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Enron - A Cultural Failing
Multiple Editorials | 15 Jan 2002

Posted on 01/15/2002 5:31:56 AM PST by Who is George Salt?

A flurry of editorials in today's (15 January 2002) newspapers indicate that some are beginning to grasp the true nature and scope of the unraveling Enron scandal:

First, Richard Cohen, writing in the WashPost editorial A Time For Outrage...:

"No, this is not a political scandal. This is a cultural event, a systemic collapse, an outrage so breathtaking that we poor scribblers have no category for it. We do not know how to say "crook" or "thief" or "creep" in describing business executives who sold $1.1 billion worth of shares in their own company while -- possibly, allegedly and just maybe -- knowing that some $600 million in debt was hidden off the books. It was in nooks and crannies where even Arthur Andersen, the totally unaccountable accounting firm, could not find it. These executives also may have sold knowing that Enron had overstated its profits year after year."

-- Richard Cohen

Then, George Will, also writing in the WashPost, . . . Especially From Republicans:

"It will remind everyone -- some conservatives, painfully -- that a mature capitalist economy is a government project. A properly functioning free market system does not spring spontaneously from society's soil as dandelions spring from suburban lawns. Rather, it is a complex creation of laws and mores that guarantee, among much else, transparency, meaning a sufficient stream -- torrent, really -- of reliable information about the condition and conduct of corporations."

"...Off and on over the years, a few capitalists have done more to delegitimize capitalism than America's impotent socialist critics ever did or today's moribund left could hope to. It is the Republicans' special responsibility to punish such capitalists."

-- George Will

And finally, Paul Krugman, writing in the NYTimes, "Crony Capitalism, U.S.A." (registration required):

"On the face of it, the sudden political storm over Enron is puzzling. After all, the Bush administration didn't save the company from bankruptcy. But then why did the administration dissemble so long about its contacts with Enron? Why did George W. Bush make the absurd claim that Enron's C.E.O., Kenneth Lay, opposed him in his first run for governor, and that the two men got to know each other only after that race? And why does the press act as if there may be a major scandal brewing?"

"Because the administration fears, and the press suspects, that the latest revelations in the Enron affair will raise the lid on crony capitalism, American style."

-- Paul Krugman


TOPICS: Business/Economy; Editorial
KEYWORDS: michaeldobbs
At the heart of this scandal are the incestuous relations among our political, financial and business elites. "Cronyism, American Style" is indeed the perfect label for this affair. And it isn't a pretty sight.
1 posted on 01/15/2002 5:31:56 AM PST by Who is George Salt?
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Comment #2 Removed by Moderator

Comment #3 Removed by Moderator

To: Who is George Salt?
Both parties stub toes on scandal

By Thomas Oliphant, The Boston Globe Staff, 1/15/2002

SNIP...The Democrats are faring only a little better. The Democratic National Committee is playing politics shamelessly, but that act itself is keeping it from being taken seriously. Party figures in the Senate, like their Republican counterparts in the House, decided well in advance of last week's feeding frenzy to treat Enron as one of those rare business scandals that easily engages the public and not as a governmental story as long as the evidence doesn't make it one.

When Joe Lieberman and Carl Levin begin public airing of this astonishing tale of duplicity, it is Enron and its see-no-evil accountants who will be in the cross hairs, not President Bush or top members of his administration...SNIP

Enron scandal one of accounting, not politics

By WILLIAM SAFIRE, New York Times

SNIP...The dozen or so investigations may turn up something to embarrass the White House, especially if Bush pulls another "executive privilege" when Congress wants facts. But the scandal I see in this corporate debacle is nonpolitical; it's professional.

This affair shows the accounting profession all too often to be in bed with the oldest profession. Accounting standards have been frequently prostituted by the new Uriah Heeps: These are executives in ever-merging firms afraid to challenge their clients' phony numbers and secret self-dealing because they might lose fees in the lucrative consulting business they run on the side...SNIP

4 posted on 01/15/2002 6:10:03 AM PST by Oldeconomybuyer
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To: Who is George Salt?
The major failing at Enron was Ken Lay's establishment of a corporate culture that extravagantly rewarded short term "profits," however derived, without any recognition of the long term consequences of the actions which led to booking those "profits." This is evident in Enron's practice of routinely booking profits from the anticipated earnings from projects in the year in which the project was negotiated, rather than over the life of the project, as is done in most other companies.

The exaggerated focus on "profits today," regardless of the long term consequences, can be found as a common denominator in many of the poor investment decisions made by Enron, as well as in the now famous Limited Partnerships established by Andrew Fastow. This corporate culture was brought to Enron by Jeff Skilling, when he was a consultant to the company, long before he became CEO. But it was accepted and endorsed by Ken Lay.

The press is trying to focus on insider trading and other scurrilous acts by top Enron executives as they tried to protect their own personal fortunes during the collapse of the company. This is important and may result in criminal indictments. However, in the long run, it is more important to concentrate on the management process that led to the collapse, with the hope of preventing such a collapse at other firms.

Until this past fall, Enron was widely viewed as a shinning star in the development of a new business model. It is probable, and almost inevitable, that other companies have attempted to copy Enron's approach. Given weak auditing oversite, and compliant boards of directors, it is possible that some of these other companies may also have fallen prey to the trap of "profits today," regardless of the consequences. Investors and employees of other companies may perhaps now be exposed to debacles similar to Enron's. This is the real tragedy of Enron.

5 posted on 01/15/2002 6:28:10 AM PST by LOC1
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To: Oldeconomybuyer
I think Safire nails it when he writes:

"But the scandal I see in this corporate debacle is nonpolitical; it's professional. This affair shows the accounting profession all too often to be in bed with the oldest profession."

Indeed, this scandal shines a spotlight on the dark side of the prevaling "corporate culture" in America.

6 posted on 01/15/2002 6:37:19 AM PST by Who is George Salt?
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To: LOC1
Investors and employees of other companies may perhaps now be exposed to debacles similar to Enron's. This is the real tragedy of Enron.

So true. This is not a Whitewater-style political scandal; the scope of this scandal is far, far wider.

7 posted on 01/15/2002 6:39:40 AM PST by Who is George Salt?
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To: Who is George Salt?
Agreed.
8 posted on 01/15/2002 7:33:31 AM PST by Oldeconomybuyer
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Comment #9 Removed by Moderator

To: Rightuvu
"Laws that guarantee how the free market system works?"

Sounds like a liberal to me.

Nope, You might be right about him being a liberal but he's right about the phony free market system....

There's no "free market", there's no "free trade" and there's no "deregulation" either.

10 posted on 01/15/2002 7:50:03 AM PST by lewislynn
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To: Who is George Salt?
At the heart of this scandal are the incestuous relations among our political, financial and business elites.

The truth is, I think the heart of this scandal is Enron tried to be the biggest company to NEVER produce anything. I think it may be a precursor to what will happen as "the service industry" is forced by NAFTA, WTO, and other so called trade agreements to become bigger than the manufacturing industry...

The so called service industry is almost half the GDP and Enron (who never produced anything) was supposedly the 7th largest corporation in America.

11 posted on 01/15/2002 8:09:45 AM PST by lewislynn
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To: Who is George Salt?
Bump this thread. Wait. I'll sell you the right to bump it next year, provided you pay me today.

Paging Mr. Ponzi.

12 posted on 01/15/2002 8:58:45 AM PST by headsonpikes
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To: headsonpikes
A market in bumps - how innovative! Better patent that "business practice" - it sounds like a real winner!
13 posted on 01/15/2002 9:05:41 AM PST by Who is George Salt?
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