The
Enron story has no heroes, only villains. Its impact
on the way that business is conducted in America
will be profound. In this column I will concentrate
on the villains, tomorrow I'll focus on the consequences.
Here's my top-10 list of villainy:
1. Many
of us who attend World Economic Forums and similar
gatherings are guilty. For years we have lavished praise
on Gates, Chambers, Gerstner, Greenberg, Welch, Weill,
Lay and others who have taken their firms to ever-greater
heights. We have been seduced by their charm and we
have encouraged their arrogance. We have been indiscriminate
and have failed to distinguish between the ethical
managers and the crooks. We never took Klaus Schwab
to task for inviting Ken Lay or, in earlier years,
Marc Rich and Robert Maxwell. We bought Enron stock,
saw it climb and congratulated ourselves on our brilliance.
We
wallowed in the Forum's comforting ambience
and
cheered Ken Lay. We applauded him last
year in Davos when he told us that the company
of the future "will be about empowering
people to create and to innovate." We
admired his insight when he declared: "A
key focus at Enron has been in attracting
and building our intellectual capital. We
are knowledge-intensive... The challenge
is to innovate, but everyone is trying to
innovate, so you have to out-innovate the
innovators. This is the future." None
of suspected quite how innovative Mr. Lay
planned to be.
2. King of the villains is Lay, who continues
to believe he can fool all the people all
of the time. There are no depths to which
he will not stoop. He even convinced his
wife to go on television to describe how
nice he is and how generous, how the family
is having to sell its properties and how
Ken just didn't know what was going on.
3. Lay hired and fired people so fast that
nobody could keep up with him. Nevertheless,
Skillings, Fastow and a clutch of others
conspired with him. Their greed was massive,
and their fall will be even greater. They
will suffer for years, hounded in the courts
as irate shareholders and pensioners seek
billions of dollars of redress.
4. Andersen's errors will be costly and
with its perceived deep pockets it will be
a prime target of litigation. Auditing firms
have weak CEOs and powerful individual partners
with wide scope to take decisions and build
relationships. The Andersen bosses in Chicago
were too trusting of some of their partners
and exercised insufficient control. As a
result Andersen may soon be history; its
partners are fleeing, its clients departing,
its new business is non existent and, given
the extent of legal actions, there may be
no rival willing to acquire it.
5.
More fortunate, although perhaps just as
culpable, is the
Houston law firm of Vinson & Elkins
L.L.P. who was often at the heart of Enron
decision-making. The firm symbolizes all
that is wrong with many law firms, whose
mega-rates and know-it-all posturing is often
far removed from ethical behavior. V&E
knew of Enron board decisions to suspend
the corporate code of ethics, but the lawyers
sat on their hands and took their fees.
6. Spare no tears for Enron's directors,
who pocketed handsome rewards in the good
years. Now they, too, will pay. When the
top executives are crooked and the lawyers
and the auditors are accomplices, then board
members don't stand a chance, but this board
was determined to hear no evil and ask no
questions. Ultimately, board directors have
to trust top managers, but suspending the
business ethics code once was reckless- suspending
it twice was unforgivable.
7. Some Wall Street securities analysts
were recommending Enron stock right up to
bankruptcy day. Just like the analysts who
pushed dot-com stocks that were sinking fast,
so the Street's Enron enthusiasts were too
close to the company and making too much
money. Now, much of the analysts' community,
and the brokerage firms they work for, are
being scrutinized as never before--it's about
time.
8. JP Morgan Chase and the other bankers
who provided endless amounts of cash and
encouraged others to do the same, are villains
as well. Where was their due diligence? Why
were they so trusting? Why is it that when
you and I go for a small overdraft we are
micro-examined, yet Enron could raise billions
without anyone looking hard at its books?
The stock of numerous banks has already fallen
sharply, and billions more may be erased
from their market capitalization before this
mess is cleaned up.
9. The credit rating agencies are no heroes
either. They were asleep at the wheel. Had
they been on the ball, Enron would never
have been able to raise, and lose, tens of
billions of dollars. Their performance has
been sub-standard, their concern for the
public interest has been poor. Maybe it's
time they, too, became subject to rigorous
governmental oversight.
10. Also in the rogues' gallery are the
politicians and the regulators. President
Bush laments that his mother-in-law lost
$8,000 on Enron stock. Don't be fooled. The
President and Ken Lay have been the best
of pals, even closer than Lay and Cheney.
Politicians across both political parties
fell in love with Enron, its cash, its generosity
and its hospitality. They were bought. Regulators
saw the cozy relationships between charming
Ken and top politicians and they steered
clear. They displayed a level of trust in
big business that showed zero respect for
the public. They too will now stand in the
dock of public opinion and suffer. And rightly
so.
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