Keeping the score on Enron
By DAVID LAZARUS
The San Francisco Chronicle
Wednesday, February 13, 2002
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OK, let's check the scorecard:
Enron's directors now admit that "off-the-books" partnerships were used to inflate the energy giant's earnings by as much as $1 billion.
Jeffrey Skilling, the former Enron chief executive, says he had no idea that anything untoward was going on at the now-bankrupt company.
Four other senior Enron execs, including former Chief Financial Officer Andrew Fastow, who devised the partnerships, refused to discuss the matter at congressional hearings on grounds that their testimony might incriminate them.
And, as of yesterday, Mr. Enron himself, former Chairman Ken Lay, also pleaded the Fifth, thus avoiding tough questions about his role in the biggest corporate meltdown in U.S. history.
Is it just me, or is this whole mess beginning to look like an episode of "The Sopranos"?
Cooked books, shredded documents, shady auditors, offshore accounts, declarations of ignorance or a refusal to testify -- Enron's bigwigs couldn't be behaving more like mobsters if they tried.
Lay's decision to keep mum was especially strange, bordering on the ludicrous.
"I am deeply troubled about asserting these rights," he said. "It may be perceived by some that I have something to hide."
Gee, why would anyone think that? Might it be that Enron's own directors found evidence of "a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition"?
Might it be that William Powers, the Enron director who led the company's internal probe, concluded that Lay "bears significant responsibility for those flawed decisions, as well as for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses"?
Nah.
Lay said he turned down an earlier invitation to testify -- thus forcing Congress to subpoena him -- because he was afraid the congressional hearings would be too prosecutorial.
I can see how that would be a concern. Congress is only looking into allegations of gigantic corporate fraud and a suspected conspiracy to fleece Enron's shareholders, including thousands of the company's own employees.
It's already clear that Fastow, the former CFO, was the architect of the partnerships that led to Enron's demise. We know, too, that he profited handsomely from his scheme.
The big question for investigators is whether Fastow was acting on his own, as Skilling suggested, or whether the alleged fraud was perpetrated with the knowledge of Fastow's superiors -- Skilling and Lay.
Having visited Enron's Houston headquarters and spoken with a number of senior officials, including Lay, I find it hard to believe that neither Skilling nor Lay had knowledge of what was going on.
Skilling was named CEO by Lay for one simple reason: He was smarter than everyone else in the building. It was Skilling primarily who constructed Enron's lucrative energy-trading business.
At the same time, Lay was nothing if not a hands-on manager, keeping involved in virtually all aspects of the company's operations. There was never any question in the minds of employees that Enron was the House that Lay Built.
So now we have one claiming he was completely out of the loop when it came to the single most important financial move the company ever made, and the other holding his tongue because . . . well, because.
Maybe if Lay had agreed to speak yesterday, he would have explained Enron's actions much as he defended the company's behavior during California's energy crisis.
When I asked him whether Enron had taken the state to the cleaners by exploiting its vulnerability, Lay countered that his company was only doing what everyone else was doing.
"We had nothing to do with creating the problem," he told me. "Everyone played by the rules."
So there.
"This American system of ours . . . call it Americanism, call it capitalism,
call it what you like, gives to each and every one of us a great opportunity if we only seize it with both hands and make the most of it."
Oh, that last quote wasn't from Ken Lay. That was Al Capone.
CROSSING GUARD: In Monday's column about former President George Bush and the millions he made on Global Crossing shares, I neglected to mention that Terry McAuliffe, chairman of the Democratic National Committee, also did spectacularly well with the stock.
McAuliffe invested $100,000 in Global Crossing and saw that stake balloon to $18 million after the company went public. He cashed out shortly thereafter.
"If you don't like capitalism," McAuliffe said in his defense, "move to Cuba or China."
The man's arrogance speaks for itself. But, contrary to the views of some of my more right-leaning readers, there is nevertheless a distinction to be made between McAuliffe and Bush.
While McAuliffe had the ear of former President Bill Clinton, Global Crossing at the time was not under investigation for alleged fraud. Nor was it anywhere close to bankruptcy.
The questions raised in Monday's column pertained to entirely different circumstances. Global Crossing, like Enron, collapsed on the current President Bush's watch. The allegations of fraud came to light only in recent weeks.
Potential conflicts of interest thus take on greater significance in light of their connection to the present administration. Global Crossing and Enron may have showered wealth on Democrats and Republicans alike, but the buck, as they say, stops at the White House.
My interest in this isn't personal, as some readers think. It's strictly business.
©2002 San Francisco Chronicle Page B - 1 |
