Lieberman Placed In Awkward Spot
Senator Not Immune to Enron Problem
washingtonpost.com
By John Lancaster
Washington Post Staff Writer
Saturday, February 2, 2002; Page A04
Sen. Joseph I. Lieberman (D-Conn.) has lately found himself in an awkward spot. As chairman of the Senate Governmental Affairs Committee, he is a leader of congressional efforts to get to the bottom of the Enron scandal and develop new laws to protect shareholders and workers. The panel has already issued 51 subpoenas.
Like many of his colleagues, however, Lieberman has his own Enron problem, involving campaign contributions and close relations with the accounting industry, whose reporting standards are also now in the dock.
"Trying to find a politician in Washington who has not been polluted by contact with the bankrupt Enron Corp. is a needle-in-a-haystack search," said a recent editorial in the Hartford Courant. "So it is that Sen. Joseph I. Lieberman of Connecticut, moralizer par excellence on the national stage, is found to be less pure than Caesar's wife when it comes to Enron."
In an interview this week, Lieberman denied he was unduly influenced by Enron or the accounting industry and promised a thorough inquiry. But he acknowledged he is rethinking his views on several key accounting issues, including his previous opposition to a proposal that would have required companies to count stock options for employees as a business cost.
More broadly, Lieberman said, the suspicions aroused by Enron's campaign contributions have only reinforced his views on the urgent need for a ban on unregulated "soft money" donations to political parties.
"Knowing what I know now," he said, "I presume almost everybody would have been advocating tougher standards for the accounting profession and, frankly, a whole group of other professions that we explicitly or implicitly rely on, all of us . . . as we make decisions about where to invest." Speaking of the role played by Arthur Andersen LLP, Enron's accounting firm, Lieberman added, "Just looking back it seems so self-evident that an accounting firm should not be both auditing a company and receiving consulting fees from it, because there's an inherent conflict of interest."
A former Connecticut attorney general, Lieberman, 59, is a pro-business Democrat -- and a possible presidential contender in 2004 -- who has cast himself as a strong defender of public morality. Since the Enron story erupted, however, Lieberman has come under fire from watchdog groups that have questioned his independence.
Like many other lawmakers, Lieberman has accepted campaign donations from Enron ($2,000) and from accounting firms. A group he co-founded, the New Democrat Network, received $14,500 from Andersen's political action committee and $15,000 from Enron's PAC since 1997, according to PoliticalMoneyLine, an independent monitoring group.
Lieberman has sometimes sided with business in disputes with accounting-industry regulators. In 1994, for example, the Financial Standards Accounting Board, a private-sector body under the Securities and Exchange Commission's supervision, sought to require companies to count the value of future stock options as a cost against current earnings. Failing to do so, the board argued, leaves investors with an incomplete picture of company finances.
High-tech firms, which make liberal use of stock options, fought the change, saying it would depress their stocks' value. Lieberman said he sympathized with the argument, in part because he sees stock options as an instrument for the "democratization" of the American workplace.
A Lieberman aide said the rule would have been impossible to implement because there is no reliable way to estimate the value of a stock option, which can be determined only by the market when it is exercised. Lieberman led the opposition to the rule, and the board dropped the idea after the Senate voted 88 to 9 for a resolution urging it to do so.
The issue has reemerged in a new context. Enron executives relied on stock options for much of their compensation. Some analysts have suggested that in their zeal to pump up the price of Enron stock -- and increase the value of their options -- Enron executives may have encouraged the kind of accounting gimmickry that contributed to the company's collapse.
Lieberman said he continues to be skeptical of the change proposed by the standards board. But he added, "Now we're looking at things differently through the filter of the Enron collapse, and that makes me want to think about it."
He added, "It may be that from a congressional point of view the most scandalous and hurtful behavior was legal, and it will therefore be critical for us to make it illegal."
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