemes that, at the same time, obscenely enriched executives. When the jig finally was up last fall, a mere $586 million of four prior years' earnings disappeared like the vapor they actually were. This is also the company that loaded up its employees' retirement account with its own shares and then, just as the truth about its dreadful finances was outing and the stock went into a death spiral, prohibited employees under 50 from selling the stock; those suddenly involuntary shareholders were left, alas, with splattered nest eggs. Yet, in those delicate days, Enron saw no reason to discourage 29 top dogs from cashing out to the tune of more than $1 billion. Enron's rotten luck was that the world didn't quake at the prospect of its going under, and the Fed, which so solicitously had arranged the bailout of Long-Term Capital Management, told Mr. Lay to get lost. As to Enron's auditors (now its ex-auditors), Arthur Andersen, already under the regulatory gun, it revealed last week that it had destroyed a heap of Enron documents, both paper and electronic. It started to deep-six the records in September and diligently pressed on with its purge after Enron caved. So admirably efficient was the demolition of files that one must wonder whether Andersen, in pursuing the task, enlisted the services of its former client Waste Management. Destruction of documents -- whether deliberate or merely the act of overzealous or undersensitive employees -- aside, the Andersen-Enron connection raises larger questions about the relationship between corporations and their auditors. For one thing, Enron's chief accounting officer and chief financial officer were both Andersen alumni; that sort of career change, which we suspect is rather common, seems a little too fraught with unpleasant possibilities for our taste. For another, Andersen was both auditor and consultant to Enron, a dual role that strikes us as dangerously loaded with potential for conflict of interest. And, of course, where, oh where, as the calamity was taking shape, was Enron's board, most especially those so-called independent directors? Why, they were doing just what boards of directors are supposed to: smiling, scarfing down the lunches served after the quarterly meetings and otherwise enjoying their lush sinecures. It strikes us that maybe the worst thing that ever happened to the concept of boards as watchdogs for shareholder interests was the invention of liability insurance for directors.