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

To: Mephisto who wrote (809)	1/18/2002 4:19:47 PM
From: Mephisto	Read Replies (2) \| Respond to of 5185

A Failure to Account 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

To: Mephisto who wrote (809)	1/19/2002 1:40:32 AM
From: Mephisto	Read Replies (1) \| Respond to of 5185

" G.O.P. Weighs Chief's Stance on Enron Tie " - "Several Republican state chairmen and party officials said in interviews that they would prefer that Mr. Racicot sever all connections to the firm, Bracewell & Patterson, from which he still intends to draw a salary." ............................................................................................ - "Party officials said Mr. Racicot, the former governor of Montana, had no intention to further change his arrangement with the firm. Undaunted by the negative publicity, Bracewell & Patterson sought to showcase its ties to Mr. Racicot. Tonight, the firm held a cocktail reception to honor him at the Four Seasons Hotel in Austin .................................................................................................... - ``The fact that he Raiscot is the president's buddy makes everyone feel real comfortable,'' said Ron Kaufman, the party's national committeeman from Massachusetts. " January 18, 2002 The New York Times By RICHARD L. BERKE AUSTIN, Tex., Jan 17 - As questions intensify about Enron's ties to the White House, Republicans who gathered here today for the party's winter meeting said they were not entirely reassured after last week's decision by the newly selected party chairman, Marc Racicot, to stop lobbying for a firm whose biggest clients included Enron. Several Republican state chairmen and party officials said in interviews that they would prefer that Mr. Racicot sever all connections to the firm, Bracewell & Patterson, from which he still intends to draw a salary. Despite their misgivings, many of those interviewed said they were not willing to block President Bush's choice and that they expected Mr. Racicot's nomination to be approved at the meeting on Friday. Party officials said Mr. Racicot, the former governor of Montana, had no intention to further change his arrangement with the firm. Undaunted by the negative publicity, Bracewell & Patterson sought to showcase its ties to Mr. Racicot. Tonight, the firm held a cocktail reception to honor him at the Four Seasons Hotel in Austin. Mr. Racicot appeared at the gathering, which included top party officials and lobbyists from the Houston- based firm - who were entertained by a mariachi band - even before he made his way to the party meeting itself. As a parting gift, guests were handed business-card holders with Bracewell & Patterson's logo. The firm's three other partners who were honored at the reception have received donations or had other links to Enron. They are Greg Abbott, a former justice of the Texas Supreme Court who is running for state attorney general; Jim Chapman, a former congressman; and Barry McBee, a former chief of staff to Gov. Rick Perry One state party leader who attended the reception said that, given the questions about Mr. Racicot, the party was ``not the most wise thing to do.'' By maintaining his connection with Bracewell & Patterson, he added, Mr. Racicot was ``giving throwaway lines to Terry McAuliffe,'' the chairman of the Democratic Party, to criticize Republicans. For all the festivities at the firm's reception tonight, there was a palpable undercurrent of concern at the party gathering itself. Six Republican state chairmen, as well as many party advisers and officials, said in interviews that they objected to Mr. Racicot's arrangement with the firm. ``I was very glad he made the decision to discontinue lobbying,'' said John L. Ryder, chairman of the Tennessee Republican Party. But if Mr. Racicot continues work for the firm, he added, ``they're going to have to look at what level of involvement there is in the law firm and what kind of involvement.'' Some party leaders who criticized Mr. Racicot, who would replace former Gov. James S. Gilmore III of Virginia as chairman, were reluctant to do so publicly. ``I'm very worried,'' said a prominent Republican who is close to Mr. Racicot. Mr. Racicot's decision to cease lobbying, he said, ``is obviously a halfway measure.'' A Republican Party official put it this way: ``Racicot is a totally ethical guy. But it's a P.R. thing. There's a lot of discomfort here.'' Many party officials said the more appropriate course would have been for the Republican Party to pay Mr. Racicot far more than the $150,000 salary normally given to the chairman if he abandoned his work for the firm. White House officials said Mr. Racicot was offered, and rejected, such a deal and has refused to draw a salary from the party. Seeking to make the best of what could be a less-than-seamless debut for a new chairman, Jack Oliver, the vice chairman of the party, characterized Mr. Racicot's decision to draw a salary from a law firm while working for the party for free as a virtue. ``We're very blessed that we have Marc Racicot, who's willing to volunteer on behalf of this cause because he believes in it,'' he told reporters. Mr. Oliver brushed aside a question about whether it was appropriate for Mr. Racicot to take money from a firm that lobbies. ``Law firms do things beside lobby,'' he said. ``If you don't know that you've spent too much time in Washington, D.C. No one has questioned the ethics or integrity of this great leader, Marc Racicot. He's going to do a fabulous job as chairman and will continue to work for a law firm. He has been very clear in stating that he will not do any lobbying or any setting up of anything that has to do with the administration or with members of Congress.'' Enron gave two contributions to the Republican Party last October, Mr. Oliver said, but they were returned when it was clear the company was in trouble. Some party members here said they were not distressed about Mr. Racicot because he is quite close to Mr. Bush - and they trust Mr. Bush. ``The fact that he is the president's buddy makes everyone feel real comfortable,'' said Ron Kaufman, the party's national committeeman from Massachusetts. Alan Novak, the state chairman from Pennsylvania, said, ``My advice to Governor Racicot is to be prudent'' in his work for the firm, ``and I think he will be.'' Besides the concerns over Mr. Racicot, some conservative party members have objected to the selection of Lewis Eisenberg, a prominent party donor from New Jersey, as the committee's new national finance chairman. Mr. Eisenberg founded the Republican Leadership Council, which favors abortion rights. In a whispering campaign, foes of Mr. Eisenberg were calling party members in their hotel rooms here to encourage them to oppose his selection, which is expected to be approved on Friday. Speaking of a conversation he had with Mr. Racicot, Mr. Eisenberg said, ``we commiserated with each other'' over ``being attacked'' from within their own ranks. nytimes.com