'Bankruptcy of character' exposed at Enron congressional hearings

Everyone else in the packed congressional hearing room could see Mr. Skilling had turned a blind eye to a blatant conflict of interest. An internal probe by Enron's own board of directors had already concluded as much…[U.S. Senator Jean Carnahan] “The bankruptcy of this company does not compare with the bankruptcy of character that occurred in the executive suite," she blurted out.

JeffreySkilling.jpg

Jeffrey Skilling

The Globe and Mail
March 1, 2002

'Bankruptcy of character' exposed at Enron congressional hearings
Barrie McKenna

For more than five hours, U.S. Senator Jean Carnahan sat patiently as Jeffrey Skilling insisted he knew nothing about the rot that had infected Enron Corp.

Finally, it was her turn to have a go at the smooth-talking former Enron CEO. She pressed him on why he ignored complaints that his trusted lieutenant — chief financial officer Andrew Fastow — was getting rich doing complex insider deals with his own company.

Everyone else in the packed congressional hearing room could see Mr. Skilling had turned a blind eye to a blatant conflict of interest. An internal probe by Enron's own board of directors had already concluded as much.

But Mr. Skilling, the highest-ranking Enron executive to appear before Congress willingly, was unflappable.

"There is no time … where I have asked anyone to compromise their integrity. It just doesn't happen."

And besides, the auditors and the board signed off on everything, he added.

Ms. Carnahan had clearly heard enough.

"The bankruptcy of this company does not compare with the bankruptcy of character that occurred in the executive suite," she blurted out.

And there you had it.

One line that seemed to capture the tenor of months of revelations – the shredded documents, reports of executives cashing in their fortunes while their employees went broke, and the frustrating wall of silence from insiders.

Anyone looking for answers on Capitol Hill is bound to get frustrated. Members of Congress have promised to uncover the truth about Enron. So far, the hearings have been the "not me" show, featuring a parade of Corporate America's brightest and best, pleading wide-eyed ignorance.

If ever the Discovery Channel decides to do a special on shocking and appalling corporate behaviour, the Enron hearings could prove to be a gold mine.

Let's review what's been learned so far. The brass at accounting firm Arthur Andersen, Enron's long-time auditor, was shocked — just shocked — to learn that the Houston partner handling the account, worth $51-million (U.S.) a year, had shredded documents. And if anything was wrong with Enron's audited financial statements, it's because the company lied to them.

The board of directors has similarly ducked responsibility. They produced a report that blames many people, including chairman and company founder Kenneth Lay, Mr. Skilling and Mr. Fastow, as well as Arthur Andersen.

Four top Enron executives have refused to say anything at all, pleading their U.S. constitutional Fifth Amendment right to avoid self incrimination. Among them was Mr. Lay, who proclaimed his innocence then lapsed into stone-faced silence.

Perhaps the most pathetic display was the appearance of four respected Wall Street energy analysts who had continued to pump Enron shares until they were nearly worthless.

What about the warning signs — executives leaving the company and cashing out, the impenetrable financial statements and plunging stock price? – they were asked.

"The business model, all along, we believed was very strong," Richard Gross of Lehman Brothers explained meekly. Each, in turn, flatly denied that the lure of underwriting Enron's business had coloured their judgment.

Meanwhile, insurance companies are balking at making potentially enormous payouts to Enron executives and companies that did deals with the company, including J.P. Morgan Chase & Co. The insurers say they were misled about the company's health and its contracts, or they never would have sold the policies.

Members of Congress may well be the worst "not me" offenders. After happily taking Enron's political donations for years, they have now viciously turned their backs on their former benefactor. One of Enron's harshest critics — Louisiana Representative Billy Tauzin — was instrumental in killing new rules last year that would have tackled some of the accounting conflicts of interest that Enron's demise has exposed.

Fear of criminal charges and legal liability has obviously caused a chill among Enron and Arthur Andersen executives, and that's understandable.

The U.S. Justice Department and the Securities and Exchange Commission are pursuing a criminal probe into the Enron collapse. Mr. Skilling and others could face fines, jail time and other sanctions.

The threat of litigation also hangs heavily in the air. Enron executives, directors and auditors are named in dozens of shareholder lawsuits.

But there's no excusing bad corporate behaviour — in all its guises.

Just once it would be refreshing to see someone stand up, swear to tell "the truth, the whole truth and nothing but the truth," and then actually do it.

While governments can make rules and pass laws, they can't legislate character. And, ultimately, that's what we all seem to crave as the excesses of the boom years are unearthed.

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