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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: haqihana who wrote (3710)	2/4/2006 12:08:56 PM
From: Peter Dierks	Read Replies (1) \| Respond to of 71588

Enron and Consequences The system has held individuals responsible, as it should. Saturday, February 4, 2006 12:01 a.m. EST Former Enron CEOs Kenneth Lay and Jeffrey Skilling went on trial this week, more than four years after the Houston-based energy company went bankrupt amid charges of financial fraud. Hard on Enron's heels came WorldCom and Adelphia, and, just like that, America was riding a "wave" of corporate scandals. That wave produced corporate governance "reform," a raft of new regulations coming out of the SEC and a boatload of hectoring about the corruption of the business class. Well, four years later it turns out that class was pretty small. The private sector, like the public sector, will have its share of scandals and malfeasance. But looking back, the extraordinary thing about Enron is how extraordinary it was. Its undoing has turned out to be almost entirely idiosyncratic. The financial engineering in which the company engaged, whereby the company's fortunes were essentially put in hock to an ever-rising stock price, came a cropper when the stock turned down. This was not financial innovation at its finest. But, it seems, it was also not widely imitated. The trial that began in Houston this week is not, or at least should not be, about the existence of a culture of corporate malfeasance. Rather, it concerns the question of whether the two men at the top of Enron knew about and participated in the fraud that allegedly brought the company down. That is a question for the jury to decide, hopefully on the basis of the evidence presented at trial and not the public excoriation the company and its executives have already received. The defense team will have to hope so too, as it's taken the stance that nearly everything Enron was doing was legal and aboveboard. To the extent that wrongdoing took place, lawyers for Messrs. Lay and Skilling will, not surprisingly, argue that the prosecution's star witness, former CFO Andy Fastow, was the bad guy. Mr. Fastow has pleaded guilty and agreed to testify against his former bosses in exchange for a more lenient sentence, if a 10-year sentence can be considered lenient. In all, some 30 people have copped pleas in the Enron debacle, and about half of them will testify against Messrs. Skilling and Lay. This suggests to us that the justice system has been doing its job the right way here. It has taken the government time to build its case against the men at the top, but they are now standing trial. Despite allegations of preferential treatment or leniency, individuals have been indicted and tried, or are being tried. This is how things are supposed to work--in contrast to the Justice Department's shoot first, ask later approach to the indictment of Enron's auditor, Andersen. In that case, Andersen was put out of business by an indictment that went after the entire firm, and so avoided the messy business of identifying the accountants actually responsible for any wrongdoing. In addition to the 30-odd guilty pleas that Justice has already secured, Merrill Lynch, Citibank and JP Morgan Chase have each to some extent faced justice for their role in Enron's rise and fall. Andersen was wiped out. Enron was also the first spark that lit a powder keg of corporate reform. It built momentum for Sarbanes-Oxley to rush through Congress, burdening companies for the foreseeable future with untold compliance costs and litigation risks. Enron helped launch the anti-corporate crusade of Eliot Spitzer, which in turn has made him a candidate for Governor of New York. Enron's culprits ended up putting further burdens on millions of honest businessfolk, beyond the immediate price paid by innocent employees and shareholders. They thus have a lot to answer for, and in fact they are answering for it under the laws in place before this latest bonfire of regulation. Messrs. Skilling and Lay are on trial for fraud and conspiracy, some of the oldest and most-sweeping crimes on the books. Sometime down the road, there will be another "Enron." Sarbanes-Oxley did not repeal the laws of human nature, any more than the crimes of a few should be used to malign the ethics of everyone in business. opinionjournal.com