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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: Mephisto who wrote (398)	1/14/2002 8:08:25 PM
From: Mephisto	Respond to of 5185

"Rep. Henry A. Waxman (D-Los Angeles) said the calls show that the administration had advance word of Enron's collapse and did nothing to protect shareholders or employees." Excerpt from the article, "Auditor Says It Destroyed Enron Records " January 11, 2002 Los Angeles Times E-mail story See:http://www.siliconinvestor.com/readmsg.aspx?msgid=16908831 By RICHARD SIMON and JAMES GERSTENZANG, Times Staff Writers

To: Mephisto who wrote (398)	1/14/2002 8:12:31 PM
From: Karen Lawrence	Respond to of 5185

NEW YORK, Jan 14 (Reuters)-Last year was the worst ever for corporate defaults, as 211 companies worldwide defaulted on $115.4 billion of debt, credit rating agency Standard & Poor's said on Monday. Both totals are records. The old records were set in 2000, when 132 issuers defaulted on $42.3 billion of debt, S&P said. One hundred sixty-two of the defaulting issuers came from the United States, including bankruptcy energy trader Enron Corp., California Utilities Pacific Gas & Electric Co. and Southern california Edison, and a flurry of upstart telecommunications companies, S&P said. The default rate for "speculative-grade," or junk-rated, issuers surged to 8.57 percent last year from 5.68 percent in 2000, the highest since the 10.87 percent record set in 1991, S&P said. About 4 percent of all issuers--including those with "investment-graded" ratings--defaulted in 2001, matching the record set in 1991, S&P said. S&P expects the U.S. economy to bottom in the first quarter of this year, and that the default rate is likely to peak near 11 percent by the beginning of summer, before "trailing off" by year end. "In a typical cycle, defaults peak six months after and economic bottom," said Diane vazza, S&P's head of global fixed income research.

To: Mephisto who wrote (398)	1/14/2002 8:13:56 PM
From: Mephisto	Read Replies (1) \| Respond to of 5185

Hiding Sensitive Data Can Be Tough in a Digital Age "Not only can computer forensic techniques recover documents, but they can inform investigators when and how they were deleted," he said. "It is often possible to determine if a deletion is an innocent act pursuant to a corporate policy or if there is an ulterior motive." Even more remarkable, technical means exist to retrieve data that has been erased." January 14, 2002 The New York Times By JOHN MARKOFF SAN FRANCISCO, Jan. 13 - The modern task of successfully destroying electronic documents has become daunting enough to give Oliver North nightmares. Mr. North is the Marine officer who became notorious during the Reagan-era Iran-contra scandal after it was discovered he had tried to delete thousands of e-mail messages, only to discover that they had been retained on backup tapes and made available to Congressional investigators. The issue of the destruction and possible retrieval of electronic data burst into the news last week after Arthur Andersen & Company, the auditors for the Enron Corporation, said that the accounting firm had destroyed a "significant but undetermined" number of documents relating to Enron and its finances. The embarrassing acknowledgment set off new demands from Congress that Andersen produce a wide range of documents, including e-mail and other computer files for investigators. Today, Mr. North's efforts would be vastly more complicated because of changing computer technologies and the emergence of the Internet, which has ensured that there will be multiple copies of almost any electronic document. "Today documents aren't just stored. They're sent," said Mark Rasch, a former federal prosecutor who is vice president for cyberlaw at Predictive Systems (news/quote), a network security consulting firm based in Herndon, Va. Even though many companies have general procedural rules that require the periodic deletion of e- mail, he noted, messages can usually be recovered. "The sender and the recipient may have the message on their machine, in addition to the server where it was stored," he said. "Unless there is a tool used to remove it using military-grade technology, it can be recovered." Most computer-literate office workers now realize that simply deleting an e-mail message or moving a document onto the trash icon on their computer's desktop screen does not eliminate the data. That is because modern computers organize information by using file-system directories that point to physical areas on a disk drive where the data resides. "Deleting" the information usually only breaks the link between the directory and the data so that the original storage space can be reused in the future. To eliminate important data, some companies and individuals use software tools that try to "wipe" files from storage disks by writing random strings of 1's and 0's over the space where the files were stored. Others will use programs that "defragment" disks by moving information around on the surface of the disk so that data can be retrieved more efficiently, which can also write over old data. Or they can reformat the drives entirely. What most computer users do not realize, however, is that the world of computer forensics has made huge strides in recent years, and it is now remarkably difficult to hide data from a determined investigator. "Computer forensics is going to play an important role in recovering documents in the Enron case," said John Patzakis, president and general counsel of Guidance software, a company in Pasadena, Calif., that makes hardware and software used by law enforcement authorities as well as the Big Five accounting firms. Every action taken by a computer user leaves a telltale trail, he said, so the act of deleting documents can itself be revealing. "Not only can computer forensic techniques recover documents, but they can inform investigators when and how they were deleted," he said. "It is often possible to determine if a deletion is an innocent act pursuant to a corporate policy or if there is an ulterior motive." Even more remarkable, technical means exist to retrieve data that has been erased. It is possible to take a disk apart and use an electron microscope to read information from the individual magnetic spots on the surface of a disk that may have been intentionally erased, Mr. Patzakis said. Originally a tool of the intelligence world, this technique - which is costly - has been used successfully in big legal cases. nytimes.com

To: Mephisto who wrote (398)	1/14/2002 8:22:43 PM
From: Mephisto	Read Replies (1) \| Respond to of 5185

A Failure to Account "Mr. Pitt was a prominent Washington litigator who represented Arthur Andersen and other major accounting firms before being appointed to the S.E.C. by President Bush." Editorial The New York Times January 14, 2002 Harvey Pitt was recently quoted in Barron's as saying that "there is nothing rotten with the accounting profession." What makes the assessment alarming, instead of just laughable, is that Mr. Pitt is the chairman of the Securities and Exchange Commission. Mr. Pitt was a prominent Washington litigator who represented Arthur Andersen and other major accounting firms before being appointed to the S.E.C. by President Bush. We can only hope that the latest revelations in the Enron saga will prompt him to change his view and to take on a forceful role in regulating his former clients and protecting the integrity of financial markets. Even within the context of the Enron story, the disclosure by Arthur Andersen that it had destroyed "a significant but undetermined number" of documents relating to its work for Enron was breathtaking. Yet it was only the latest in a series of betrayals of the public trust by major accounting firms. Enron may have been deceitful in recent years, using off-the-books partnerships to exaggerate revenues and hide debt. It was Arthur Andersen, however, that signed off on the energy trading company's deceptive financial reports. Andersen's relationship with Enron has long been cozy, and its eagerness to peddle profitable consulting services may have been another reason why it went easy on the audits. It is awkward enough for auditors to get paid by the companies whose books they must review without creating additional conflicts of interest. Arthur Levitt, the former S.E.C. chairman, sought unsuccessfully to ban such conflicts. The industry resisted. Disturbingly, Mr. Pitt prefers to be less confrontational and believes accounting firms should be given more freedom to regulate themselves. But the industry has proved unable or unwilling to discipline its own members to any meaningful degree, despite frequent promises to undertake tougher self-regulation and tighter peer review. The Enron debacle is exceptional only in its scale. Other former Wall Street favorites have engaged in creative accounting to pump up their stock prices. Lucent, Sunbeam, Waste Management, Xerox and Cendant are only some of the more notorious cases of companies forced to restate previously reported earnings, causing their stock prices to crater. People lost billions of dollars, misled by phony numbers ratified by the accountants. The public's trust in the integrity of markets, and in the reliability of companies' disclosed financial data, has been one of America's competitive advantages since the adoption of its security laws in the 1930's. The danger in the wake of Enron and similar scandals is that investors, understandably wary about the safeguards they once relied on, may decide to avoid buying company shares altogether. A majority of Americans are now invested in the stock market, but they will not long participate in a game they know to be rigged against them. Justice demands no less than a full accounting in the Enron case. But the nation's economic well- being also demands a broader response from Mr. Pitt and Congress to shore up the credibility of financial markets. Investors, as absentee owners, must be able to trust the information public companies report about their businesses. Buying shares in a company cannot simply be an act of faith. nytimes.com