For the week of January 23 - 29, 2002

Enwrong

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Americans may be excused for thinking it’s time to bring back tar and feathers.

Enron has made a lot of people think that cruel and unusual punishments for company executives might not be that cruel or unusual.

There were tears in the eyes of the 20,000 or so Enron employees who lost their jobs and $1.3 billion dollars in their retirement accounts when the stock collapsed. The tears got bigger when they found out CEO Kenneth Lay had made a killing by selling his stock before the collapse. The staggering cost of the collapse is still mounting. The employees are not alone.

As the layers of this stinking tuber are peeled back, everyone’s eyes are watering.

Enron stock was widely held. The cost for investors in mutual funds that held the stock and in bond funds that held Enron debt hasn’t been tallied.

Even people who have no investments in stocks or bonds will be damaged.

In Idaho alone, the $768 million state endowment fund—the one that earns money to support the education of Idaho children—lost $4 million on Enron stock. The state employee retirement fund lost $2 million. But what’s $6 million among friends, especially in a small state like ours, which is desperately trying to balance a recession-hammered budget.

Last winter’s energy crisis raised Idaho electric bills by 30 percent. Enron and its friends in politics were the architects of that free market misadventure.

And Enron had lots of friends. The company donated $6 million to candidates for federal office between 1989 and 2001 according to the watchdog Center for Responsive Politics. Not to mention its friends at Arthur Anderson, one of the Big Five accounting and consulting firms that has been busy shredding Enron’s records.

Even before the shred-fest, Arthur Anderson, was one of the five top contributors to President Bush’s campaign fund.

Criminal investigations are still to come, but Arthur Andersen was structured the way all big national accounting firms are structured today—courtesy of relaxed federal regulation. Andersen’s consulting arm helps design and build businesses, while its other arm audits the businesses.

Each arm scratches the other’s back. Yet, the accounting industry got its friends in Congress to bury conflict of interest initiatives.

Former Securities and Exchange Commission Chairman Arthur Levitt Jr. told the New York Times last week that when the SEC threatened to impose conflict of interest rules, he received calls from 10 or 11 senators who threatened agency appropriations.

There’s plenty of blame to go around. Yet some on Wall Street are quoting W.C. Fields who said, "You can’t cheat an honest man."

Fields was wrong. It’s easy to cheat an honest man. Lie to fund managers, stockholders and employees. Cheat by setting up fictitious companies to hold debt "off the books" where no one can see it. Cheat by getting the board of directors, the politicians and the auditors to go along. Then, steal like crazy.

 

The Idaho Mountain Express is distributed free to residents and guests throughout the Sun Valley, Idaho resort area community. Subscribers to the Idaho Mountain Express will read these stories and others in this week's issue.